3 Tips for Building your Credit Score from Zero

Mortgage and Lending with Ruoff Home Mortgage 234777

Most mortgage lenders today base the borrower's eligibility  guidelines for credit on their personal credit reports " FICO score". But how do you build a credit(FICO) score when you have never had any credit and no one seems to be interested in giving you credit. That can be a real "Catch 22" dilemma. Here are 3 tips for getting yourNo credit, don't ask score off the ground and moving upward to where you can hopefully be credit eligible for a mortgage loan in 9-12 months.

1.) Starter Loan - Go to your bank that you have a savings or checking account with and request a small starter loan, $300 -$500 should do the trick. If you don't bank with someone, start there by opening a savings account. Make the term of the loan short, 6 - 12 months. The bank will ask for you to deposit with them, an amount equal to the loan that you can not touch while the loan is outstanding but that's okay, this is their collateral for non payment. This type of loan, is called an installment loan and scores better than revolving(credit cards) debt.

2.) Secured Credit Card - Again, basically the same concept as #1 about working with your local bank and they will require a deposit equal to the card limit. Whatever limit you get, only charge up to 30% of the limit per month on the card and pay it off every month.

3.) If your parents are nicely established with good credit, ask them to put you on one of their credit cards as an Authorized user. They would not even need to give you a card or allow you to access it, but as an authorized user it will go on your credit report also. *Word of caution here* This works both ways, Positive or negative. If you are not absolutely positive that they pay off the card every month, do not go this route or it could hurt your credit or ratios when it's time to buy.

I might note here that if you have any outstanding negative collections, judgements or unpaid debt, that needs to be your first priority.

 Follow these steps and in a year or less the banks will probably release your security deposit and the credit that you have established will open more opportunities for you in both available credit  and the interest rates that you are charged.

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Greg Miller   
Mortgage Loan Originator 
NMLS # 234777


Comments (5)

Rob Lang
At Home Kansas - Shawnee, KS
Local Expert in NE Central Kansas Real Estate Home

Good tips for those trying to build a good credit history.

Jul 09, 2012 01:06 PM
Teral McDowell
Referral Patners LLC - Murphy, TX

Hi Greg, a couple of good tips for building credit; not sure how many parents would jump on the bandwagon for that lasst one though.

Jul 14, 2012 11:49 AM
Greg Miller
Ruoff Home Mortgage - Sarasota, FL
Florida Home Loans - Conventional,FHA,USDA,VA

Hi Teral, I understand what you are thinking but I am not suggesting that a parent give a child their own card or even have knowledge of the account numbers & yes they might find out but if you wouldn't trust your child to leave this alone, then no I wouldn't recommend.

On the other hand, I got a young man into a USDA mortgage who had absolutely no credit other than a credit card that was mom's and he had been on the card as a authorized user for 2 years. Because of this he had a 748 FICO.


Jul 14, 2012 12:54 PM
Jerry Newman
Brown Realty, 210-789-4216, - San Antonio, TX
Texas REALTOR, San Antonio Military Relocation

Hi Greg. Some nice tips here for building one's credit score. No. 3 would have to proceed with caution if parents are willing to do that for the kids.

Jul 15, 2012 06:36 AM
Dave Sullivan
Real Estate One - Birmingham, MI
Michigan Realtor with an investor viewpoint

Nice Job Greg I agree with you and like number 3 the most keep up the posting !

Jan 06, 2013 09:48 AM