Credit History is Essential to Loan Approval
Are you interested in purchasing a home? In order to purchase a home, your lender will need to evaluate your credit history. So what happens if you don’t have a credit history? Assuming you have confirmed your meager credit history with an updated credit report (get a free credit report every 12 months from each of the nationwide consumer credit reporting companies at www.annualcreditreport.com), here are 5 tips on how to begin establishing your credit.
5 Tips for Establishing Credit
1. Bank Accounts – If you don’t have a bank account, you need one. This is an easy process that can often be completed online. If you are not sure which bank to choose, begin by asking your friends and family for recommendations. After opening your account, make sure you carefully balance your account on a regular basis and avoid any overdraft charges. Even though this activity is usually not reported to the credit bureaus, lenders inquire about bank accounts on credit applications.
2. Apply for Credit Wisely – Do not apply for too much credit at once. This can appear as though you’re desperate for credit and perhaps make lenders less inclined to extend credit to you. In addition, too many credit inquiries can have a negative impact on your credit score.
3. Vary Your Credit Types – Credit scoring models value having different types of credit. In plain English, it is beneficial to have both revolving accounts (credit card) and some installment accounts (like a car payment). As always, paying bills on time every time is essential to building your credit.
4. Consider a Co-Signer – Obtaining a loan in the absence of any credit history can be difficult, sometimes requiring a co-signer to guarantee payment. The loan is usually structured where the primary borrower is expected to make the payment, with the pay history reported in both names. If the borrower defaults, the lender will approach the co-signer, and missed payments will be reflected on both credit files. There is somewhat of a risk to the co-signer, but if handled responsibly, co-signing can be an effective way to help another person obtain and build credit.
5. Consider a Secured Credit Card – If you are unable to get an unsecured credit card, many financial institutions offer secured credit cards. Your secured credit account activity is reported to the credit bureaus each month and after making responsible payments on a secured card you will be more likely to get an unsecured card.
Good luck on your journey towards homeownership! We hope these tips for establishing credit will help you on your path. We strive to provide useful information for home buyers at every stage of the buying cycle. Check back often for other first time home buyer tips and news!
Feel free to contact one of our licensed mortgage loan officers at any time to discuss specific loan program qualification requirements. Use our branch locator to find an Inlanta Mortgage office near you.
About Inlanta Mortgage
Inlanta Mortgage is proudly celebrating twenty years in business. Learn more about Inlanta’s twenty year history here.
Inlanta Mortgage offers Fannie Mae/Freddie Mac agency products, as well as a full suite of jumbo and portfolio programs. The company is fully delegated HUD-FHA including FHA 203K, VA, and USDA approved. Inlanta Mortgage also offers numerous state bond agency programs. Review Inlanta’s mortgage loan programs.
Inlanta Mortgage is a multi-state mortgage banker based out of Brookfield, Wisconsin. NMLS #1016. Inlanta Mortgage is proud to be named to the Scotsman Guide Top Mortgage Lenders 2012 list and to be among the Top 100 Mortgage Banking Companies in America in 2012.