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"How do you build credit?" is one very popular question these days, primarily because a good credit score is the key ticket to most of life's big purchases, including buying foreclosure homes. Here, we will discuss how to build credit, including suggestions for credit repair.
For those who are just starting out, learning how to build credit is a must. Credit is required for virtually any major purchase, such as a new home or a new car. So, building up your credit score helps you to obtain the means to buy a first home, buy a new car, or take out a personal loan for a variety of purposes. Also note that your credit score is also used to determine interest rates.
If you are under the age of 21, it helps to have a co-signer help you sign up for credit cards. Any activity with these cards then shows up on your record as well as your co-signers, which can provide you with the beginnings of a credit history.
If you are over the age of 21, you can start small and work your way up. Signing up for credit cards to build credit is one solution, and it is fairly easy to sign up for credit cards offered by gas stations, retail stores, and secured credit cards. (More on these later.)
As you accumulate a credit history, you'll begin building credit - and your credit limit will rise and more opportunities will emerge.
In a word, yes. Mortgage companies use your credit score when you apply for a mortgage. When youapply for a first or second mortgage, your credit score is one key metric these companies use to evaluate whether you can reasonably pay for the new loan.
Ever since the housing market crashed in 2007, credit reports and credit scores have become more important. They are now just as important as income in qualifying for a mortgage. When purchasing a short sale or a foreclosed home, anticipate having your credit score, including in your application.
You should always be aware of your credit history. The American government passed a law requiring each of the nation's three major credit reporting bureaus - Experian, TransUnion, and Equifax - to make available a credit report once every 12 months. You can go to AnnualCreditReport.com to obtain your free copy. This is the only government-sponsored website that gives you a free report.
Note that this site is only for credit reports. For credit scores, you'll have to order a copy from one of the three main bureaus that offer that service.
What constitutes a good credit score range? The ranges are as follows:
Building credit scores is achieved by demonstrating a track record of successfully taking on debt and paying it off. Debt is required for this to work. Those who have never taken out a loan or obtained credit cards and used them will not have a credit score at all.
There are a few types of credit cards that can help build your credit score:
Beware of predatory secured cards, those with high APRs (like above 30%) and high annual fees.
It is really easy to get too many retail cards, though, so limit yourself to just a couple and make sure you pay off their balances monthly. APRs tend to be higher for this type.
In addition to getting the right cards, you can fix credit scores by going to credit score repair agencies who provide repair services. A service in this line of work uses legal solutions to help negotiate with creditors to reduce your debt and work out reasonable repayment schedules and amounts.
Tips to further improve your credit include talking to lawyers who specialize in credit issues. An attorney can help you with your creditors, and may even recommend bankruptcy as a way to discharge accumulated debt and obtain a fresh start.