Questions Regarding Building Credit from the Ground Up!
Building a credit score can seem like an elusive task. How does one go about it when starting from scratch? Whether you haven’t had time to establish credit yet or haven’t wanted to bother, those are both valid reasons. However, if now is the time in your life you’re looking to purchase a home, you’ll need to work to prove to lenders that you’ll be good for it: essentially that you’re capable of paying them back.
1. How long does it typically take to get a fair score?
If starting from zero, it doesn’t take as long as one might think to start building credit. You want to get to at least a fair score somewhere between 650 and 699. However, this could limit your ability to get a great interest rate. You might get the loan but have a spiked interest rate with a “fair” score. This might take you 3-6 months to establish that you are creditworthy. For a better score, you’ll have to spend more time working to bring that number up.
2. How does one go about building that credit-worthiness?
You just need to prove that when you have credit extended to you, you will be able to pay it back and that you do in fact pay it back in a timely manner. So begin by opening a credit card in your own name. Then make purchases. Pay at least the minimum monthly payment on time or before each month, and you’re on your way to showing that you are creditworthy.
Another point to mention is to keep yourself well below your maximum allotment of credit, at least while you establish yourself. This shows you’re not reckless with money in biting off more than you might be able to handle.
3. What other ways can you build credit?
Another away to help boost your score is to become an authorized user on someone else account, a family member for example. They add you as the authorized user and that information gets reported to the credit bureaus
and helps boost your score. You don’t actually have to even have a card or make a purchase yourself.
One further way to help you gain an initial card if that seems to be giving you trouble is to try for a secured credit card. This just means you start by putting a deposit down to secure the transaction. That way if you can’t pay back for any reason, it comes out of the deposit. It’s just a way to start so lenders don’t have to risk as much on you if they’re unsure.
While credit score is not the only deciding factor when applying for a mortgage, lenders do take it into account so follow these steps to get you on your way to building better credit.