How to Build Your Credit

Having a good credit score is essential for getting a good mortgage rate. Before purchasing a home, make sure you have started to build your credit and that it is in a good place. Here’s how to start building your credit to put you in an optimal position. 

How to start building credit 

At a minimum, you need to have at least one credit card open in your name. Then, you have to make a purchase using the card and make a payment. Once you’ve made your first payment, your creditor will submit that payment to one or more of the major credit bureaus. Typically, it will take between three to six months of activity before a credit score will be able to be calculated. 

However, you can’t stop there. Once you’ve established credit, you need to continue to build it. Credit history is based on performance. That means, the healthier your credit behavior is, the higher your credit score will be. 

What credit score do you need to get a mortgage

While building, your credit will most likely be in the 660s. This is considered to be a fair credit score, which may be enough for some lenders, but may not be enough for others. Most likely, a lender will want to see your credit score be somewhere from 700 and up. A good credit score will be any score from 700-759 and an excellent credit score will be any score 760 and higher. 

How to speed up the process

There a few ways to speed up the process of building your credit. 

  • Become an authorized user 

This means that you’re attached to another person’s credit card. This can be a parent, other relative, or friend who already has had an account and has a good credit history. You don’t need to use the account or have a card for the account. Once you’ve been added as an authorized user, there will be an immediate affect to your credit and may even be enough to generate a credit score if you don’t already have one.

  • Get a secured card 

If you’re having trouble qualifying for a traditional credit card, try applying for a secured card. A secured card is “secured” by a deposit that you set. This means that if you stop paying or default, the deposit that you set will be used to pay off the account. This lowers the risk for the lender.