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March 07, 2013
Building Your Credit HistoryIn this day and age, credit scores seem more important than ever. They are used to determine your worth when you apply for financing, a rental home, even for a job. It may seem impossible to get financing when you don’t have an established credit history, but no credit score is actually far better than a bad credit score and with a little time and work, it is something that can absolutely be overcome. Here are some steps you can take today to begin building your credit history.

Get a Secured Credit Card

A secured credit card is similar to any other credit card with one exception, the credit card company requires you put down a security deposit (typically $300-$500) that you can then borrow against. With many companies, your credit limit will begin with the amount you put down as a security deposit, but will increase over time as you build a positive history with the creditor.

Keep Your Available Credit to Balance Ratio Low

Just because you have the credit at your disposal, does not mean you should spend it. The quickest way to build a positive credit history is to only spend what you can repay within that billing cycle. Not only does this mean that you will likely not be accruing any interest on the charges you apply to your card, but it will demonstrate that you are responsible with your money.

An easy way to do this is by choosing just one bill that you typically pay from your checking or savings account and begin paying it on your credit card and then paying off the balance when you receive your statement. That way you are not increasing your outgoing expenses, but are making consistent charges and payments on the credit card account.

Pay Your Bills On Time

Typically, secured credit cards will report to the various credit bureaus each month, which is a good thing when you are trying to build your credit. That is, providing you are making your payments on time. Even one late payment can significantly damage your credit early on; so make sure you are making your payments on time every month.

Don’t Apply For Too Much Credit

Each time you apply for credit, the company pulls your report and your rating will drop a little bit in points. It’s like taking two steps forward just to take one step back. Chipping away at your credit score like that will just make it take longer to build. Hold off on applying for more credit until you have demonstrated you can manage the credit you have.

Apply for Unsecured Credit

Give yourself six months to a year and then check your credit score to see where you stand. You can get a free annual credit report that will give you an idea of what your score looks like with each of the reporting agencies. Providing it looks good, shop around, give your credit card company or bank a call, and request an unsecured card to continue to build your credit rating.

It may take a little time, but with patience and a little bit of work, you can experience a big payoff in the long run with low interest rates and the ability to obtain financing on your dream home.

If you’re interested in speaking with one of our lenders about First Options credit requirements for a home loan, want to see if you qualify, or want to discuss some of the first time buyer programs we offer, simply fill out our Fast Response form or give us a call at 888-644-1999. Our experienced mortgage professionals would love to discuss your needs.

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