FICO Scores and You!

“I’m thinking of a number between 300 and 850. Do you know what it is?” Thanks to the abundance of fix-your-credit ads on television, most of you probably guessed that I was talking about your FICO scores. FICO, that all important number that credit bureau’s use to tell potential creditors how much of a credit risk you may be.
Just a couple of years ago a score between 680 and 720 would often get you the best loan terms but today, with the increase in the number of defaulted loans, that score has risen to between 720 and 750.

So how do you bring your score up? Often, consumers find the process a lot tougher than they initially anticipate.

The basics haven’t changed: Pay your bills on time and don’t max out available credit. 35% of your FICO score comes from your payment history. Another 30% is derived from account balances – including the number of accounts as well as the amount of available credit on each card.

Also, you want to analyze your credit report. You can get a free copy of your reports from the three main reporting companies from someplace like Annualcreditreport.com. Look through this report carefully for errors and then contact both the creditor as well as the agency reporting the discrepancy to get them resolved. You can also obtain a copy of your actual FICO scores from myfico.com.

One thing to check on the reports is if your current credit cards report the credit limit of your account. If they do not, the report can treat your highest account balance as the credit limit thus not correctly reporting the debt ratio of the account.

Having a variety of credit types can also help boost your score. This will become even more critical as FICO 08, a new scoring system being introduced, becomes more widely accepted. So a history of payments to both installment creditors (car loans, house loans, etc.) and to revolving credit lines (credit cards) can be interpreted as a sign of successful credit management.
Be careful not to open several new credit lines in a short period of time. Though it may seem beneficial to increase your overall available credit, numerous inquiries to the credit bureaus is taken as a sign of higher risk. In the same line, if you are shopping for a new loan, try to move quickly. A couple of inquiries that result in a new loan should have little or no adverse affect on your credit score.

Another tactic that may seem counterproductive, don’t close off old credit lines. This could result in lowering your available credit which, in turn, could lower your score. Instead, keep them open but paid off. Some strategists even recommend using an old card every couple of months for a small purchase just to keep an active payment history going.

Fixing or improving your credit score can be a long process but with a little preplanning and a sound spending strategy, it is obtainable and can result in saving you thousands of dollars in lower interest rates and better loan terms. Well worth the time investment!

FHA Loan Limits Rise

Effective as of March 6, 2008, the mortgage limits for loans guaranteed by the Federal Housing Administration(FHA) have been raised in 14 high cost California Counties.
The California counties at the new maximum level of $729,750 for FHA loans are Alameda, Contra Costa, Los Angeles, Marin, Monterey Napa, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz and Ventura.

The new, temporary loan limits range from $271,050 to $729,750. These limits are derived from the median home prices in each county. Loan limits will be set at 125% of the median sales price for an area. This increase will help provide economic stability to communities in California and give hundreds of thousands of homeowners and homebuyers throughout the country a more affordable mortgage alternative.

However, these higher loan limits are temporary and expire at the end of 2008.