Establishing new credit is a bit of a catch-22. To build a credit history, you need credit. But it’s hard to get credit without having a credit history. So, where do you start?
The first thing you should know is that building credit takes time. It’s not something that happens overnight. If you’re looking to secure mortgage financing, you will want to have a minimum of two trade lines (credit cards, loans, or lines of credit) with a minimum limit of $2500, reporting for at least two years.
If you don’t have any credit yet, the best time to get started is right now. However, without a credit history, most lenders won’t feel confident about taking a chance on you, so you can consider a secured credit card.
When looking for a secured credit card, be sure to ask whether they report to the two nationwide credit bureaus, Equifax and TransUnion.
Once your secured credit card begins reporting to the credit bureaus, you begin to have a credit score; usually, this takes about three months. Now you can start to seek out a second trade line in the form of an unsecured credit card. Another option at this point could be a car loan. From here, you simply want to make all your payments on time!
But what happens if you’re looking to secure mortgage financing before you have a fully established credit report?
Well, if you have someone who would consider co-signing, you can certainly go that route. Have questions? I'd love to help.
