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How to Build Your Credit

As a Milton mortgage broker, I know how having bad credit or no credit at all can affect being able to get a mortgage. With bad credit, you can start to clean up your credit report to get a better rating. But what about when you have no credit history at all? It can affect one’s ability to get a phone account, an apartment, or a job. It may seem like it’s hopeless, needing credit to get credit, but there are things you can do to start building your credit up.

Open a Bank Account

One of the first steps towards building your credit is to open up a bank account. It gets your foot in the door of beginning to build your credit history. The best option is to have one savings and one checking account. With a checking account, you need to be vigilant and be sure you have no checks bounce and that your account does not become overdrawn, especially in those early days of building your credit. The point is to prove to lenders that you are responsible and able to handle your debts.

Have Bills in Your Name

Having some major utility bills, such as phone, electric, and gas helps to establish your credit history as well. So does having an apartment lease in your name. These are things that lenders will look for when reviewing your credit history. Just be sure that you always pay your bills on time. Late payments will hurt your credit report.

Tip: When you move home, make sure that any of the utilities that are in your name are disconnected, letting the utility companies know you are vacating the property. Otherwise, you could end up paying a bill for the time after you left and another person took over the apartment and the utilities.

Stable Residence and Employment History

In situations where you don’t have much of a credit history built up, lenders will look at other things, such as your employment and residential history. They will look to see if you have had steady employment to start with. Having several jobs over a short period can be a red flag for many lenders, as are periods where you have been unemployed. Your residential history works the same way. It looks better having lived in one place for a while, rather than moving around a lot.

Applying for Gas and Store Cards

Once you’ve started building up your credit history a bit, you can look into applying for store and gas cards. Large department stores, such as Walmart and Home Depot usually have credit options that aren’t too difficult to secure. Gas stations, like Canadian Tire Gas+  may also offer a credit card option. One thing to check before taking out one of these cards is to be sure that they report to a credit bureau. If not, it won’t help with building up your credit history and isn’t worth getting.

Tip: Store cards have higher interest rates. Once you’ve built your credit up and can get a secured line of credit, it’s best to cancel the store and gas cards.

Secured Cards

Secured cards come after you have built your credit history using the above steps. After you have had your store cards for a while, have an established bank account, have proven that you can pay bills on time and have steady work and residential history, you can try to apply for a credit card. In some cases, you may be denied a credit card but you can ask if lenders have a secured credit card option. This is a line of credit that matches what you have in your bank account.

Loans

Loans can help you build your credit history quicker and these tend to be based on your salary. You need to make sure you make your monthly repayments on time and never miss any if you want to keep your credit history in good standing.

As you can see, it’s not impossible to build your credit. It takes a bit of time and patience, and its something you need to do well before you decide to apply for a mortgage. If you need advice on how to build or repair your credit, give your trusted Milton mortgage broker a call today at (289) 270-1586!

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