Things to Do Before Buying a Home

As a 90’s baby, I was never taught anything regarding credit. All I knew was that you had to have a good score to buy a car, a house, etc. Today, I learned a very important credit lesson in regards to purchasing a home. I learned that there are a lot of things to do before buying a home.

My boyfriend and I have been looking into getting a place of our own. I wanted to explore the option of actually buying and completely avoid renting. I had been building my credit score steadily through my visa credit card. I thought that I would be able to get a loan, no problem.

Boy was I wrong.

My boyfriend, mother and I went to look at a mobile home for sale this morning. It was “reasonably” priced, and we just wanted to take a look at this option. At the end of the showing, the realtors asked if I would like to speak to a credit advisor. I agreed. I wanted to know where I stood and what probability of my getting a loan.

Only fifteen minutes after leaving the showing, the advisor called me. I gave her my information (full legal name, address, and social security number) and she ran my credit report. She also asked for my work history (at least a full year)?

She was very kind and explained everything for me. She explained that while I have a terrific credit score, I only have one streamline of credit. That means I only have one thing contributing to my credit score rating (my Visa card). Loan investors typically require two different streams of credit, so that meant I was out.

Another issue was my work history. I have had four jobs over the course of two years and never more than eight months at a time at any of the jobs. This was the BIGGEST issue. She told me that investors won’t even give the application a second look if you don’t have solid work history.

My heart was crushed.

I had always thought as long as you had a good credit score, you would be approved for a loan. There is so much more to applying for and receiving a loan than I had thought. So I thought that I would provide you with a list of things to do before you try to apply for a loan.

Step 1. Building Your Credit

You can’t get a loan without credit. Plain and simple. The quickest way to build your credit is through credit cards. Apply for a credit card through your bank, this is the easiest way to get a credit card. After you get your card in the mail, make purchases. Start small, think gas or something you buy consistently. Pay those charges off immediately. If you can’t pay them off right after purchase, be sure to pay the statement balance ON TIME every month. Using this card every month will slowly but surely help build your credit score.

Step 2. Have Multiple Streams of Credit

As I stated above, many loan investors will overlook your application if you don’t have more than one streamline of credit. This means that you either have multiple credit cards, or have bills in your name along with a credit card.

Step 3: Contact a Loan Advisor

This step is vital. The advisor will let you know your credit score, and if you are able to get a loan. If you are unable to get a loan, the advisor will give you the appropriate steps you can take to get a loan.

Let this be a lesson to you! Follow these steps to ensure you are able to get a loan no problem!

Credit Building 101

Building or repairing credit can seem like a daunting task in the beginning. Luckily for you, I too was in your shoes a mere year ago. I had a credit score of zero. Yes, that’s right; zilch, zero, nada. I had no concept of credit, but thankfully with a little research I found ways to increase my credit score drastically.

In this post, I will outline the basics of building your credit score. I will also tell my personal story of how I grew my credit score from 0 to in the lower 700’s. Follow these steps to watch your credit score grow considerably!

One of the easiest ways to grow your credit score is to have bills put in your name. Always be sure to pay these bills on time and never make a late payment, as this can actually hurt your credit score. This is not the route I took, due to still living at home. All the bills were in my mother’s name, so this was not a doable option for me.

Option number two, which is also the “scarier” step for most people, is to get a credit card. This is the way I chose to build my credit, as I was unable to put bills in my name.

Choosing a credit card can be an overwhelming process. APR, interest, rewards; all of this was like a foreign language to me. You may as well have been speaking gibberish. As always, I decided to do a bit of research to find out what the best option was for me. In the end of my research, I ended up finding that my “home bank” actually offered a credit card! I signed up for this card, without much expectation. I wrote¬† $500 in the limit spot and was highly surprised to find that I was granted a limit of $1,000.

In other words, check with your local bank to see if they offer a credit card as this is the easiest option instead of going with a big company card.

Once I received my card in the mail, I wrote down a plan that I would follow when using the card. I would ONLY use the card for gas. I never came CLOSE to maxing out the card every month. I spent a maximum of $80 a month, and made sure I paid the bill on time, if not early. It was a diligent process, but over time, I knew the work would pay off.

I logged in to credit karma after seeing the commercials on TV as I was curious to see what my credit score was. I was shocked to see that my credit score was in the 700’s! Before I had received my credit card, Credit Karma was unable to even bring any data up for me.

Here’s an outline of some tips to use once you receive your credit card to promote a healthy credit score, as well as safety measures so you don’t go into debt with your new credit card.

Credit Building 101:

– Write out a plan of what you plan to use the card for, and stick to it. Whether that may be gas, groceries, etc.

– Make consistent purchases. You can’t grow your score if you aren’t using the card. Those purchases could be for example once a month, or once a week.

– Carefully mind your spending. Do not go over your spending limit! Actually I suggest not to come ANYWHERE close to it. I set a limit within my limit of only $200. I usually do not even come close to that number either.

–¬† Always make your payments on time and in full. Most cards actually charge a fee for late payments. Paying your payments in full will help you not get behind and go into debt.

If you follow this strategy religiously, I can guarantee you will drastically change your credit score.

What are YOU doing to increase your credit score?