Steps to Rebuilding your Credit
Credit Reporting 101
I often get calls from prospective home buyers looking for information on how to get the home buying process started. In the course of my needs assessment, we will eventually get around to discussing their credit. Some clients are ready to go, while others may need to do a little work before we can get the process started. Understanding and knowing about credit utilization and reporting and how they can impact your ability to purchase a home are critical for any buyer. The following infographic by Your Wealth Puzzle shows consumers how to rebuild their credit score.
Building your credit may require a roadmap:
- Check your Credit report - you are entitled to a free credit report if you Live in Texas once per year from each of the three credit reporting bureaus, Equifax, Experian and Trans Union
- Verify that the information is correct and be on the lookout for any information contained in the report that does not pertain to you. If you find errors contact the credit bureaus.
- Start establishing credit stability by maintaining and using checking and savings accounts regularly.
- Learn the basics of credit scoring, research and be invested in your good credit habits.
- 'Borrow' off another persons record by being an authorized user, or by having a co-signer.
- Apply for a secured card, by depositing a secure amount with the lender and borrowing and repaying. This can help get you started on establishing your own score.
- Avoid opening credit cards and accounts at several institutions or retail stores - this can dramatically lower your score and harm you in the process. Remember when you are starting out establishing your credit has a purpose - to build your score. Only open one new account to start. A responsible person really only needs a couple of credit cards, and perhaps a couple of retail credit cards if you shop their often. Having too much available credit can harm your score also.
- Once you have an established secured credit card, open a retail card. Stop here and build your score by using and paying the cards off.
- Do not max your cards and keep them at the max. Try to keep balances at no more than 33% of the limits and pay in full monthly if you can.
- As you move down the road, open an installment loan such as a car loan or small loan. Pay it religiously and never late.
- Use your revolving credit accounts lightly but regularly so that you are continuously reporting to the credit bureau.
Lorna Calder is an award winning Real Estate | Broker Associate at | RE/MAX Associates Northeast in Kingwood TX