JoAnn M. Drabble's Blog
Chances are good you know all about your credit score. Also called a FICO score, this magical number is a major factor in many financial transactions, including qualifying for a mortgage and renting apartments.
Yet here's some info that may have slipped past your news feed: In October 2018, the Fair Isaac Corp. (the creators of FICO) announced a whole new scoring method called the UltraFICO. Currently in beta testing with a small, undisclosed group of lenders, this new scoring method is expected to be more widely released in April 2019.
So, what is this exciting new scoring model? Will it help? Will it hurt? Here’s what you need to know.
FICO vs. UltraFICO: What's the difference?
Your traditional FICO score looks only at the money you borrow from lenders (e.g., through credit cards, and car and college loans). FICO scores generally do not factor in any traditional bank accounts, be it checking or savings.
The UltraFICO, in contrast, does look at your banking behavior, adding it to the mix along with more traditional metrics like your credit card payments. UltraFICO examines your checking, savings, and/or money market accounts (which are similar to savings accounts but offer a higher interest rate in exchange for maintaining a higher balance), and reports on details such as the following:
- Your account history: How long have you had these accounts? The longer the better.
- Your account balance: According to the UltraFICO website, it's looking for “a healthy average balance.” It doesn't spell out exactly what that means, but it suggests that consumers with a balance of at least $400 over a three-month period should fare well with this new scoring system.
- Your account activity: Do you regularly pay your bills through your bank account? If you don't, you may want to start, since that will be considered, too, particularly how often you pay your recurring bills (e.g., cellphone and utility bills), according to Nathan Danus, director of housing at DebtHelper.com in West Palm Beach, FL.
If you show “responsible financial behavior” in these accounts, this could improve your credit score. If you have imperfect credit or no credit but you have a positive banking history, your score may see a nice boost.
“If you have even a few hundred dollars in your account, and if you haven’t bounced checks or gone under the minimum balances, that will now count in your favor,” says Howard Dvorkin, a certified public accountant in Fort Lauderdale, FL.
Will UltraFICO replace FICO?
No. “Most banks and lenders are going to use it initially as a backup scoring model,” says Danus.
The way it will likely work, according to Danus, is that when you apply for a loan or mortgage, if your regular FICO score isn’t high enough to qualify you, the lender may ask for your UltraFICO.
The UltraFICO is also voluntary. You don’t have to volunteer your banking information with a prospective lender for review unless you want to. This is a major difference from your FICO score, which is calculated whether you like it or not.
Who will benefit from UltraFICO scores
Building a credit history takes time. If you have little or no credit history but do have a banking history, you may be able to generate an UltraFICO score even if you don’t have enough of a credit history to generate a FICO score.
As such, the UltraFICO has a lot of potential, especially for consumers with borderline credit (meaning you’re at the cutoff between having poor and fair credit or between having fair and good credit) or who have a limited credit history. FICO estimates that over 15 million consumers who don’t have a FICO score could receive an UltraFICO score.
If you already have a good FICO score, then you probably don’t need to worry about the UltraFICO. Whether the UltraFICO will help you depends on your banking history.
“If the consumer finds themselves among the 60% of Americans who have very little to no savings funds, the UltraFICO will likely not help build their credit rating,” says Todd Christensen, education manager at Money Fit by DRS in Boise, ID.
Consumers who don’t have a recent pattern of positive savings may not want to opt in to the UltraFICO, according to Christensen.
How to prepare
The UltraFICO is currently in beta testing. Ultimately whether the program is expanded depends on how well it does for consumers as well as lenders, according to Danus.
If everything goes well, consumers may soon see this option available with lenders in April. And there's a way to prepare: Start building up your savings now, so that if you have the chance to opt in, you’ll have a positive banking history for lenders to review.
Ultimately, though, don’t let the UltraFICO distract you from taking steps to improve your FICO credit score. It’s still important to make on-time payments to lenders, to pay down your credit balances, and to make payments arrangements if you have any delinquent accounts.
We know that location matters when you’re trying to find the right home to buy, but why? First, buying a home you like in a location that matches your needs is a sign of a solid, long-term investment. Finding the right home isn’t always the answer to your property search woes. Many times, finding a house that needs a little TLC in the right neighborhood can give you a better return on your investment than finding a move-in ready house in the wrong neighborhood. You want to think in terms of finding a home that will be easy to sell if you so choose to sell it. Most importantly, you want to feel comfortable in your home and in your surroundings. What are the signs of a good location? Below, you’ll find the most important things you should look for when searching for a home.
Everyone wants a safe neighborhood, and you certainly know a sketchy neighborhood when you drive through it, but what denotes a neighborhood as “safe”? First, if you see people up and walking around a place, you know it’s a good start to finding a safe neighborhood. People who are outside, interacting with one another give a neighborhood a community feel. You will feel like your neighbors have your back in a neighborhood like this.
the better the school district is, the higher the property values in the area are. If you don’t have kids, this may not be much of an issue for you. However, if you’re thinking that you may want to sell your home anytime in the future, keep in mind that a less than reputable school district can really dip into property values.
