Credit Campaign, Credit Scoring, Home Financing Tips, Practical Financial Tips

How To Improve Your FICO Score Before You Buy A Home

June 28, 2013 by · Leave a Comment 

How To Improve Your Credit Score For Better Financing TermsImagine that you’ve found the perfect Northwest Indiana home and are ready to apply for a home loan. Your home loan approval amount comes back lower than you would have expected and at an interest rate significantly above what you have heard is available on the market.

This could be because you have an average to poor FICO credit score

Mortgage lenders base interest rates on many things, but your FICO credit score plays a large part. Anything between 740 and 850 will typically qualify for better interest rates. A mediocre FICO score is usually between 660 and 739, and a low score is 659 and under.

If you have a lower FICO score than you’d like, below are a few traits for you to follow of people who possess higher credit scores and secure the best home financing.

They don’t max out their cards.

It’s better to keep a low revolving balance on a few cards than to spend every dime allotted on one. The ratio of credit card balance to your credit limit is called credit utilization. The higher your credit utilization, the larger affect it can have one your credit score.

They make payments on time.

This is very likely the most important tip for your credit health. If you miss a payment on a term loan, credit card account or monthly home bill, then you could be turned over to collections, which will affect your score negatively.  You will almost surely be reported as late to the credit bureaus, which will in turn drop your credit score precipitously. Absolutely make all of your payments before their due date.

They stay with one card.

Don’t close and open credit card accounts frequently. Each time you make a change to your line of credit, it affects your score. Even if you don’t want to be tempted to use a credit card, keep the account open and leave the card at home. According to the Fair Isaac Corporation (FICO), high credit achievers have accounts that are usually at least 11 years old.

Excellent credit could qualify you for a better interest rate, which might save you thousands of dollars over the life of the loan. So stay on top of your monthly credit bills and keep a low balance on just a few cards to watch your score steadily increase.

If you’re ready to learn more about your ability to purchase a Northwest Indiana home, call and speak with a Certified FICO Professional. Don’t know one? Look no further…

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James K Barath, CMPS®

James K Barath is a Certified Mortgage Planning Specialist®, Certified FICO® Professional, Certified Military Housing Specialist® and your FHA Home Loan Expert. He is also a graduate of Purdue University, The CMPS Institute, Dale Carnegie Human Relations Course & Napoleon Hill Foundation's PMA Science of Success Class. It's your home and your future. It's his profession and his passion. He is ready to work for your best interest. Contact James for your FREE Home Loan Approval !  His Motto: I Facilitate the American Dream Through Responsible Mortgage Lending and Financial Literacy!

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