Buying a Home? Get Your FICO Score

When it comes to real-estate (on the consumer side), there exists two groups: the rookies and the veterans. Simply stated, those who are new to the home purchasing process and those who have gone through it. Both groups will tell you the same thing - buying a home requires a lot of sweat, and some tears.

We went on a search for some of the best home buying tips out there. We hope you find the information useful.

The credit basics

Before you start reaching out to a real estate agent or browsing through your neighborhoods of choice, obtain your FICO score and your credit report. Again, the key word here is FICO. A FICO score is different from other credit scores, like a TransUnion credit score. Let’s see how.

Remember your three friends, Equifax, Experian and TransUnion? These are the big 3 – the major credit bureaus that maintain credit reports in the US. The bureaus issue credit reports to creditors (like the banks and lenders). When you apply for a credit card, one of theses bureaus will send a report along with a credit score to the creditor. Each bureau has their own formula for calculating the credit score, so your Equifax credit score may be different from your TransUnion credit score.

Mortgage use FICO, not the big 3

Mortgage lenders use a different credit source. They use FICO credit reports and scores. FICO stands for Fair Isaac Corporation. As we previously stated, a credit score that comes from one of the credit bureaus, like Experian, is modeled after Experian. A FICO score is created by FICO and will vary from an Experian credit score.

“Today, FICO scores are omnipresent to the point that people generically refer to all credit scores as ‘FICO scores’. This is akin to calling all adhesive bandages ‘Band-Aids’. FICO is the brand name — not the product. FICO scores range from 300-850.” [source]

If you’re looking to buy a home, get your FICO score and credit report. Like all credit reports, review it thoroughly and pay attention to any delinquencies or negative marks.

Extra tip: We’re always reminding you to make your loan/credit card payments. Here is when this piece of advice becomes important. Your FICO credit report will be analyzed thoroughly, and recorded late payments will have a negative impact on your future mortgage rate. Lesson: make timely payments.

Default risk

It’s a numbers game. If your FICO score is low, you’re considered a risk and and your future home has a higher default risk. This means that you are less likely to pay your mortgage payments (principal and interest) in a timely fashion.

Did you find the information above helpful? Let us know. As always, your feedback is encouraged, so leave a comment (or two) below.

Sources:
[TransUnion: Credit Report Information]
[Equifax Credit Score vs FICO Score]
[Trulia Blog: Better Mortgage Rates Start With Better FICO Scores]

[Image credit: TaxBrackets.org]

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About the Author

Alejandra Gutierrez Alex is the new Social Media Specialist for the ILWU Credit Union. She's a 'nerd' at heart who enjoys community building. Her obsessions: baked goods and old mariachi ballads.