Establishing Good Credit To Qualify For Mortgage Loan
This BLOG On Establishing Good Credit To Qualify For Mortgage Loan Was UPDATED On July 5, 2017
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 means extra money from consumers to pay in interest expense.
- Having good credit mean 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 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.
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 user 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, if a parent who has excellent credit adds a son or daughter as 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.
- Mortgage 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.
Build Credit With 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, judgement, 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.
Build Credit With Loans
Get an auto loan or installment loan.
- For example, car buyers who can purchase a 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 and make sure the majority of the credit limit is wide open.
- A good credit score is derived by having a large 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.
- The more open credit account credit history a consumer has, the better,