I HAVE NO CREDIT… SO HOW DO I START?

Having been in the mortgage business for more that ten years now, I have found this to be one of the most asked questions.

If  I don’t have any credit and no one will give me credit, how do I get started? 

First of all you should know where you are and know where you want to go and what it takes to get there or a plan. No matter what your age , sex or marital status you will need credit all of your life. Everything today is based on your credit or FICO score so you should understand it and take great care of keeping it in good standing. First lets talk about how to get credit established if you dont have any.

One of the easiest ways is to use your local bank and if you dont have one find one and open a checking or savings account or both. If you make a deposit weekly , this is called history and will in some way be reported to the reporting agencys, so getting to know your local banker is the best place to start. Approach the banker, go in and sit and introduce yourself and explain you are interested in opening an account and you do not have credit and would like to build a relationship with that bank for this reason.  Ask the banker if they have any programs to help those with no credit some banks do but you may have to be a little creative and make a suggestion.   Prosper.com also has programs and loans to assist you in rebuilding your credit.     

One way you can obtain credit is to open a savings account even if it is only $100.00 and pledge the savings account against it. Now this will tie it up where you do not have access to it but usually will get you a credit card up to that amount.

OK now what you ask… The repositories or reporting agencies are merely computer programs that track what you do and here is my suggestion to build your credit score quickly.  Deposit your entire paycheck weekly into an interest bearing account such as a money market account and do not write checks on it! Use your newly aquired card but do not go over the limit and pay it off monthly, yes pay it off. This does two things, you use the credit cards interst free and your money is drawing interest and you are building a history the repositories see.  So you draw interst on your money, and use there money for free, yes for free. If you pay your balance monthly most cards are interest free, now keep in mind if you are one day late your rate can go thru the roof, so pay it early or on time and your credit card company will hate you…but…. guess what all card companies want to make money so guess what They raise your limit and in turn your credit score goes up!

Now this does not mean go out and get in debt, but if you use the card as if it were a debit card or a check and you pay it monthly and carry a zero balance you will quickly begin to create a credit score if you did not have one before. Now for anything large you may want in life they want to see two active trade lines that have reported for at least 24 months, so this means you want to try and find another card maybe a gas card and your new bank card and use them as if they were cash.

So in short you will use them as if they were a debit or check card and pay them off monthly. So if you did not have it in your checking or it was not in your budget to begin with DONT BUY IT.  If used properly and you maintain a budget and have a savings plan, assuming you have no score, with in 10 to 24 months, no lates you should see a credit score well up into the high 600’s.

Most important, have a plan and work your plan and gaurd your credit score.  Did you know your homeowners and auto insurance look at your credit score when determining the rate you are going to pay! So build it carefully and guard it and never be late with a payment. I found it is better to build a personal relationship, meaning do the online banking thing but BE Visible, make your deposit in person, know the bank managers name, wave at them if possible when walking in. Yes I said walk in, dont use the drive thru, you want to be recognized when you go in as well, this comes in handy when you need that car loan down the road.

Years ago when i opened my first business with no money, no credit, hmmm.. I am amazed when i look back, but a client of mine, Charles Buddeke, a very successfull businessman gave me a book to read and if really made a difference on how I viewed bankers, I understood them.

Buy low, Sell High, Collect Early, Pay late….  really.. by levin  … I would recomend this book to anyone,  I know it can be found on Ebay… not sure were else.. but it helped me and continues to….

Happy Credit Building….

Bill Corley

mortgageanswers@ezmtg4u.net

For more information on credit you can visit my website at www.ezmtg4u.net  or once I get the hang of this blog I will have free booklets to help you.  Please email me with any specific questions you may have or simply post your question here and I will be more than happy to try and answer you.