Inland Empire Real Estate
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8 Ways to Improve Your FICO Score
Your credit score is a “snapshot” of your credit standing at a particular point in time. It changes as new information is added to your credit bureau files. By taking time to improve your credit score, you may qualify for a more favorable interest rate when you are ready to buy a home.
Your FICO score falls between 300 and 850 and is determined by five weighted factors: Payment History (35 percent), Amounts Owed (30 percent) Length of Credit History (15 percent), New Credit (10 percent), and Types of Credit (10 percent)
Here are 8 ways you can improve your score:
1) Always pay your bills on time. Even better, split your payment in half and make two payments a week or two apart. Credit reporting agencies check your payment history twice a month. If every time your credit is checked, you’ve made a payment, your score will climb even if the total is the same as when you made one payment.
2) If you’ve missed payments, get caught up and stay that way.
3) Keep your balance under 30 percent of whatever your credit limit is for each card.
4) Have credit cards and use them – responsibly. (You can’t have a good credit history if you never borrow.)
5) Pay off debt rather than moving it around.
6) Apply for and open new credit accounts only as needed.
7) Don’t open a lot a new accounts rapidly. Every new credit inquiry drops your credit score.
8) Never close unused credit cards as a short-term strategy to raise your credit score. (The opposite will happen!)
Home buyers get pre-approved for a home loan before they start looking at homes, then “lock-in” an interest rate once their purchase offer has been accepted. The process of buying a home is so exciting, the buyers sometimes forget that the lender will run a final credit check before funding the loan at the close of escrow. If the buyer has made a major purchase, fallen behind in payments, closed accounts or lost or changed jobs, the lender may refuse to fund the loan.
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