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 and ends with your finances. To make your goal of homeownership realized, considering your credit score is a must along with the type of lender for which you'll qualify in Plano.

The Fair Isaac Company bases your FICO score on the summary of your total credit history. Most people traditionally have a score of 650, 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 just that and often means you can't get a loan. Some of the factors in calculating your FICO score include:

• Payment History — How many late payments have you made?
• Credit to Debt Ratio — How much do you owe versus your available credit?
• 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 loans and credit cards?

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 credit score gives lenders a view of 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 700 or higher to get a decent interest rate. You can get approved for a mortgage with a lower score, but the interest accrued over time could be more than double that of an individual having a superior FICO score.

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

How do you boost your credit score? Building your FICO score takes time. It can be rare to make a significant 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 best way to do this is to know your FICO score. Here are some ways you can improve your credit score:

• 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 an even balance than to have the majority of your debt transferred to a single card.
• Apply for service station cards or retail credit. For those who have no credit or low credit, store credit cards and gas credit cards are ways to establish your credit history, increase your spending limits and keep up your payments, which will raise your credit. You must always beware of carrying a high balance for more than a couple of months because these types of cards traditionally have a surprising interest rate.
• Keep your cards active. Whether you have older cards, or are just getting started with credit, use your cards to make sure your accounts maintain an active status. But, pay them off in no more than two or three payments.
• Stay on top of payments. Late payments kill your credit score. It's one of the reasons people who have recently been unemployed see the biggest hit in their credit score. Yes, it takes longer to restore your credit with payment history, but it's the surest way to prove that you're responsible enough to make payments to a lender.
• Correct your credit report. If you discover incorrect items on your credit report, contact 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.

Now that you're better informed about credit reporting, you'll be able to successfully take the first step in owning a home, and that is improving your FICO score. Keep in mind that when it's time to apply for a loan to purchase a home, you'll want to keep your credit inquiries within a two-week window to avoid adverse effects on your credit score. With the help of The Rice Group, Inc., shopping for a mortgage is sure to go more smoothly so you, too, can achieve home ownership.

Learn more about FICO scores at 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.