If you’re looking to purchase a home, having good credit gives you many more options.  For many people, however, building can be difficult if they don’t have past credit or if they’ve experienced a financial hardship that brought their credit score down.  If you find yourself in either category, there’s no need to get upset.  What you need to do is focus on the areas which help you build your credit score back to the top.

First, if you’ve never had any credit to your name, here’s what you need to do now:

  1. Apply for a secured credit card.  This is to help you establish credit, without putting down a deposit.  This won’t be used for the long-term, just to get you started.
  2. Apply for a credit builder loan- This is exactly what it sounds like.  A way to build your credit with a manageable loan amount.
  3. Do you have someone who could co-sign a loan?  If so, you can opt for this option to build credit, but normally at a lower interest rate.
  4. Make sure the rent you pay is being reported to the credit bureaus. RentalKharma and RentTrack are just a couple of platforms who will do this.

If your credit has taken a hit in recent months or years, working to rebuild it is critical.  Building good credit takes at least 6 months of an on-time payment history. Building good credit habits will help you get back on track.

  1. Make 100% of your payments on time.  This includes; rent, credit cards, utilities, school loans and medical bills.
  2. Keep your credit utilization low.  Meaning not more than 30% of the credit offered should be used.
  3. Keep your accounts open for as long as possible. Unless one of your unused accounts has an annual, all accounts should be kept open and active to count toward your length of credit, payment history and utilization.
  4. Make sure not to open too many accounts as this will initially lower your credit score and shorten the average time open of all accounts.
  5. Check your credit reports frequently for errors and your credit score on a monthly basis to see your progress.  Websites like www.creditkarma.com and www.nerdwallet.com, offer free credit score checking without causing a ‘hard hit’ to your credit.

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