Improving Your Credit Score

FICO scores are based on specific credit history, with hundreds of inputs used to find your score.

There are 5 main parts of your credit score:

1. Payment History: 35% of your credit score

Payment history measures how you’ve paid on your debts. Payment history is the largest part
of your credit score because if you’ve recently missed payments your creditors, it’s likely those
missed payments will continue, and may lead to default.

Payment history also measures how “severe” a missed payment has been. An item in
collection is worse than an item paid 30 days late.

Tip to improve: Make payments on time, all the time — even items in dispute. Pay the bill and worry
about refunds later.


2. Amounts Owed: 30% of your credit score

Amounts owed measures how “maxed out” you are. It is the second-largest part of your
credit score because a person that is maxed out has no safety valve in the event of a crisis.
Amounts owed is not about the dollar amount you’re borrowing — it’s about the dollar amount
you’re borrowing relative to the amount available to you.

Tip to improve: Don’t close out “old” credit cards, and don’t lower your available credit limits.
Having access to credit is good.


3. Credit History Length: 15% of your credit score

Your credit history is your track record with respect to managing credit. It matters in
the FICO model because “experienced users of credit” areviewed differently from new users. Similar
to the hiring process for a job, the credit bureaus want to see that this isn’t your first experience.

Tip to improve: Don’t close cards with“history”. You need them to show you’re experienced
with credit.


4. New Credit: 10% of your credit score

This category accounts for your recent attempts to secure new credit. In general, themore credit for which you’veapplied, themore damage it will do to your credit
score. This is more true for credit cards than for mortgage applications. A consumer in search of new credit cards is presumed to
“need” more credit lines.

Tip to improve: When you shop for a mortgage, multiple credit checks can count
as a single credit inquiry, protecting
your credit score.


5. Types of Credit: 10% of your credit score

The type of credit you carry matters and not all credit types are the same. Installment loans such as mortgage loans and studentloans, for example, are considered
“better” than credit cards and charge cards. This is because installments loans eventually pay down to zero. Consumer cards, by contrast, can only go up.

Tip to improve: Don’t carry an abundance of store charge cards. Interest rates are high
and the FICO model looks
unfavorably upon them.

Financing Your Home Purchase

5 Steps to Save for a Down Payment

One of the greatest hurdles to home buying is coming up with the down payment. Here are a few softer
practical strategies to help you clear the hurdle and come up with the cash you need.


1. Plan for progress –
Your Dream Budget

Saving isn’t all dollars and cents, it’s a little emotional. That’s why we recommend finding
a few visuals to remind you why you’re saving. They could be photos or a list of features of
your dream home. Whatever your focal point, store it  close to your budget, wallet, or in the place you
pay bills to remind you of what you’re working for.


2. Slow your Spending –
The 10-day Rule

The biggest enemy of spending is the impulse buy. For purchases over $25 exercise self discipline and give yourself 10-days to decide

if this purchase is for a real need or a want?


3. Avoid the Convenience

From coffee on the go to lavish meals out, consumers pay quite a bit for convenience. Avoid your local convenience stores and

become friends with your kitchen to help your bottom line.


4. Track Expenses – Face Your Truth

We scoured the net and all the experts agree, the only thing more powerful than creating
a budget is tracking it. Schedule time with yourself each week to face the truth about your spending and find new ways to save.


5. Eliminate the Excess Spending

Locate the excess in your budget and slash it. Trade the gym for home workouts, movie nights out for rentals at home, and keep an

eye out at the end of each month for services.

Serious Sources for a Down Payment

Payroll Deductions:

One of the best ways to save money is to hide it from yourself. Payroll deductions or allocating a piece of your direct deposit
to a special savings account can be a great way to trick yourself into saving.


Tax Refund:

You know it’s coming, why not use it toward your down payment? If you’re really serious about home ownership, talk to an accountant

about tax planning to make sure there is a little green at the end of the year to help
you with your down payment.


Borrow from the 401k:

It’s not losing your retirement, it’s more so using a piece of one investment to make another. First-time homebuyers can one-time

borrow up to $10,000 from their Individual Retirement Accounts (IRAs) without paying the early withdrawal fees. Be sure to talk
to your 401k or IRA administrator to find out how it will impact your retirement.


More Work:

Yes, we said it; more work. If you’re serious about reaching your down payment goal, consider spending a few hours working
parttime. 10 hours/ week at $10/hour all year will get you $5200 closer to your goal.