When preparing to get a mortgage, lenders take a look at your credit history and typically want to see at least three (3) trade lines that have been open for two years or more. By trade lines we mean credit cards, car loans, student loans or any other form of credit you may have opened that would be reported to the credit reporting agencies. If you don’t have these minimum requirements, all hope is not lost. Consider jump-starting your credit history and credit score with the following tips:
- Open two credit cards immediately. If you apply and they won’t give you a credit card because of your thin credit history, ask them to set you up with a secured credit card. These typically require about a $300 security deposit and they will give you a major credit card with a $300 limit.
- Use each of your credit cards every month. Make sure that you spend no more than 25% of the available credit limit on each card. For example, if you have a $400 limit, you never want to charge more than $100. When the monthly statement comes in, pay the bill in full before the due date.
- Make sure you have the lease for your apartment in your name. Ask your landlord if they will report the rent you are paying each month to the credit reporting agencies (all three preferably). Many of the larger apartment management companies are already doing this. In addition, make sure to have the utilities in your name and pay those bills on time. These do not report on your credit but oftentimes we can get you approved with some “alternative sources” which includes utilities (need to have a 12 month clean track record of cancelled checks) and things like auto insurance etc….
In developing a credit history, the sooner you get moving on these suggestions the better. If you have no credit score at all (because of no prior credit history) it will take six (6) months of a trade line reporting before scores can be generated. And to learn more about how to improve your credit score and build a credit history, watch our Credit Basics video!