Establishing Credit to Purchase a Home, or purchase a Car or Establish credit cards at a good rate.

Nowadays FHA is the most popular mortgage loan program because it still allows for 96.5% financing and because it can work with a low credit score. (All the way down to 600)

Underwriters will not even consider you as a viable candidate for a mortgage unless you have three pieces of credit established for one year or more and your rent is paid on time with a check for one year or more.

Once again, in todays market you need at least a 600 credit score and have three pieces of credit paid on time for one year or more. It is almost better to have no credit than bad credit because I am going to show you the path you can take to ensure that in approximately one years time you can go buy a house.

If you have bad credit go here: CreditRepairCompanies  This is the best company I know of when it comes to repairing credit. They are very results driven. You will need to improve the ratio of good accounts to accounts with derogatory credit.

Back in the old days if someone didn't have any credit we would use alternate forms of credit such as proof of electric bill paid on time, proof of phone bill paid on time,  car insurance paid on time , etc. Nowadays there is only one bank that accepts these type of verifications and usually they will find a way to decline the loan.

Here are some examples of how to build your credit profile in acceptable ways that can be documented for the sake of a mortgage application.

1.) Pay your rent with a check. This is mandatory. You need to prove that you can make your housing payment. If you don't have a checking account, get one. Do not pay with a money order, do not pay with cash. It doesn't matter if you are staying with family or renting from a huge management company, pay with a check so we can document this on time history later.

2.) Get a secured credit card. this is very simple. You send say $300 to a secured credit card company and they will give you a credit card of $250. Use it to purchase clothes or gas and pay it on time. Here is a list of secured credit cards. 

 Be careful with these. See attached statement from the president of a consumer credit counseling company.  Secured credit cards  are like a Clint Eastwood movie -- the good, the bad and the ugly. Some are good. They have low fees and treat customers as customers instead of as cattle. The bad ones take advantage and extort the clients because of their situations. Then there's the ugly, which are completely despicable. They'll give you the card, but you have to buy this insurance policy for $55 a month."
Once your credit is established for a year you can always upgrade to a regular credit card with better terms.
3.) Apply for a Store Card  Clothing stores are a great place to establish credit. In today's economy business is slow and they will get you a card right on the spot . Technology is such that you can go pay for a few items and they will offer you a discount if you have a card and do a rudimentary application right there at the cash register. Here are some stores that may be worth trying:
  • Sears  If you get turned down do not go running from one store to the other because this will generate too many inquiries on your credit report which becomes a red flag of a different type.

4.) Furniture Stores and Appliance Stores  These are great but make sure they report to the credit bureaus. If they do not we can still use the history to support your file but the whole point of this exercise is to create a credit score above 600 and show a history. Always pay with a check.

5.) Buy Here Pay Here Car Dealerships. Similar to furniture stores and appliance stores. Ask the question if they report. These are good ones because the payment that you are making is a little more sizable. Always pay with a check.

6.) Credit Unions are a great place to establish or re-establish credit. They offer unsecured "signature loans" and will refinance again and again as long as you create an on time credit history. They will do this because they have an affiliation with the members work place so they can garnish your pay if you fall behind.

7.) If you are buying a computer, try fianncing it. I know that Dell finances compuetrs. I am not sure how tough they are but it is worth a try.

Please remember that this is all about establishing credit and being responsible.

Please don't get carried away like the United States of America. See US Debt Clock  "This is Scary"

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