Credit Building Tips For Aspiring Homeowners
Updated: Jul 28
If you follow me on Tik Tok & Instagram (first of all thank you!), then you saw I posted a video recently on credit building for future homeowners. I wanted to do a blog post to explain this in a little more detail. When it comes to credit building, I like to say it's easy as 3-2-1.
3. You need to have at least 3 open and actively reporting credit cards. Open accounts are key to building credit, but revolving credit is where the bulk of the points that you can control come from. Credit utilization, or how much of the credit you have available to you are you using, is 30% of your credit score. Payment history is 35% of your credit score. So if you are keeping your credit utilization below 10% OVERALL (not per card), and making all of your payments on time, then you are effectively controlling 65% of your credit score! That's approximately 357.5 points! **WHEN you pay your credit card is important too. If your monthly statement does not show your statement date, call your credit card company and ask them what is your statement date or how long is your billing cycle. The statement date is when the credit card companies tell the credit bureaus how much of your available credit you're using right now. So if you pay your balance down to >10% before this date, it'll report low which means you are maximizing the number of points you can get from this section of your credit profile!
Here are some credit cards I suggest:
Capital One (second chance lender)
Chime Credit Builder Card (must have direct deposit into chime checking account of at least $200)
Navy Federal Credit Union
*these are subprime lenders, meaning higher than normal interest rates
2. You should have at least 1 loan with a term length of, at maximum, 2 years. Installment loans with a term length of 2 years or less are considered short-term installment loans. These tend to be furniture rent-to-own contracts (Aaron's and RAC), accounts like Self Lender, Credit Strong, MoneyLion, or secured loans from a credit union/bank.
1. You should have at least 1 loan with a term length of, a minimum of 3 years. Installment loans with a term length of 3 years or more are considered long-term installment loans. This is normally an auto loan, student loan, or mortgage. Some people don't have these things and can't afford to honestly. Don't put yourself in a bind trying to set up a long-term installment loan!
The most important thing you need for credit building though is TIME. It is not a very quick process, the average age of your accounts is factored into your credit score! The average age of a mature account is 4-6 years old! Keep this in mind when starting the (re)building process with your credit.
I hope this helps! Markia B aka The Money Plug