Build quality credit
Over the years I have met with thousands of homebuyers. Many have long established credit histories that include past mortgages, vehicle loans, credit cards, student loan and many other forms of past and current credit. But, many young and first time homebuyers have little to no credit and little to no credit history. So here are a few ways to build credit so that when it does come time to buy a home, car or other major item you will have built a history that will allow for such a purchase.
For people with absolutely no credit to their name I suggest that the first thing you do is establish a bank account. In fact, establish a bank checking account and a checking account. At the same time apply for one, not two or three, bank credit cards. Ask for only a small line of credit, say $200.00. Then, when the card is approved, buy a tank of gasoline or charge a $50.00 dinner on the card. Now here is the most important thing to do, pay the bill in its entirety when it is received. Write a check on the day the bill is received and mail it immediately. Do not wait week, mail the entire payment the very day the bill is received. Then, once a month charge another tank of gas or dinner on the card and do this every month for at least six months.
This is the point where I need you to know and understand that a credit report reports most all of your credit history. The report will show the amount of debt that you currently have but it also shows credit debt that you have had in the past. My credit history shows accounts that I had twenty, even thirty years ago. So do not make the mistake to think that if you make a late payment now it will disappear within a month or two after it has been paid. That account will show up on your credit report for years to come.
The second way for you to establish credit is to open an account with a specialty retailer, such as Home Depot, Sears, or Victoria’s Secret. Then when the bill comes pay it off in full, or at least pay more than the minimum amount due.
I suggest that you open these accounts only if the retailer tells you that a major credit reporting bureau will be notified of your open account. The reason for this is that the account will do you no good if the information is not reported to a credit bureau.
Finally, if you have a relative that has good credit and they have a major credit card or two ask them if you can be added to their account. Many times this will give you instant credibility and show a history well beyond your time on the account.
So open up one or two charge accounts. Use them sparingly and pay well more than the minimum when the bill comes in the mail. This will establish a history that show s that you have credit, and more importantly, pay the bill on time.
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