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How to Build Credit With Bad or No Credit
When it comes to Bad Credit Mortgage Repair and qualifying for a mortgage, there are three essential components: a down payment, an acceptable credit score, and a verifiable income history that shows you can manage the obligation over time. Setting aside a down payment is a matter of sticking to a savings budget, and building an income history means finding and sticking with a profession that provides you with the money you need to reach a particular lifestyle. When it comes to credit, many consumers are confused about how to get from having bad credit (or no credit at all) to having the kind of score that banks will approve.
Mortgage Credit Problems
Understanding the Important Factors in Your Credit Score
There are three primary credit bureaus: TransUnion, Experian and Equifax; Canadian lenders generally rely on Equifax and/or TransUnion to make their decisions. Each one uses an algorithm to determine your score. You may notice that your credit scores differ slightly among the three bureaus; this is due to the fact that the three algorithms are slightly different, as well as that different bureaus receive information from your creditors at different times (and sometimes one credit bureau may not have information that the other two do).
Your payment history makes up 35% of your overall score. The more recent the history, the more weight an item receives. You want a record of payments that are in full and on time.
The length of time you have had credit represents 15% of your score. If you’re just out of school, this can be a handicap for you.
The amount you owe accounts for 30% of your score. This includes both the total amount of debt that you owe and the ratio of your debt to your credit limit. Having large sums of credit card debt can push your score down significantly.
New credit accounts for 10% of the score. If you have opened accounts recently, the agencies tend to look down on that.
The sorts of credit that you use make up 10 percent of your score. Diversification is definitely a good thing.
Follow These Bad Credit Mortgage Repair Rules
1. Always make your payments on time. This is a good rule of thumb for everything from credit card bills and car notes to your mortgage.
2. Keep your credit card debt at a low level. Use your card every month, but don’t spend more than you can pay back.
3. Stay under 30% of your total credit limit. This helps your score significantly.
4. Keep your credit accounts open as long as you can. The longer your average credit account age, the better your credit score.
5. Don’t apply for a lot of new accounts at one time. This reduces the average age of your accounts.
6. Scan through your personal credit report once a month and check to see if everything is correct. This does not hurt your score.
7. Don’t sign up for a prepaid debit card. They don’t help your credit score. Now that you have some basic principles in mind, if you have no credit or poor credit, and you haven’t been able to qualify for a traditional credit card, it’s time to apply for one that is designed for people in your situation. If you’re in college, think about applying for a student credit card. These have reduced fees and often reduced interest rates, and they are a good way to start building credit.
If you’re out of school, think about applying for a secured credit card. After approval, you make a deposit into your account. The amount of credit you have may be the same as your deposit, or it may be higher, depending on the card issuer and your credit history. When you close your account, you get the deposit back, but it’s good to leave it open so ti ages.
Signing up for a couple of secured credit cards and having a family member add you as an authorized user to his or her credit account can bring your score up. There aren’t really any “magic fixes” when it comes to building your credit, but if you stick to a plan of making payments on time and procuring credit over time, you’ll be surprised how quickly your score starts to move upward.
If you would like an individual assessment of your credit history, talk to one of our credit specialists at Amansad Financial today. We can give you a series of steps to start you on the path toward Bad Credit Mortgage Repair and mortgage qualification.
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