Establishing Good Credit To Qualify For Mortgage Loan

This BLOG On Establishing Good Credit To Qualify For Mortgage Loan Was UPDATED On December 10th, 2018

Establishing good credit is one of the most important factors for all American consumers. Establishing good credit means saving money. Lenders and Creditors view bad credit as high risk. High risk means higher interest rates. Higher interest rates mean extra money from consumers to pay in interest expense.

Having good credit means that it will save consumers money on auto loans, mortgage loans, student loans, installment loans, and credit card interest rates
Good credit also means that will pay less on your insurance premiums
Many companies also check credit scores as part of their job application process
A low credit score or a lot of negative items on a credit report can cost a job
Having no credit is like having bad credit
Consumers who have no credit need to start thinking about establishing good credit
The sooner that task is done, the better it will be
Credit reporting companies rate on credit longevity as part of calculating consumer credit scores

In this article, we will cover and discuss Establishing Good Credit To Qualify For Mortgage Loan.

Build Credit With Outside Help: Joint Credit

For those who have no credit, a good way of establishing good credit is by piggy backing on somebody’s good credit. Adding on as authorized users can help boost credit scores and good credit but there are stipulations.

This can be done rather quickly by adding themselves on as an authorized user on someone else’s credit
Adding a spouse with the same last name and same address will work
In order for this tactic to work for people that do not live at the same address, the person being added on as authorized-user needs to have the same last name if they do not live at the same address
Being added as an authorized user does create some risks

For example, here is a case scenario:

if a parent who has excellent credit
adds a son or daughter as an authorized user to the parent’s credit card as an authorized user
the son and/or daughter will benefit from getting instant excellent credit and the history of the good credit

The risk associated with this method of establishing good credit is that in the event if the parent is late on their monthly credit payment, it will reflect it on the son’s and/or daughter’s credit report:

Thus damaging their credit
Borrowers who decide to be an authorized user on some else’s credit, make sure the creditor reports authorized users
There are creditors that do not report authorized users to credit reporting agencies

Establishing Good Credit With Credit Cards

Another method of establishing good credit to get a few secured credit cards.

Secured credit cards is the most powerful tool there is in establishing good credit or re-establishing credit after bankruptcy, foreclosure, collections, judgment, tax liens, or late payments
The key number of secured credit cards to get is 3
Each secured credit card should boost a consumer’s credit score by at least 30 points or more

Make sure the secured credit card company reports credit activities to all three credit reporting agencies.

Establishing Good Credit With Loans

Get an auto loan or installment loan.

For example, car buyers who can purchase used car cash should finance it in order to establish credit
They can put 50% down and finance the other half

This is another powerful tool in establishing good credit.

Establishing Good Credit: Always Remember These Tips

Another major factor in establishing good credit is to use revolving accounts regularly but never max it out.

Always leave a small balance on the credit account like $10 dollars:

Make sure the majority of the credit limit is wide open
A good credit score is derived by having a largely available credit limit
For example, consumers who have a $500 secured credit card and have a credit balance of $475, this will hurt credit scores because of high balance
High credit card balances will drop credit scores
Consumers should have a credit card balance of $10 dollars and never zero
This will maximize credit scores
Never close out a credit account
Many consumers cut up their credit cards and close it out
Leave it open because having a credit history is part of credit score