First-Time Buyer's Guide to Better Credit

Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts with your finances. Without an acceptable FICO score, entering into a loan for a house is harder and, you could end up renting longer than you expected in Dunedin , Florida until you improve your score.

A FICO score is a collection of your years of credit history based on a model developed by Fair Isaac and Company. Most people usually have a score of 600, but scores range from 300 to 850. Job loss has been common in the last few years, but FICO scores aren't necessarily adjusted "on a curve." A low score is just that and often means you can't get credit. Some of the pieces in summing up your FICO score include:

• Credit Inquiries — Do you have too many open accounts?
• Types of Credit — Do you have a healthy mix of credit cards and loans?
• Payment History — Do you pay your bills on time ?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?

When you pull your credit report, you'll see that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different models to determine your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. Because of this, you have three scores, one for each scoring model.

Lenders want to be positive that giving you a loan isn't a risk for them. Your FICO score gives lenders a view of what type of borrower you'll be based solely on your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 740 or higher to get an acceptable interest rate. You'll still get approved for a mortgage loan with a lower score, but the interest accrued over time could be more than double that of someone having a near perfect credit score.

We're used to working with all tiers of FICO scores. Contact us and we can help you get on the right track to the home of your dreams.

How do you obtain a better score? Improving your FICO score takes time. It can be difficult to make a significant change in your credit score with quick fixes, but your score can improve in a year by monitoring your credit report and by using your credit wisely. The most important thing is to know your FICO score. You'll improve your credit score by using these helpful hints:

• Apply for service station cards or chain store credit. For those who have no credit or low credit, department store credit cards and gas credit cards are ways to start your credit history, increase your credit limits and stay on top of your payments, which will raise your FICO score. You should always avoid maintaining a high balance for too long because these types of cards usually have a surprising interest rate.
• Don't let your cards get dusty. Whether you're just getting started with credit, or if you've got older cards, be sure to use your cards so that your accounts maintain an active status. But, pay them off in no more than two or three payments.
• Keep up with payments. Late payments kill your FICO score. It's where people who have recently experienced job loss see the biggest hit in their credit score. Yes, it takes longer to rebuild your credit this way, but it's the surest way to prove that you're able to make payments to a bank.
• Ensure that your credit history is correct. If you discover incorrect items on your credit report, write to the bureau asking that the item be removed. If you have a common name or the same name as a family member, you'll want to pay extra attention to make sure the activity reported is correct.
• Spread your debt around. At first, this doesn't sound like a good idea. But, you want to avoid of having one card that is at the limit and have your remaining cards at a zero balance. It's better to have each of your cards at about less than 40% of their credit limit than to have the bulk of your debt taking up the balance a single card.

Knowing the methods you can use to build up your credit score, you're one step closer to becoming a homeowner. Know that when it's time to apply for a loan to purchase a house, you'll want to keep your lender applications within a two-week window to avoid a negative mark on your credit score. With the help of Hot Homes Realty, the loan application process can be a stress-free experience so you, too, can achieve home ownership.

Learn more about FICO scores at myFICO.com, Fair Isaac's informational site and you can review all of your credit reports for free each year at annualcreditreport.com. And, for a small payment, you can get your FICO score from each bureau on their websites: equifax.com, experian.com and transunion.com.