1. Keep track of spending. Always keep track of checks written, debit and credit card transactions, and ATM card usage. Review your monthly statements for discrepancies and report any errors.
2. Pay bills on time. This applies to all bills, even those that aren't reported to credit bureaus. This is because they can end up on your credit report if you fall behind.
3. Keep balances low on credit cards. Combined credit card balances should be within 30 percent of your combined credit limits.
4. Don't close unused or old credit cards. Closing a credit card stops updates sent to the credit bureaus by credit card issuers. Closing a credit card also reduces available credit, especially since your goal is to keep your balances less than 30 percent of your available credit.
5. Don't exceed your credit limit. Available credit is how much credit you have remaining on your line of credit or on your credit card - the credit limit minus the outstanding balance.
6. Build credit without a credit card. You can maintain credit by paying items off diligently.
7. Limit applications for new credit. Don't submit too many applications, as multiple credit inquiries can have a negative impact on your credit score.
8. Watch your credit report. Keeping an eye on your credit report will help you monitor any changes, find errors, reveal identity theft, uncover credit card fraud, and more.
As you’re thinking about purchasing a home, you will need to consider the important role your credit score will play in your ability to secure a mortgage loan. If you have little to no credit currently, the tips below can help you get started and on your way down the path to home ownership.
1. Open a checking or savings account. Lenders typically request bank account numbers on credit applications. Open a bank account and keep it in good standing to show lenders that you can responsibly manage your money.
2. Apply for an entry-level credit card. Entry-level credit cards do not require a long credit history for approval. There are various types to consider, including secured credit cards, student credit cards, and store credit cards.
3. Get a co-signer for a credit card or loan. As you know, applying and obtaining a credit card or loan can help you establish good credit as long as you pay on time and do not miss payments. A co-signer with good credit can help you qualify or acquire better credit terms. If you choose this route, the co-signer will take responsibility for payments. Therefore, the credit history will be reflected on both of your reports.
Establishing credit is crucial to your everyday life as it makes it easier for you to purchase items—along with saving you money in the process. Specifically, qualifying to make big purchases like buying a home are determined by your credit score. Each of these tips, along with the responsible use of credit, can help you build your credit over time.
Reach out to me with any questions or to learn more!
Our HomeStar Financial Corporation blog post is here.