How to build credit before buying your first home?
You want to buy a home? Great, but there are some actions you will need to take before you begin the process.
Building your credit score is one of the first steps to buy a house and it happens all the way in the beginning. Now you may already have a great credit score, so you may be able to skip a few steps due to your current situation. For the most part though, you will need a very good credit history in order to buy a house.
You may be wondering how to build your credit score. There are a few ways you can do so.
Open a credit card
This is the most common way to build your credit. A credit card is nice as long as you are diligent with it. Maxing out a credit card and not being able to pay it off on time will actually have a negative effect on your credit score.
Be smart with your credit card. Put some purchases on it that you can pay with cash for or out of your checking account and pay it off early. Your credit score will start to increase.
A little side note: get a credit card that offers rewards. There are plenty of cards out there that offer cash back bonuses, airfare miles, hotel points, and more. Do some research and get yourself a card where the rewards will benefit your lifestyle.
Pay extra on your student loans & pay on due date
Not everyone will have student loans, but a good percentage of the world’s population does. If you do, make sure you pay the minimum amount due and on or by the due date.
Too many people let their student loans go into forgiveness and that will not be good for your credit. It could dig a deep hole for you that you may never be able to get out of.
If you could, paying more than the amount due will help your credit score tremendously.
Buy a car
Another way to acquire debt and pay it off in payments to increase your credit score is to buy a car. It can be new or used based on whichever you prefer and can afford.
Taking out a loan to buy a car is similar to if you had student loans or credit card debt that needed to be paid monthly. A car payment will need to be paid by a certain due date every month. As long as it’s paid in the full amount and on time, your credit score should go up as a result.
Just like was mentioned with student loans, paying more than the amount due and early will make your credit score increase faster.
Make payments more often
This tip was hinted at a few times throughout this article. Making payments on your debt more frequently will increase your credit score 5-10x. If you make a purchase on a credit card, pay it off right away. If you can afford to make two student loan payments or two car payments in one month, do so.
If you’re looking to buy a house sooner rather than later but your credit score is holding you back, figuring out a way to make more payments within a month should help get you to where you need to be.
