One truth about building a strong credit and FICO score profile is that it takes time. An individual can not jump from having no credit history to excellent scores quickly. For this reason, it is incredibly important to start building credit scores and credit history as early as possible. If you are starting from scratch, here are some great ways to get started:
Open a Secured Credit Card
Almost anybody can open a secured credit card by making an initial security deposit with a creditor for around $200-$500. This deposit acts as both your credit limit and collateral in the case of any late or missing payments. Once opened, the credit card functions like a typical card. The key is to make a few purchases each month and begin making payments to build up a history of paying on time.
Become An Authorized User On A Credit Card
A primary account holder may add an individual to a credit account (typically a credit card) with their permission to become an authorized user. An authorized user gains permission to use the credit card but has no other control over the account. This typically works best for spouses or parents looking to help their children build credit responsibly.
The primary account holder is still responsible for paying the entire balance including the charges the authorized user racks up, but is a great way to build credit. The primary account holder is responsible and pays on time because the payment history will be reported to the credit bureaus for both individuals.
Manually Report Recurring Monthly Payments
Self-reporting certain items such as rent payments, utility payments, and other recurring payments to the credit bureaus is another way to build credit history. One of the major benefits of building credit this way is that it requires zero debt to do so.
Please keep in mind that while building credit is important so is remaining financially responsible. It can be easy to view credit cards as free money and tempting to run up high balances; however, doing so might also hurt your ability to qualify. Even if you can make the minimum payments, too many credit cards with high balances can hurt your credit score.
If you have any questions or would like to learn more about how credit affects your ability to qualify for a mortgage please give us a call at (760) 930-0569 to talk to a loan officer.