Ginger Peel is a Mortgage Loan Originator with the Bank of Utah who has worked in the mortgage industry for over 30 years. I recently had the opportunity to ask her a few questions about how someone would go about improving their credit score in order to buy a home.
What is a FICO score and how is it calculated?
Peel: A FICO score is a type of credit score created by Fair Isaac Corp that lenders use, along with other details, to evaluate a borrowers’ credit risk in order to determine whether or not to extend credit.
Why is it important to have a good FICO score if you are interested in buying a house?
Peel: It is important to have a good FICO score if you are interested in buying a home and obtaining financing from a lender. Lenders follow guidelines from investors on what the minimum FICO score should be for a borrower. Lenders will pull a credit report from all three credit bureaus: TransUnion, Experian, and Equifax, to determine the credit risk and qualifications to purchase a home. Without a good FICO score, you may not be able to qualify for a mortgage loan.
What is the lowest score you can have to qualify for a loan?
Peel: The minimum FICO score that most lenders want to see is 620. Credit scores can range from the low end of 300 to the higher end of 850. The higher your FICO score is, the better the loan program and the better the interest rate that you will qualify for.
What measures can you take to improve your score?
Peel: The FICO scores take into account various factors in 5 areas to determine your credit worthiness:
- Your payment history makes up 35% of your FICO score. You will want to make sure that you pay all of your debts on time.
- The amount owed to your creditors makes up 30% of your FICO score. You should attempt to keep your balances under 30% of the total credit limit.
- Your length of credit history makes up 15% of your FICO score. FICO considers how long the oldest account has been open, compared to the newest account, and averages the term.
- Types of credit used account for 10% of your FICO score. Make sure to keep revolving credit account balances low; don’t open new accounts too rapidly; and, open up different types of credit. Revolving credit is usually an adjustable rate loan, and the payment revolves according to your balance each month. Like a credit card. Installment credit is usually a fixed rate loan, and the payment is fixed each month, similar to a car loan.
- New credit accounts make up for 10% of your FICO score.
How long does it take to see an improvement in your score?
To improve your credit score in 30 days – first, you will want to correct any errors on the credit report, and then. try to become an authorized user on another account in good standing, especially one that has been open for some time. You can raise your available credit line by keeping your balance below 30% of the credit limit. Also, make minimum payments on time, and pay off debt, rather than move it around. Reduce your debt to income ratio and have a good mix of debt. Don’t close unused credit cards as a short-term strategy to raise your scores.
In her spare time, Ginger Peel enjoys cooking, gardening, and watching football. You can contact Ginger Peel to apply for a loan in English or Spanish.
Ground has been broken for the first three of seventy-six homes to be built in the Granite Legacy development on the south end of property where Granite High School once stood. The beloved high school opened in 1907 and closed its door following the commencement ceremonies for the class of 2009. Many notable students graduated during the 102 years that the school was open, including Leigh Harline from the class of 1925 who won an Academy Award in 1940 for Best Song “When You Wish upon a Star”.
Wasatch Developments and Garbett Homes purchased the land after several attempts to preserve the building failed. Garbett Homes, Utah’s premier Zero Energy Ready Home builder has been building homes in the community for over 30 years, but has been working closely with U.S. Department of Energy (DOE) Zero Energy Ready Homes since 2009 according to Jacob Ballstaedt, the Land Acquisition and Entitlement Director for Garbett Homes.
The HERS index measures a home energy’s efficiency, the lower the score, the better the efficiency. Ballstaedt states Garbett Homes have a HERS score of 40. The standard new home has a HERS score of 100. A score of 40 is 85% more efficient than the typical resale home. A Net Zero home (HERS score of 0) produces as much energy as it uses through the use of renewable resources, such as solar panels. Other than the mortgage loan; heating, cooling and water heating make up the largest cost of homeownership.
Ballstaedt stated that Garbett Homes is able to achieve the lower HERS score by making the home more air tight, which also provides additional benefits of eliminating outside noise and blocking out drafts, moisture and pests. The thermal envelope includes the foundation, outer walls, roof, windows and doors. This prevents heat transfer from the interior to the exterior and vice versa during the change of seasons.
The indoor air is filtered with outside air through the Energy Recovery Ventilation (ERV) technology. This improves the indoor air quality and reduces the energy used by the heating and cooling systems.
The Garbett homes are pre-wired for solar panels, which if the consumer chooses to have installed will convert sunlight into electricity. This will reduce their HERS score even lower, with the potential of being a Net Zero home, producing as much energy as they are consuming.
The South Salt Lake community is close to shopping, golf courses, dining, and entertainment. It is a great place to make your housing dreams come true!