Home buyer's Guide to Better Credit

You might think that the home buying process starts with getting pre-approved for a loan or with choosing a real estate agent. In reality, the home buying process starts with your finances. To propel your dreams of homeownership forward, you must consider your FICO score along with the type of mortgage loan for which you'll qualify in Needham, Massachusetts.

A FICO score is a collection of your years of credit history based on an instrument developed by Fair Isaac and Company. Most people usually have a score of 600, but scores are tiered 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 a low score and that often means you can't get a loan. Some of the factors in summing up your FICO score are:

• Credit to Debt Ratio — How much do you owe versus how much credit you have available?
• Credit Inquiries — How many times has your credit history been accessed by someone other than you?
• Types of Credit — Do you have a healthy mix of credit cards and loans?
• Payment History — How many late payments have you made?

In reviewing your credit history, you'll find that you actually have three reports. Experian, Equifax and TransUnion — three of the major credit reporting agencies — use a slightly different systems to calculate your credit rating. FICO is used by Experian. Equifax's model is called BEACON and TransUnion uses EMPIRICA. As a result, you have three scores, one for each bureau.

When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a problem. Your FICO score gives lenders an insight into what type of borrower you'll be solely because of 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 a decent interest rate. If your score is lower, you can still qualify for a loan, but the interest accrued over the life of the loan could be more than double that of someone with a stronger FICO score.

Improving your FICO score is the best way to ease into owning a home. Contact us and we can help you get on the right track to the home of your dreams.

You want a better score, but how do you get it? Improving your FICO score takes time. It can be difficult to make a large-scale change in your FICO score with small changes, but your score can improve in a few years by monitoring your credit report and by using your credit wisely. The best way to do this is to know your FICO score. You'll improve your credit score by using these helpful hints:

• Retail cards and gas cards. For those who have no credit or less-than-stellar credit, department store credit cards and gas credit cards are ways to obtain credit, increase your spending limits and stay on top of your payments, which will raise your credit. You should always beware of charging a large balance for too long because these types of cards traditionally have a steeper interest rate.
• Use your credit. Whether you have older cards, or are just getting started with credit, use your cards so that your accounts maintain an active status. But, pay them off in one or two payments.
• Keep up with payments. Delinquent payments instantly lower your credit score. It's where people who have recently experienced job loss see the biggest dip in their credit score. Yes, it takes longer to build up your credit this way, but it's the most reliable way to prove that you're able to make payments to a lender.
• 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 holding the maximum and have the rest of your cards at a zero balance. It's better to have each of your cards at about 20% of their credit limit than to have all of your debt taking up the balance one card.

Knowing the ways you can raise your FICO score, you're one step closer to becoming a homeowner. Keep in mind that when it's time to apply for a loan to purchase a house, you'll want to keep your credit inquiries within a two-week window to avoid a negative mark on your credit score. With the help of Louis Wolfson & Co., the loan application process can be a stress-free experience so you, too, can become a homeowner.

To learn more, visit myFICO.com, Fair Isaac's informational site and once per year, for free, you can review all three of your credit reports 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.