Scoring Your Credit

Choosing a lender isn't the first step in becoming a homeowner. In reality, the home buying process starts with your finances. Putting back your money for a down payment is a good idea, but if you lack an acceptable credit score to reinforce it, you could end up renting longer than you expected in Pittsburgh until your score improves.

The Fair Isaac Company calculates your FICO score on the summary of your total credit history. The score ranges from 300 to 850, with most people normally having a score of 600. With the change in the economy, however, some people have seen their score lowered as a result of unemployment, charged off credit card accounts, or credit card accounts closed by the lender due to inactivity. Some of the factors in reviewing your FICO score are:

• 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 — Do you pay your bills on time every month?
• Credit to Debt Ratio — How much do you owe versus how much credit you have available?

When you apply for a mortgage or any other loan, lenders want to make sure that extending a loan to you isn't a risk. Your FICO score gives lenders an insight into what type of borrower you are based solely on your credit history. Because of the shift in the economy, most home buyers should have scores in the range of 700 or higher to get a satisfactory interest rate. You can get approved for a mortgage with a lower score, but the interest accumulated over time could be more than double that of someone with a stronger FICO 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.

You want a higher score, but how do you get it? Building your FICO score takes time. It can be hard to make a large-scale change in your credit score with small changes, but your score can improve in a few years by keeping tabs your credit report and by using credit extended to you to raise your score, instead of ruin it. The most important thing is to know your FICO score. You'll improve your credit score by using these tips:

• 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.
• Pay on time. Payment history is a huge factor in your credit score. It's one of the reasons 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 surest way to prove that you're responsible enough to make payments to a bank.
• Ensure that your credit history is correct. If you discover mistakes on your credit report, write to the bureau requesting 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 steer clear of having one card that is at the limit and have the rest of your cards at a zero balance. It's better to have each of your cards at a smaller balance than to have the most of your debt sitting on a single card.
• Apply for service station cards or store credit. For those who have non-existent credit or below average credit, store credit cards and gas credit cards are ways to begin your credit history, increase your credit limits and stay on top of your payments, which will raise your credit. You must always avoid charging a high balance for more than a couple of months because these types of cards usually have a steeper interest rate.

Knowing the ways you can improve your FICO score, you can move toward becoming a homeowner. Keep in mind that when it's time to apply for a loan to purchase a home, you'll want to keep your applications within a two-week window to avoid damaging your credit score. With the help of Hanley Agency, Inc., the loan process can be a stress-free experience so you, too, can achieve home ownership.

Get more information by visiting 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.