How to create and improve my credit score?
Hello, everyone, and welcome back to our Top Level Home Loans Blog. My name is Miguel Gómez, and here, we provide information on how to obtain a property loan for the purchase of a home.
Now that you've received your social security and are trying to buy a house, someone has mentioned that you "need to develop credit",so you're wondering what that means. Here, we will discuss: What is credit first and foremost? Secondly, I'm going to give you some advice on how to improve your credit score.
I am aware that credit scores are not as essential in other countries as they are in the United States, but here, having a strong credit score is crucial since it will be required when you apply for loans and when you get automobile insurance, both of which are determined by credit. Therefore, keep in mind that getting a decent grade is beneficial if you want to succeed in the US.
First, let’s talk about what is the credit score? and what it is for?
Back in the days, some companies came along and said, "Look, we need a score to give people”, so that the lenders and the banks know that each individual knows how to pay their debts or how to handle their money, what did they do?A few private businesses were established, and they started instructing the banks to share the relevant data so they could assign each individual a personal score. When you apply for a loan, money, or a car, the lender will check your credit score and say: "Well, that person knows how to make the monthly payments and make them on time, great."
This helps them construct a score: What portion of the debt is this person borrowing against? Additionally, they ask: How long have you held those debts? So, these are all the factors that they will consider, but they are crucial since they let the banks know that you are a responsible individual who understands how to manage your finances. Accordingly, you must have a high credit score.
I'm going to give you five strategies so that you can build your credit score quickly. I figure, if you're trying to buy your home, it's something you want to do within the next six months to a year, then these are the ways that we as lenders have seen that help create your credit score as quickly as possible.
1. Point number one:
What type of credit is best to take out in order to generate that credit score quickly? Now, normally if you go to a bank, they will tell you that a personal loan is better or that perhaps a car loan is better, but what we have seen is that what generates credit scores faster are credit cards. You can get them at your bank, you can also go to a store. So yes, if you can go to the Lowe’s store, Home Depot, TJ Maxx, Best Buy, whichever one you prefer, you should go and ask them that you need a line of credit or a credit card and some times you can apply in the same store and they can approve you there at once.
2. Point number two:
Since you have your credit card, how many do you need? Is the next question. In order to be able to build your credit as soon as possible, it is best to have at least three credit card lines.
3. Point number three:
It will be crucial to take into consideration your balance on each of your three credit cards, because this will indicate how much you are using them. For instance, if you have a credit card that was given to you for $500, don't put more than $150 on it. It's crucial that you use the card because if you keep it in your wallet and don't use it, you aren't demonstrating that you know how to manage your money. If they offer you a higher credit card line for $1,000, for example, you can use $300 right away. However, try not to go above that 30%.
4. Point number four:
Now that you have a balance on those credit cards, it's time to make a payment. Typically, clients will say, "I pay it all off before the end of the month because I don't want to pay interest." Again, if we keep in mind that our goal is to demonstrate to the banks that we are capable of handling our finances, one aspect of that knowledge is the ability to make our minimum payments and the realization that we must do so. I understand, you will pay interest, but to increase your credit score, you only need to make a small sacrifice. In the long term, it will benefit you greatly and save you money in a variety of other areas. Therefore, that is what we must do. Usually, I advise people to use their credit cards to spend $150, $200, or $300 depending on what that 30% is, and for at least three to four months they must meet their minimum payments.
5. Point number five:
Strategy number five is a little different because it's not like you have to go get a credit card and utilize credit, but rather it's more like a method that we've seen people use to help them develop that antiquity.
Seniority makes up a portion of the credit score provided to us; therefore, if you're just starting off, you won't have seniority. If you know someone with excellent credit, you might ask them to add you as an Adrise User to their account.
But it's also important to remember that the person who assists you is there for both good and bad times. If they can't afford the monthly payment or use the card excessively, that can also damage your credit.
I like to save this point for last because it is important to know that the person you are asking for aid in is a very responsible person, you have a solid relationship with them… We do not advise you to just ask some random person you met yesterday to help you grow your credit score - it will end bad for you and your credit.
Keep in mind that the main point is to demonstrate to the banks that we are capable of handling our finances responsibly. It is crucial that you remember these things and use these strategies.
The bank will always ask: "Well, how are they going to pay for a house of $2000 or $3000 a month if they don't know how to pay their credit card, that is a payment of $50 monthly?" So, honestly credit is a very important part of being here in the United States and it will give you heightened benefits if you steward it responsibly.
I want to thank you for being here with us. I hope you were able to get some information from this, and I hope you come back for the next one. Also if you have a friend that you know would help them, send it to them, share it with them and we will see you in the next one.
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- Miguel
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