Michael Santos

MLB Residential Lending

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How to Build Credit from No Credit in 6 Easy Steps

September 24, 2012 by Michael Santos Leave a Comment

1. Get a secured credit card.

A secured credit card is just like a “regular,” or unsecured credit card, only you are required to put down a security deposit – typically $300 to $500 – to provide assurance to the creditor that you will repay your debt. Your credit limit is often the amount of your security deposit, or a percentage thereof.

Many people confuse a secured credit card with a debit card, however the two are very different. First, banks do not report debit card usage to the credit bureaus, as a debit card is not an extension of credit. A debit card is merely a convenient way to access the funds in your bank account.

Creditors, on the other hand, do typically report secured credit card activity to the credit bureaus, as a secured credit card is an extension of credit. Your purchases are not deducted from your security deposit. Rather, each time you charge something, you are effectively borrowing money from the credit card company and are obligated to repay that debt. As a result, how responsibly you use a secured credit card will affect your credit score – both positively and negatively.

[Free Resource: Check your free credit report and score]

 

2. Only charge what you can afford to pay off in full.

Building credit means consistently demonstrating your ability to pay back any money you borrow. Your goal is to prove to creditors and lenders that you can responsibly manage debt. That’s why it’s smart to start small – Only charge purchases that you can afford to pay off in full every month.

Unfortunately, it’s not enough to open a credit card – secured or otherwise – and sit on it. If you don’t use your credit card, you’re not demonstrating anything. Use your card at least once a month for small purchases like inexpensive meals, gasoline and drug store essentials. Try to not charge more than 50 percent of your credit limit in a given month however, as that can take a toll on your credit score.

3. Pay on time every month.

The most important thing you can do to build and maintain a good credit score is paying all of your bills and debt obligations on time every month. Even one late payment can significantly damage your credit score, especially early on.

4. Avoid applying for numerous accounts.

Each time you apply for a credit card or loan, your credit score takes a small hit. And there’s no point to chipping away at a credit score you’re trying to build up, especially when you haven’t yet demonstrated that you can handle just one credit card. Instead, use that energy to prove to yourself that you can keep the balance low on one credit card and pay the bill on time every month.

5. Check your progress by checking your credit report and score.

After six months of timely credit card payments, check your status by viewing your credit report and score. Pay special attention to what’s on your credit report and any positive or negative factors listed, so you have a better idea of what you need to work on next. Also make sure to take a look at your credit score – It will help you make sense of your credit report and give you an idea of how well you’re doing.

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Branch Manager Executive / Mortgage Loan Originator

Top Loan Originator Since 2001

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Union, NJ 07083

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Michael Santos NMLS #199875 • MLB Residential Lending, LLC. NMLS# 1101220. Michael originates NJ loans only. MLB Residential Lending, LLC. is located at 51 Commerce Street, Springfield, NJ 07081, 732.243.0140. MLB Residential Lending, LLC. NMLS#: 1101220 is a residential lender, licensed by the NJ Department of Banking and Insurance; licensed by the PA Department of Banking and Securities; licensed by the CT Department of Banking; licensed by the DE Dept. of the Banking Commissioner; and is licensed under the FL Mortgage Lender Service License # MLD1128. All rates are subject to change without notice. MLB in no way, claims to represent or to conduct business on behalf of HUD, the FHA or the Federal Government. This site is not authorized by the New York State Department of Financial Services. THIS SITE IS INTENDED ONLY FOR NJ CONSUMERS.

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