CREADIT BUILDER
When buying a home your credit is your primary factor to starting the home buying process. Building credit and developing a strong credit profile involves strategic steps to establish a positive credit history, maintain a healthy credit mix, and demonstrate responsible financial habits. Patience is key, credit improvement takes time. Focus on being consistent and doing something each day or each week to get you closer to meeting your credit building goals. A strong credit profile reflects consistent, responsible use of credit over a period of time.
1. Payment History (35%)
Consistently paying on time is critical.
2. Credit Utilization (30%)
The ratio of your credit card balances to credit limits.
3. Length of Credit History (15%)
The average age of all your accounts.
4. Credit Mix (10%)
A variety of credit types (revolving credit vs. installment loans).
5. New Credit Inquiries (10%)
Too many hard inquiries can lower your score.
Credit Monitoring
Get a 3 in 1 credit report to see a side by side view of each account and how each credit reporting agency is reporting the account.
Dispute Errors
Review your credit report for errors and outdated information.
Clean Credit Profile
One name, one address and one employer
Negative Accounts
List your negative accounts affecting your credit scores.
High Utilization
Keep credit utilization below 30%; ideally below 10% for the best scores. Determine which credit cards have balances over 30%.
Inquiries
Keep credit utilization below 30%; ideally below 10% for the best scores. Get inquires below 3 to 0.
Pay Bills On Time
Avoid late payments by setting up payment reminders.
Secured Credit Cards
Start with a deposit-backed card. Use it for small purchases and pay off the balance in full.
Credit Builder Loans
Offered by credit unions or online platforms, these loans help you build credit by making payments into a savings account.
Self-Reporting Rent
Use services like Experian Boost, Rental Kharma, or Rent Reporters to add your rent payments to your credit report.
A healthy mix of revolving credit and installment loans strengthens your profile:
Revolving Credit
Credit cards, retail store cards, or lines of credit.
Installment Loans
Auto loans, personal loans, student loans, or mortgages.
- Apply for a secured credit card or credit builder loan.
- Become an authorized user on a well-maintained credit card.
- Set up rent reporting if applicable.
- Open a low-limit store credit card and pay off balances immediately.
- Maintain low credit utilization on revolving accounts.
- Monitor your credit score monthly for improvements.
- Consider an installment loan (personal or auto loan) for further diversity.
- Request a credit limit increase on existing accounts to lower utilization.
- o Start building a longer credit history by keeping older accounts open.
- Select 2-3 credit unions and banks.
- Open a savings account with the amount of the loan amount you desire.
- Minimum to start is $500 and higher.
- Apply for a secured loan against the funds in your savings account.
- Funds will be held in a savings account as a security deposit while you make monthly payments and until the loan is repaid.
- Payments are reported to credit bureaus, helping build a positive payment history
- Allow 3-6 months of on time payments to see a credit score increase.
- Payments are reported to all three credit bureaus.
Credit Union and Bank Recommendations:
- Select 2 - 3 secured credit cards.
- Open the account with a refundable security deposit, which acts as your credit limit.
- Minimum to start is $300 and higher. Higher is best!
- Funds will be held in a savings account as a security deposit while you make monthly payments and until you close the account.
- Payments are reported to credit bureaus, helping build a positive payment history
- After 3-6 on time payments, your credit scores will increase.
- Use the card responsibly and pay off balances in full each month.
- Payments are reported to all three credit bureaus.
Secured Credit Card Recommendations:
- No credit check and no denials
- Credit Builder Apps offer tools to help establish and grow your credit.
- Low-risk, small-scale credit-building options.
- Ava
- Kickoff
- Kovo Credit
- Rent Reporting
- Consolidate your debt into one monthly payment
- Reduce credit utilization (below 30% recommended).
- Paying down balances shows responsibility and boosts scores.
- Universal Credit
- Upstart
- Upgrade
