FHLC Advice: Building Your Credit

credit building 1Roll the credits. Credit where credit is due. Credit cards.

“Credit” is a prevalent word in our society, and this is especially true with the almighty credit score. You may remember our earlier piece on the difference between a FICO and VantageScore, but how does one boost up, or create, their credit score?


THE CREDIT SCORE YOU WANT

The coveted credit score you will want is 720 or higher. It seems impossible, but you can get there some day. Even if you’ve had a past collections account or had a car loan, you can get to this point.

In order to be given the OK for a home loan, or similar big investments, 620 is a good universal fair credit score you will want to have. Some lenders will take a score as low as 580, but it will depend on other factors such as your income and DTI (Debt to Income Ratio).


WHERE TO GET YOUR CREDIT SCORE FROM

Ask your bank or creditors if they provide free FICO credit scores for taking part in their services. If they do not, the lender you are looking to use will have to do an inquiry on you. While CreditKarma is popular and free, it only gives you VantageScore estimates, so don’t rely on it as your only credit score source.


FIND NEW LINES OF CREDIT & MAKE THEM WORK FOR YOU

Choose a credit card that will benefit you the most. Do you want to travel more? Get a card that gives you air mile points. Do you go to Starbucks or use iTunes a lot? Get a card that offers you gift cards in exchange for points. Do you gas up a lot? Make it work to your benefit and get a gasoline credit card for incentives to fill up at certain places. If you can, take out two new lines of credit and alternate using each so you are diversifying your credit and getting more rewards.


READ FINE PRINT

Just because one card offers you more rewards than the other, doesn’t mean it comes without a catch. One air mile card may offer you 10,000 more miles if you go with them, but you could have to spend $500 within a three month period versus $300 in a three month period with a competitor card. Make sure you understand the terms of getting the card reward, and factors such as interest and credit limits.


PAY IN FULL AND ON TIME

Pay off your credit bills in full and on time, or if you can, pay them off before you get your statement and before the status of the bill goes from pending to permanent. Pay off collections accounts, child support delinquencies, traffic tickets, and similar debts immediately. Ask for proof of payment from these sources and keep clear of similar debts. If you have substantial medical or school debt you cannot pay off right now, the monthly payments are part of your DTI – just make sure you pay on time, all the time.


building creditBEST APPROACH TO LARGE PAYMENTS

If you have multiple lines of credit and a large bill for a car repair, a new computer you need for school, or a spa appointment, ask them if the payment could be split between multiple credit cards. This will differentiate your credit and help you get more incentive from each card via points or gift cards.


PROTECT YOUR IDENTITY

Do not read your credit card or sensitive information such as a social security number or a password out loud in a public place. Keep track of your wallet so no one can grab your identification and payment cards. Do not ever give your personal information in reply to emails that your credit card company or bank sends you because it could be a phishing scam. Most importantly, if you suspect your identity has been stolen, alert your local police department and tell your creditors immediately.

If you want more advice on how to improve your credit in order to get to homeownership, contact us today! Call 877-432-5626, chat with a rep on this site, or give a follow over to @FedHomeLoan.

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