For first-time Chicago home buyers, good credit is a must. Your credit score affects the mortgage offers you’ll receive, and affects how much you’ll pay for homeowner’s insurance, too! But creating and keeping good credit can be tricky, especially when FICO changes up the rules. Here’s the latest credit score tips for Chicago home buyers!
As you may already know, FICO is the most common credit scoring model in the U.S. This summer, credit scoring changes are happening with the “FICO 10” upgrade, which adds new wrinkles to how debt levels are treated.
The good news: if you do not increase your debt load from one year to the next, you’ll be fine. If you have a history of on-time payments, and you don’t use much of the credit you have available, your score may increase!
The bad news: if your outstanding debt tends to grow higher year-over-year, FICO is going to reduce your score by 20 points or more. The exact impact depends on how sharply your debt has risen, and whether or not you’ve missed any payments.
Credit utilization and debt-stacking will come under tight scrutiny with FICO 10, which looks back on your last 2 years of debt use. FICO 10 frowns on refinancing credit card debt with installment loans – especially when the cards have a balance run up again. If you have credit cards with nearly maxed-out limits, your best defense is to pay them down methodically. If you decide to get a debt consolidation loan and refinance them, you’ll need the discipline to leave those cards at a zero balance afterwards.
FICO 10 is still in the fine-tuning stages. Not all mortgage lenders will be in a hurry to use this new scoring model, so don’t panic if you’ve got credit clean-up to do! We’ll be happy to refer you to trustworthy lenders who can help you prepare for your mortgage application.
StartingPoint Realty – serving Chicago home buyers since 2004!
StartingPoint Realty proudly serves first-time home buyers throughout the Chicago area. Get an introduction to home buying by attending our free home buying seminar! There’s no sales pressure and no obligation. Space is limited, so please register your choice of location and date to reserve your seat!
Always feel welcome to contact us for help with your Chicago home buying questions!
Ryan Gable Broker/CEO Starting Point Realty
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