FICO, SCHMIKO!  (Or, What in the world is a FICO score anyway?)

                I'm going to be honest with you. Understanding  your credit score can be like understanding a foreign language film without subtitles. The whole credit score world seems to speak a numerical language, and unless you're a computer, you don't speak numbers. Even their commercials are peppered with numbers: 720, 830, 640.  But what on earth do they mean and how do credit scores happen?

                So, let's start with the basics.  If a bank is going to loan you money, they want to know two things:

                Will you pay this money back?

                Will you pay on time?

                A FICO score is the lending world's attempt to keep score for you.  Imagine you're at a baseball game and you have one of those cool scorecards that lets you keep track inning by inning.  The Yankees score 2 runs in the first and you mark your card accordingly. The Braves scores 1 run and 1 error in the second.  Now imagine that there's only one team, and it's you and your spouse. Experian, Transunion and Equifax are the ones sitting in the bleachers, keeping the score cards. 

*Paid that credit card bill fifteen days late? -1!  

*Borrowed $5000 for a motorcycle? -10

*Paid off that credit card as agreed? +20  

                Those figures are arbitrary and mean absolutely nothing in the real world, but you get the idea.  Every credit reporting agency keeps a running tally on you.  And me. And the 300+ million people in the U.S.  Everything we do, whether we apply for a store credit card, buy a new car or get a cell phone is reported to these agencies.  The combination of activity in your credit life is what constitutes a FICO score.

                So, what makes it lower than it should be?  Obviously, unpaid bills or bills that are paid late, but a myriad of other things can affect your score negatively. If you have too much debt, or too many new credit cards.  Believe it or not, too little debt and too few credit reportings can also be detrimental.

                There are five things that contribute to your FICO score.  Types of credit in use, New Credit, Payment History, Length of Credit History and Amounts owed.

                In order to stay aware of your position in this confusing world, always request your credit report from all three agencies once a year.  Mistakes happen and it's possible there are things on your credit report that make you go, "Huh?"  That is the time to make a call and set things in motion to fix any items that are not yours.

                If everything on the report looks like it's yours, but your score still will not let you buy a house or car or tractor or whatever you want, follow these simple tips.

                Pay your bills on time.  From your water bill to your cell phone bill to your car loan, pay on time.  Every month. Period.

                Get current and stay current. If you've fallen behind, make the moves to get things up to date and then stay there.  It might take a while, but your efforts will cause that number to rise.

                If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.  This is not an instant fix, but managing your credit will allow your score to improve over time.

                Keep your balances low.  High outstanding debt can significantly lower your FICO score.

                Pay off debt.  Those offers from your credit card company allowing you to move your "high interest balances" to another card won't help your score.  Paying down the debt will.

               

                In short, manage your credit carefully.  Your future depends upon it.

Blast From the Past!

     Once upon a time in America, say around 1960, the average price of a home in this country was $16,500.
     Yes, you read that right.  Sixteen thousand Five Hundred Dollars.
     Of course, a dozen eggs cost 57 cents and a loaf of bread was a quarter.
     But I digress.
   
     In those bygone days, owning a home was the pinnacle of achievement.  It was "The American Dream".  Part of the reason it was a "dream", is that it was not easy to achieve.  When you owned a home, you had arrived.
      In those days, and frankly in the days when I first started Real Estate, people saved for a down payment, usually 20%.  On $16,500, that would be somewhere around $3300.  And the average house payment was $85.00. Remember,we're talking about a time when the average household yearly income was $5620.00. (Source: bls.gov/opub/uscs)
    It is true that everything was cheaper then.  Milk was 49 cents a gallon. Gas was 31 cents a gallon. A stamp was 4 cents.
    And the mail was delivered on time.

    But that's another subject.
    Saving for a down payment and buying a house were a benchmark of success -- much as they still are today.
    In comparison, buying a house in 2015 is actually much easier. The interest rate is incredibly low.  Compare today's rate to the interest rate in 1993 when I was first licensed to be a Realtor.  The rate in January of 1993 was around 8% for a 30 year Fixed Rate Mortgage. The rate in January of 1995 was 9.15%.
       At this writing, the 30 year rate is 3.76% (Source: Zillow), and that is a thirteen week high!
       Lenders and the government and the economy have all banded together to make owning a home more accessible to today's consumer than ever before.
       Does that make the American Dream less valuable?  Not at all.  It simply makes it more accessible.
       And there's nothing quite so satisfying as making a house your home.