Fun With FICO Scores

If you listen to my radio show (and I sure hope you do!) you will hear the first few minutes with myself and my segment co-host, Ed “The Money Man” Wacaster talking about the real estate market. While our focus in on the Sacramento market, clearly the show and out discussions are universal (okay, maybe just national) in nature.

One thing that is going on right now that buyers (and sellers with time-lines) need to be aware of is how difficult it is to get qualified for a loan. While that in itself is enough of a topic for three posts, I thought I would dedicate this one to FICO scores.

Your FICO score can be your friend or your foe. In fact, one entity might give you a higher score than another, so it’s always best, in my opinion, to work with a qualified lender to see just where you are at in terms of your credit-worthiness.

Recognize that there are three credit bureaus that conduct credit scores–and again, they may each have information that is slight different, hence, giving you a slightly different score. You’ve got your TransUnion, your Equifax and your Experian. If you run your own report from each, then you’ll get a good idea what the lender will be looking at, but as I said, if you’re ready to think about buying a house, you can just have the lender pull it.

When you review your scores,  you might find errors. For instance, a few years ago when I ran mine, there were misspellings on my name, and yep, that can cost you points! Also, look for debts that were paid off, debts that don’t belong to you, and liens that should have already been removed. It is kind of a hassle to contact the credit bureau, but listen, it’s kind of a much bigger hassle to not qualify for a home loan!

Once you’ve checked out possible mistakes and made strides to clean them up, make a commitment to never, ever be late on your bills again. Clearly, going to collections is bad ju-ju, but in some cases, it can’t be helped. I know that lenders are a little more lenient with collects that are a result of medical bills, so that’s always good to know. If you miss a payment, make up for it as soon as you can. The creditors do not care about your problems, they just want to get paid what you owe them. Pay them what you owe them and try your best to avoid high-interest credit cards.

Keep your older credit cards in the game. The older the credit card and the better your history of making prompt payments, the rosier that reflects on you. Established credit is what we need to teach our children, not how to get a Macy’s card and be well-dressed for a premium interest rate!

Another thing to remember is that your debt to income ratio will affect things. You’ve got to make enough to show that you can handle your long-term debts AND a possible house payment. Remember too, that there are other expenses involved in maintaining a house besides the payment, such as property taxes and home owner’s insurance.

Finally and almost the first thing I tell my prospective buyers, is DO NOT BUY ANYTHING while you are in the house-hunting process. No boats, cars or computers! Do not charge anything until your escrow is closed! I once had clients think they were fine with their home loan and then they went out and bought a car. Dumb. Dumb. Dumb.

With credit scores today needing to be at an almost impossible high (750 and up), it’s more important that ever that you do your part to ensure you look as creditworthy on paper as you really are (you are, aren’t you?

Hope that helps. Let me know if you have any questions : 916-482-5834 and please tune in on Wednesdays to listen to all our past pod casts at www.InLoveWithSacto.com

ta ta for now

Tamara