TIPS FOR BUILDING YOUR CREDIT
It can be tough for the Millennial generation and others to obtain credit due to lack of credit history. There is not a better time than now to start building your credit but keep these important tips in mind.
- Don’t open too many lines of credit
- Keep your credit card utilization rate between 1% and 30%
- Check your credit report for errors
Getting Credit Cards
Many credit card companies will offer you “deals” that make getting a card easy. However, it’s important to do your research and know your financial limits. Keep in mind that credit cards are not supplemental income, ergo getting more cards does not mean you have more money to spend. A higher number of cards does mean that it’s easier to accumulate debt.
While it’s essential to have a credit card in order to build your credit score, you have to manage that credit responsibly in order to prove you are not a risky home loan candidate. Therefore, be sure to ask yourself “Do I really need another credit card” before you sign up for one.
Using Your Credit Card
The whole point of getting a credit card is to use it, but depending on how much you use it and how quickly you pay back your credit. Your credit utilization rate, or the percentage of available credit you use on a daily basis is a major determining factor in your overall credit score. A healthy credit utilization rate is between 1% and 30%.
Disputing Credit Report Errors
Of course, lenders use your credit report to calculate your credit score, which determines whether or not they approve you for a loan. However, mistakes happen, even on credit reports. Even seemingly small mistakes on your credit report can negatively impact your score, so be sure to check your report and dispute errors before applying for your first new home loan.
Apply for a new home loan now with Tony Pogrelis from Cornerstone Mortgage LLC