Tips for Building Credit
Knowledge is Power. -Francis Bacon
I get a lot of calls from potential home buyers who would really love to purchase a home and thought that they would be good to go but unfortunately, they were misinformed about credit issues or not informed at all. I have compiled some helpful information that will help align your credit with your home purchasing goals.
- Open a Checking AND Savings account- Try to make sure you get it for FREE! Most banks are competing hard for your business so negotiate fees (if any) with them.
- Get at least 2-3 Major Credit Cards- I recommend the following companies based on their approval rate. Please bear in mind that you are essentially “paying for your credit” by getting your first credit cards. These cards will come fees and that should be expected because right now you are considered a “high risk” case. Don’t over do it though. If you’re denied by the first 3 companies below, don’t try the 4th. Too many “hard inquiries” on your report will drop your score lower.
- Use your credit cards- The key to building your credit is using it and using it correctly. Buy something small on your credit card each month. Pay that bill off completely each month. This will help boost your credit worthiness. Keep your monthly balances at $0 or as low as possible. The amount of available credit vs. total credit you have affects your credit score. The more available credit you have, the better off you are…yet you still need to use the credit cards to help boost your scores so don’t let them sit unused.
- Monitor Your Credit Report- Yes, this too will cost you a fee. I recommend http://www.FreeCreditReport.com ($14.95/ month) because it is extremely user friendly and offers helpful tools to understanding what affects your score. You will receive monthly credit score reports on how your score changed and what caused it. You can also see all of your open credit accounts, past and present. Sometimes you may find that a company may have mistakenly identified you as someone else. The credit monitoring websites make it easy to dispute claims online. If you have items on your credit report that are incorrect or are old, try disputing them and having them from being seen on your report.
- If you are Renting an apartment or home, ask your Landlord to report your good paying habits. Websites like http://www.tenantverification.com allow Landlords to do so for free. You can suggest this to them as a great way to attract responsible adults as tenants because renting their home helps the tenant build credit.
I recommend using your credit cards responsibly as mentioned above for 6 months. Within 3-6 months it should help boost your score. If you’re watching your score on a credit monitoring website, notify your real estate agent when you’re at or near 640. This is a great number and you can often secure prime interest rates with this score!
These tips are based on personal experience and tools that have helped prior real estate clients. They are not guaranteed and each person’s credit report varies because of everyone’s unique financial history.
Please feel free to ask if you have any questions or concerns regarding this information!