What do you do if you do not have enough credit references (credit) to obtain the loan you wish to secure?
First, start by opening small lines of credit that report to one of the three major CRA’s, and make purchases that can be paid off easily. Be careful not to charge more than 30% of the available balance, doing so could actually affect your score in a negative way. Ideally don’t charge more than 10% of your available credit.
If you do not already have a checking or savings account, open one. Your bank or credit union may be able to provide you with a credit card account once you have established a history with them as a customer.
Open one to two secured credit cards. Use these cards for small purchases (ie; gas, lunch) and then pay off the balance a few days later. Once the payment shows up on your account, repeat the process. These payments can be made before you get a billing statement from the company. Remember the 30% rule. Once the card starts reporting on your credit, toss it in your dresser drawer for the 6 months. It will report “paid as agreed” in your file and you will start building new credit.
It is also wise to start saving money for the down payment on your home. The lender will look at your application more favorably when you are able to bring in anywhere from 5% to 20% of the total loan amount for a down payment.
You can also check out my post with some Rebuild Credit Quick Tips for more information.
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