You Can Easily Access The Things You Need
If you can access the shops, restaurants, and other conveniences easily from your neighborhood, that’s the sign of a good location. No one wants to have to drive 45 minutes in order to get to the grocery store. Many people who are looking for homes like to be in or very close to the action and have easy access to the things they need. Think in terms of convenience when it comes to location.
A View And Nature
A home with a view is always a sign of a great location. whether you’re near the water or near the mountains, it’s nice to have something scenic and peaceful near your home to enjoy. Property values near the water are also always a bit higher than those further inland.
Access to public transportation is key in many neighborhoods. You want to be able to easily get to and from where you need to go without waiting around. If the area is more suburban or rural, access to freeways and main roads is key. Adding precious time to your commutes is never pleasant. Many times location and commute times come down to a simple matter of balance and planning when searching for a property.
The right time to purchase a home varies from person to person. Meanwhile, buying a house is one of the biggest decisions an individual may make in his or her lifetime. As such, it is important to weigh your options closely to determine if now if the right time to buy a house.
There are several things you can do to get ready to pursue and buy your dream home. These include:
1. Make a Plan
Think about the steps you'll need to take to go from homebuyer to homeowner. Then, you can craft a plan to put these steps into action.
Also, it often helps to create a list of homebuying criteria. This list will help you narrow your home search and speed up the process of finding your ideal residence.
You should stay flexible as you conduct your home search too. The housing market fluctuates constantly, and if you maintain flexibility, you'll be ready to adjust your homebuying strategy as needed.
2. Get Home Financing
It usually is a good idea to get pre-approved for a mortgage. If you have a mortgage in hand, you'll know exactly how much you can spend on a home.
Banks and credit unions are available to teach you about all of your mortgage options. Thus, meeting with these financial institutions will enable you to learn about different types of home financing and make an informed mortgage selection.
Of course, you should not hesitate to ask home financing questions. Banks and credit unions employ courteous, knowledgeable mortgage specialists who are happy to respond to your queries. Therefore, if you are unsure about which mortgage option is right for you, these mortgage specialists can help you evaluate all of your options.
3. Hire a Real Estate Agent
A real estate agent offers expert guidance throughout the homebuying journey. He or she will help you find your dream home and submit a competitive offer to purchase it. Plus, a real estate agent will negotiate with a seller's agent on your behalf, help you prepare for a home closing and much more.
In addition, a real estate agent can provide plenty of support during your house search. He or she first will help you craft an effective homebuying strategy and search for properties that meet your criteria. Next, a real estate agent will set up house showings and keep you informed about open house events in your preferred cities and towns. And if a seller accepts your offer to purchase his or her home, a real estate agent will help you set up a property inspection and finalize your house purchase.
For those who are ready to purchase a home, it helps to be prepared. If you take advantage of the aforementioned tips, you can enter the real estate market as an informed property buyer. As a result, you may be better equipped than other homebuyers to enjoy a quick, successful property buying experience.
For a first-time homebuyer, it is important to realize that a home seller's acceptance of your initial offer provides no guarantees. In fact, a homebuyer will still need to complete a home inspection before a home sale is finalized.
A home inspection is a valuable opportunity to learn about any potential issues with a house. After the inspection is finished, a homebuyer has the opportunity to submit a counter-proposal, rescind a proposal or keep his or her current offer intact.
Ultimately, hiring the right home inspector can make a world of difference for a homebuyer. With an expert home inspector at your side, a homebuyer can gain insights into a house's pros and cons and determine whether a house is a viable long-term investment.
So what does it take to employ the right home inspector? Here are three tips to help a first-time homebuyer do just that.
1. Conduct an Extensive Search
Search far and wide for a home inspector – you'll be glad you did. If you allocate the necessary time and resources to locate a skilled home inspector in your area, you can boost your chances of identifying potential home problems before you complete a home purchase.
A first-time homebuyer can begin a search for an expert home inspector online. A simple web search is sure to provide plenty of results, and a homebuyer then can perform an in-depth review of local home inspectors' credentials.
Furthermore, don't hesitate to ask family members and friends for assistance. If a loved one recently sold a house and had a great experience with a home inspector, it may be worthwhile to hire this same professional to perform your home inspection.
2. Look at a Home Inspector's Background
How many years of industry experience does a home inspector have? What are past clients saying about a home inspector? And how does a home inspector approach each job? These are some of the questions that a first-time homebuyer should consider as he or she assesses a home inspector's background.
In addition, a homebuyer can always reach out to a home inspector directly to learn more about this professional's experience. A face-to-face or phone conversation with a home inspector may require only a few minutes to complete and can help a homebuyer make an informed decision.
3. Consult with a Real Estate Agent
A real estate agent can help you discover your dream house as well as put you in touch with the top home inspectors in your area. As a result, this housing market professional will ensure you can purchase a first-rate house that matches or exceeds your expectations.
If you're uncertain about whether to hire a particular home inspector, it never hurts to consult with a real estate agent. By doing so, you can gain honest, unbiased tips to determine whether a home inspector is the right person to evaluate your residence.
Employ the best home inspector prior to completing your home purchase – use these tips, and a first-time homebuyer should have no trouble hiring a superior home inspector.