Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage

This BLOG On Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage Was UPDATED On June 8, 2017

Home buyers who have bad credit or do not quite meet the minimum credit score requirements to qualify for mortgage can find some quick fixes by utilizing secured credit cards.

Two of the most important factors lenders put heavy emphasis on when qualifying a borrower for mortgages are the following:

  • Credit Scores: Besides credit scores, lenders want to see timely payment history in the past 12 months and no late payments after bankruptcy and/or foreclosure.
  • Qualified Income

Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage is the easiest and fastest way of getting prepped up. Why secured credit cards? To get unsecured credit cards, consumers need established credit tradelines and higher credit scores. We will discuss on Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage and some quick fixes to help potential home buyers who do not qualify for a home loan now get qualified within a matter of a short period of time.

What Do Secured Credit Cards Do?

Two important functions Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage play are the following:

  • Establishes credit tradelines
  • Instantly boosts credit scores

Credit Tradelines are active creditors who report to credit bureaus.

For a lender to consider a credit tradelines, the following requirements needs to be met:

  • Needs to report to credit bureaus
  • Have at least 12 months payment history

Active revolving credit accounts instantly boosts credit scores for consumers who have no credit accounts on their credit report.

  • One credit card account can easily boost credit scores by 30 points or more
  • For maximum credit score optimization, three credit cards with at least $500 credit limit is highly recommended

How To Get Credit Through Secured Credit Cards To Re-Establish Credit To Qualify For Mortgage

Consumers with the following will experience a difficult time in obtaining new credit:

  • Bad Credit
  • No Credit
  • Limited Credit
  • New Credit
  • Bankruptcy
  • Short Sale
  • Deed In Lieu Of Foreclosure
  • Foreclosure
  • Collections
  • Charge Offs
  • Judgments
  • Tax Liens
  • Late Payments

Credit Scores And Credit Report

Lenders will review two aspects when reviewing borrower’s credit:

  • Credit Scores to see if borrower meets the minimum credit score requirement
  • Overall payment history especially payment history after bankruptcy and/or housing event such as deed in lieu of foreclosure, deed in lieu of foreclosure, short sale

Bad & Low Credit & How It Affects Consumers

  • A bankruptcy, short sale, deed in lieu of foreclosure, or a foreclosure can plummet credit scores over 100 plus points instantly. 
  • Late payments will cause your credit scores to plummet the following month. 
  • Too many credit inquiries will also drop your credit scores dramatically. 
  • A poor credit score can cause you a job because many employers check an applicant’s credit score as part of the employment application process. 
  • A low credit score can also cost you more in insurance premiums. 
  • All insurance companies run an insurance credit report when issuing an insurance policy to their insurance prospects and the insurance credit score is part of what determines the premium you will pay for your homeowners insurance, auto insurance, health insurance, and life insurance. 
  • People with bad credit can start rebuilding their credit and start improving their credit scores by the use of secured credit cards.

How To Qualify For Mortgage

FHA Loans are the most popular mortgage loan program in the United States for first time home buyers. buyers with higher debt to income ratios, and home buyers with less than perfect credit.

  • Creditors are not willing to extend credit to people who have bad credit or no credit. 
  • Whenever consumers apply for credit, it shows up as an inquiry on their credit report. 
  • Every hard credit inquiry will lower consumer credit scores temporarily.
  • Multiple inquiries are not viewed favorably to creditors. 
  • Consumers who get rejected by half a dozen unsecured credit card companies, stop applying for any more credit because the chances of getting unsecured credit card approved is next to impossible. 
  • Plus the many inquiries that is posted on your credit report will worsen credit score than it already is. 
  • Easiest and fastest way to start credit rebuilding process is to get three secured credit cards with at least $500 limits.
  • Any credit limits under $500 will have little impact on boosting credit scores but is better than no credit.

Secured Credit Cards As A Powerful Tool To Build Credit

Secured credit cards is an excellent way of building and rebuilding credit.

  • The way secured credit cards work is consumers need to put down a cash deposit with a secured credit card company and in lieu the secured credit card company will grant credit limit equivalent to deposit.
  • Make sure the secured credit cards get reported to the three major credit reporting agencies. 
  • I strongly recommend that you get three, $500 limit, secured credit cards. 
  • By utilizing three secured credit cards consumers will definitely see credit scores improve at least 20 to 30 points per secured credit card.

Types Of Secured Credit Cards

Shopping for secured credit cards is shopping for anything else.

  • Try to get the best deal for the money. 
  • There is a processing fee, annual fee, and credit card interest on credit balances even though consumers have deposits.
  • Purpose of secured credit card is to establish or rebuild credit and it is extremely important that they report it to all of the three major credit reporting agencies. 
  • Always read the fine print so there is no unexpected surprises.

Using Secured Credit Cards To Maximize Credit Scores

Use secured credit cards on regular basis and make sure to pay the balances off every month and just leave a $10 dollar credit balance on each card.

  • Always pay your monthly credit card bill on time and make a point to pay them early. 
  • Secured credit card companies will report consumer payment history on credit reports so do not ruin credit again by being late on secured credit card payments.

Importance Of Credit Tradelines

Getting an unsecured credit card will be the ultimate goal.

  • After the three secured credit cards have been seasoned for about six months to a year, apply for a few unsecured credit cards. 
  • Apply for just one and the chances are it will get approved. 
  • Wait 90 days and apply for a second unsecured credit card and the chances will be good that the second unsecured credit card will get approved. 
  • Keep using both secured and unsecured credit cards and pay minimum payments religiously every month.
  • Never close out active revolving credit accounts.
  • Secured and unsecured credit card companies will increase credit limit consistently as the secured credit card ages without asking cardholders for additional deposit. 

If you have any questions in rebuilding your credit via the use of secured credit cards, contact The Gustan Cho Team at 800-900-8569.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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