How to Establish Credit

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Hey, what’s up Bob Mortgage Nation? This is the 30th episode of the Bob Mortgage Zone. What we’re going to talk about in the zone, is how to establish credit, because I get this asked a lot. It’s like, “I have no credit, how do I go about establishing credit, so I can be able to buy a home?” And let me, first off tell you, I absolutely hate the fact that people have to go get into bad debt to be able to purchase a home. And, ultimately, that’s what we’re doing here.

            So, we have to put people into bad debt to be able to purchase a home just so they get a credit score. And look, let’s put a strategy together on how to do this. Like if you have no debt at all, good for you, but that’s not good for us, as a lender, because we have to be able to know whether you have the ability to repay debt. So, what I would urge you to do, if you haven’t no credit built yet at all, go establish a couple of trade lines.

            Let’s look at two credit cards, maybe two credit cards in one installment loan. But on those credit cards, see if you can qualify without doing a secured credit card, but if you have to do a secured credit card, that’s great. Do it for like $300, and keep about a 25 to $50 balance on there. But if you go ahead and get your normal credit card without being a secured credit card, fine, if it’s $1,000 balance, or $1,000 available credit just make sure you don’t have more than, call it, $250 on that credit line at any time Because we want to make sure that we’re sitting at about 20 to 25% of that available usage for the maximization of your score. Really because that’s what I’m talking about here is really what can we do to maximize the credit score?

            So, get a couple of credit cards, maybe one installment loan that’s going to take anywhere between 45 to 90 days to be able to report to the credit agencies. And that’s going to be just enough to get you from in a zero credit score all the way up to something that could be in the high 680s to 700s in less than, call it, 90 days.

            Okay, that’s really all it takes. A couple small credit cards, if you want to throw in an installment loan, if you could do that, a car, or a personal line that’s perfectly fine. But it’s something as simple as that to get you well on your way to be able to get a high credit score, and to be able to get the lowest down payment, and interest rate options available to you. And this is the 30th Mortgage Zone, the Bob Mortgage Zone. So, you guys take care, have an awesome rest of your week.