Credit Building Fundamentals

Credit Building Fundamentals

So you want to buy a house and will need a mortgage. It won't happen overnight and so you need to start planning strategically and will need to start somewhere.

  • Focus on the fundamentals – Lebron James did not become the player he is today overnight so you need to start building a strong foundation. While checking and savings account data isn’t typically reported to the credit agencies, lenders will look for these accounts, so it’s important to make sure you have them.

  • Check your scores to know your starting point - You’re entitled to a free copy of your credit report from each of three major credit-reporting agencies: Equifax, Experian, and TransUnion, once a year. It’s a use it or lose it proposition. It’s free and won’t affect your score provided to you by the Federal Government at www.annualcreditreport.com.

  • Monitor and manage your credit utilization (debt-to-credit) ratio - Your math teacher was right, you will need math everyday of your life, sorry. Debt-to-credit ratio is defined by how much of your available credit is currently being used. This calculation typically accounts for 30% of a FICO® Credit Score. Basically, it’s the amount of credit you’re using. Here is how to figure it out yourself: D – is total amount of all your debt and A – is the total amount of all credit available to you. Now R is just the ratio. So R = D/A and the answer will be a percentage. You want to keep number at or below 20% honestly.

  • Have a diverse portfolio of credit accounts – Your 401(k) is diversified, your stock portfolio is also diversified and your credit should also follow the same route. Therefore, credit cards, bank loans, store cards, retail accounts and mortgage loans are all considered when your FICO® Credit Score is calculated. While it’s great to have a mix of several types of accounts, it’s important not to open too many at once.

  • Start with a secured credit card with a plan to graduate up to an unsecured card – This should be your last resort, personally, I don’t know why you’d let a bank hold on to your money and let them charge you to spend it. There are reputable lenders out there that will issue you a low balance limit to start and continuously increase your limit. Though if you are wondering how to build credit if yours isn’t looking so good at the moment. A secured card is not the worst way to start. Keep in mind you’ll need to deposit an amount of cash up front and then you can charge up to your assigned credit line, after the annual fees are deducted.



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Phone: 561-951-3759
Dated: May 20th 2016
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