Tips for building your credit
Credit scores are an important part of our financial profiles – especially when purchasing a home. While good credit can get you multiple loan offers at low rates, bad credit can leave you with increased monthly payments, fees, or even without a loan at all.
Having imperfect credit doesn’t preclude you from ever purchasing a home, however. These four tips can help build your credit and get you one step closer to the home – and home loan – of your dreams.
- Get your credit report
Getting your credit report – not just your credit score – is one of the first steps to building good credit. In addition to listing information such as your name, address, and Social Security number, a credit report will list loans or credit card accounts in your name, account limits, payment history, and outstanding balances.
- Fix credit report errors
If your credit report has any errors, it is important to get them removed as soon as possible. Inaccurate or incorrect information can negatively affect your credit report for as long as 7-10 years if not corrected. Discrepancies can be easily reported and challenged with all of the major credit check bureaus.
Even if you already own a home, it is recommended to check your credit report at least once per year. With identify theft on the rise, checking your credit report annually ensures no new loans or debts have been taken out in your name.
- Pay bills on time
While credit reports and FICO scores are based on the money you’ve borrowed, there are other ways to judge your credit. Increasingly, lenders are using bill payment histories as a way to determine credit worthiness. A pattern of paying bills on time can help you look better to lenders. Setting up rent and utilities on automatic payment plans is one way to ensure bills are paid on time every month.
- Responsibly use a credit card
Having a credit card is one of the fastest and easiest ways to build credit. Because they show how much you spend and pay off each month, responsible use of a credit card can quickly build credit. To maximize its credit-boosting potential, pay off the balance completely each month; you do not need to pay or accrue interest or carry a balance in order to build credit.