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Articles » Fico Score | | Top Ways to Improve Your FICO Score for a Better Home Mortgage |
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The Fair Isaac Company has formulated a score based on a person’s credit history. This score is called one’s FICO score, and knowing this score is among the most important actions you can take before applying for a home mortgage loan. Your FICO score is one of the determining factors for the interest rate on your loan and for the amount of your down payment. In some cases your credit score can even determine whether you get the loan or not.
Your FICO score is a 3-digit number, the making of which takes about 22 factors from your credit record into consideration and generates this number as the representation of your current credit worthiness. This is why all lenders use your credit score in order to predict your future financial behavior.
Your credit isn’t everything in determining your financial status, but it carries great weight and lenders, insurance companies, landlords and recently even employers are taking advantage of it to measure your responsibility capability and your stability.
You can benefit from a high FICO score to:
• Obtain better employment opportunities
• Obtain more beneficial credit deals
• Decrease APRs on your credit cards
• Keep more money for yourself
• Get quicker accepted for credit cards
Credit grantors look for credit patterns, and that’s why you should begin to establish a new and great credit record for yourself. Keep in mind that it takes more time to develop your credit than it takes to destroy it. Below is a list of useful actions you can take to raise your credit:
1. Obtain your credit report (it’s free) and go over it:
Make sure there is no inaccurate or fraudulent information on your report, and if you do find any dispute them and get them removed from you record ASAP.
2. Make your payments in a timely manner:
On time payments make the biggest influence on a credit record. Therefore, if your goal is to raise your credit score quickly, this is the way to start
3. Do not apply for too many credit cards in a short period of time:
Having credit cards can be good if you can manage to make all your payments on time and if you can keep your debt to credit limit ratio under 30%. This said, when applying for the cards, make sure you do it over an extended period of time, leaving a few months of time between the requests.
4. Only apply for necessary credit:
If you are not going to use the credit in an essential and constructive way DO NOT apply for it as your applications get recorded on your credit history.
5. Maintain your debt to credit limit ratio below 30%:
In order to calculate this percentage just multiply your total credit card debt by 100 and divide the resulting number by the sum of your credit card limits. If this number is below 30% you are on the right track, otherwise you are spending too much on your credit cards.
6. Do not close credit accounts you already have opened:
Closing an account will decrease your total credit limit and if you have not reduced your debt, your debt to credit limit ratio will greatly increase. This will hurt your credit, so do not close accounts unless you absolutely have to. Instead, keep the card in a safe place and only make minimal charges on it once or twice a month and make its payments on time. This way the card will still contribute to your credit and will not be categorized as an inactive card by the credit card company.
7. Value your credit and constantly work on further building it:
Having great credit can save you a lot of headache, time and money if you continue to work on improving it even if you don’t need it at the moment.
MyFico.com has various tools you can take advantage of in order to assess you current credit status. I also recommend visiting Fico.org to further develop your understanding of credit.
Comments
Jordon March 25, 2009 08:16:33 PM 8:16 PM These are really good points that one must read. This really helps to know how we can manage our finances well so that getting mortgage would not be a big problem. That was a good point you mentioned here that credit report is not the only thing to get mortgaged but it carries a lot of weight.
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