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Need Help Starting or Rebuilding Credit?

In my years of experience in this business, I've had plenty of clients come to me and apply for a mortgage to buy a home.  When someone applies, we look for the Four C's.


  • Capacity (Income)

  • Capital (Savings)

  • Collateral (Property/Appraisal)

    And last but not least...


  • Character


This is another word we use for "credit history".  This is a hurdle that some people haven't jumped yet, especially at a young age.  Or, if you're like a lot of people, you've had that one or two instances that have hurt your credit history and you're trying to re-establish a good credit history.


Starting (or Re-Starting) New Credit

One of the easiest ways to get credit started (or re-started) is to open a secured credit card.  You are basically guaranteed approval, and the right creditor will report the history to all three credit bureaus (which is important). You essentially deposit money, and the amount of the deposit determines your credit limit. I suggest at least $500 if possible, but $300 at a minimum. Once you get the card, you may or may not be charged an annual fee up front, which is ok. 


Don't be too concerned about the interest rate, because your goal is to not carry much of a balance.  The idea is to leave a balance of about $10 on the card each month, let that report to the credit bureaus (typically when your statement closes each month), and then pay off that balance, and then go charge another $10 worth of goods or services again and repeat the process.  

When you pay off the balance each month when the statement arrives, you essentially pay no interest.  Do this for 1-3 months and you'll typically see an improvement in your scores.  If this is your first line of credit, it will take approximately 6 months of reporting
before you'll get a credit score.


More Credit Tips


Here are a few other general credit tips to help you improve your credit score:


  • If you have existing revolving accounts (credit cards), work to pay down the balances to < 30% of the limit. Even lower is better!

  • Closing existing accounts isn't always a good thing, even if you haven't used them in a while.  Accounts that are open for a long period of time help your overall length of credit, which is another factor in your FICO score.

  • Keep "hard" credit inquiries to a minimum. "Hard" inquiries include applying for any type of loan or even asking to raise a limit on a credit card.  "Soft" inquiries are ok and do not impact your score. "Soft" inquires include shopping insurance quotes, checking your own credit (i.e., or background checks for employment.

  • Limit any disputes on your account to ONLY inaccurate information that you find. Blanket disputing of all negative accounts can impact not just your score, but also your ability to qualify for a home loan.

  • PAY ALL YOUR ACCOUNTS ON TIME!  This probably goes without saying, but keeping at least the minimum payments made on time every month will go a long way in improving your scores.




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