5 Tips for Establishing Credit

Establish Credit History

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.

Monitor Your Credit Ratings

Keep an Eye on Your Credit

Are you trying to establish a good credit rating or are you trying to maintain your credit rating? Regardless of your situation, it is important that you monitor your credit.

Credit reporting companies have files on everyone who has applied for a credit card, loan or insurance. The files contain information about where you live, how you pay your bills and whether you have been sued, arrested or have ever filed for bankruptcy. This information is used to make decisions when you apply for credit.

The three consumer credit reporting companies, Equifax, Experian and TransUnion, are required to provide a free copy of your credit report once every 12 months at your request. Some financial advisors suggest that you stagger your requests during a 12-month cycle so that you can monitor accuracy and changes on a regular basis.

To begin – we recommend that you order your credit report from Equifax by visiting annualcreditreport.com or by calling 1-877-322-8228. There is no need to contact the companies individually because they use the same service to provide the free reports.

When requesting your free credit report, you will be asked to provide your

  • Name
  • Address
  • Social Security
  • Date of Birth

If you have moved in the last two years, you may be asked to provide your previous address. For security purposes, the company may also ask you a “secret” question that no one else would know.

Don’t let you credit rating come as a surprise – keep a close eye on your report and be prepared to dispute inaccurate information or manage outstanding debts. However, if you are in the process of applying for a mortgage or close to it – consult your mortgage loan professional before taking any big steps in terms of credit repair. Inlanta Mortgage professionals have been assisting homeowners with their financing needs for years and know quite a lot about repairing credit.

Ready to purchase your first home or are you finally ready to make an offer on your dream home? Perhaps, you are looking to take advantage of historically low mortgage rates and refinance into lower payments or get cash out of your home. Consult a licensed Inlanta Mortgage loan officer today and get started. Click here to find a mortgage professional near you!

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 here.

Inlanta Mortgage is a multi-state mortgage banker based out of Brookfield, Wisconsin. NMLS# 1016. Inlanta Mortgage has recently earned the distinction of being named a 2012 Top Workplace in Southeastern Wisconsin.

To Pay Off or Not To Pay Off

Guest blog written by Sam Parker, Vice President of Heartland Credit Restoration (formerly CreditAbility). For more information or further questions email Sam at sam@hcrepair.com or visit www.heartlandcreditrestoration.com.

Many people are under the impression that paying off a collection, charge off, or profit and loss will increase their credit scores. Unfortunately, not only will your scores NOT increase but they will actually GO DOWN! It seems a little backward right? You pay a debt and you get dinged for it.

Here’s why! Once a debt goes to collection, the balance is no longer a factor. This means that technically a $5 collection will hurt you just as much as a $5000 collection. The only real factors that matter to your credit scores once a debt has been placed for collection are the DATE OF LAST ACTIVITY and the M.O.P RATING attached to the item. (I’ll explain MOP ratings in the next discussion) .

For the sake of this discussion lets pretend that you have a collection which was last active in October of 2005, this item would have a “9” rating attached, which is negative.

As time passes between present day and the date of last activity this negative item hurts your credit less and less. When you pay this negative item it updates the date of last activity to the current month and year HOWEVER the 9 rating attached to this item remains the same. What does this mean for you and your credit score? It goes down because to the scoring algorithms it appears that a new 9 rated (negative) account just hit your credit.

Some might say it’s best to NOT pay collection then. Unfortunately if left unpaid for too long, most collections will go to a Judgment status, meaning that this debt is confirmed by a court and must be paid.

So what can you do to avoid a mess like this? Get it in writing! If you’re going to pay a collection first get something in writing from the creditor stating that once your debt has been paid, they will either remove this negative item from the credit or update the item to an “unrated status”.

I hope this helps! Feel free to ask questions!

As you’re looking through the credit report what you want to pay attention to is the “rating column.” As most of you know there is a rating system which goes 0-9. It will usually looking something like R9, I9, I1, I9, etc…. The letters before the number are referring to the type of account….R meaning Revolving, I meaning Installment, etc. The number following the letter refers to its status. Below I have listed what each number means.

R0 – Too new to rate. Approved but not used.
R1 – Pays within 30 days of billing or as agreed.
R3 – Pays in more than 30 days, but less than 60 or when next payment is due.
R4 – Pays in more than 60 days, but less than 90 or when two payments are due.
R5 – Account is at least 120 days past due but is not yet rated R9.
R6 – No rating exists.
R7 – Paid through a consolidation order, consumer proposal or credit counseling debt management program.
R8 – Repossession
R9 – Bad debt, or placed for collection or bankruptcy

If you would like to discuss home financing options and your credit status with a licensed mortgage loan officer, click here to find a Inlanta Mortgage branch near you.