So you want to own a house: Establishing Credit

Establishing and building credit is the first step to owning a home! We have already gone over what your credit score is and how to repair your credit score. What we haven’t discussed is how to build credit. Building credit isn’t rocket science. When you build credit, you are building trustworthiness and creating a ledger that confirms you are reliable when borrowing money. We have some tips to build your score safely and securely!

How to build credit.

Step 1. Open a savings and/or a checking account at a bank.

Seems easy but the first thing you need to do is find a place to house your money. Having your money in an FDIC insured bank means your money is safe and always available to you when you need it. Banks also offer many tools to help you manage your personal finances. Those tools make saving money easier then stuffing cash into envelopes and storing them in a coffee can.

Step 2. Apply for a credit card.

There are many types of credit cards available to you. Retail cards, gas cards, company cards, prepaid cards, bank credit cards (or called general use cards). Whichever you prefer fill out the application and get approved for a credit card.

Step 3. Apply for a secured credit card.

A secured card is a credit card but with boundaries. The boundaries could be as simple as maintaining a savings account with a balance that meets or exceeds the credit limit on the credit card at the bank that issues the credit card. Usually that balance starts at $200-$300. What is great about a secure credit card is you cannot over spend what is in your bank account. In that regard, the card operates like a debit card. Details on the how much is needed for your spending limit vary, so it is best to ask.

Step 4. Apply for a co-signed loan.

Applying for a loan is a great way to establish credit history. One problem is you may not qualify for a loan on your own. If that is the case you may need a co-signer. A co-signed loan means that whoever signs onto the loan with you (mom, dad, grandparents) they are responsible for the loan as well. If you are unable to pay the loan back, the burden will fall onto your co-signers, and that will in turn affect their credit. Using a co-signer is how many people finance a first car or student loans.

Those are some of the easiest ways to establish credit and to build your credit score. Don’t forget to practice good habits of always paying your bill on time every month and keep your credit utilization low! However you want to build your credit score, just remember it is easier to keep your score high then it is to repair and rebuild your score! Ready to see if you can get pre-approved for a mortgage? Visit here or call 218-346-5700 and speak with one of UCB’s Mortgage Lenders and see how we can work for you!

Part 1: What is Credit?
Part 3: How to repair Credit?