Do you have little to no credit, damaged credit or are just starting to build your credit? If so, this is the blog post for you! Being a mortgage broker, I have seen a lot of people in these situations. It’s never easy to build your credit when first starting out and it can sometimes take years to establish even a little bit of credit.
In this blog post, I will go over some of the best credit habits and how to obtain credit when first starting out, coming out of bankruptcy or building from damaged credit. It’s possible to acquire credit, you just need to know where to start and to actually make the first move in starting! Once you do that, the opportunities are endless.
What builds credit and what ruins it.
The only items that build your credit are credit cards, lines of credit, and loans. However, there are many items that can damage your credit. Any missed bill payments, usually missing two months in a row. Or, you may have missed one month, went a couple of payments on time and then missed another.
Are you looking for the easiest credit to acquire when you have little to no credit? Try looking for secured credit cards. These are a great way of building credit.
These will be noted on your credit bureau and will lower your credit score. Now that you know what builds your credit and what ruins it, here are my best credit guidelines to follow!
The best credit guidelines.
- Try to keep variable balances such as credit cards below 50% full. You don’t need to keep a balance on your credit card, it can be paid off each month.
- Don’t miss any payments on your cell phone, credit card, cable or any other bills. Any missed payments can be noted on your credit.
- Missing a payment or two in a year isn’t a big deal as long as it doesn’t happen often and you generally have healthy credit habits.
- There is no need to pay down your loans unless you are paying them off, as banks debt-service you for a mortgage based on monthly payments, not amounts owing on your loans.
- Generally, a bank would want someone to have a minimum of two sources of credit with a limit of $2.000 or more each, established for two years or more.
- Obtaining credit isn’t always easy, but the more credit you have the easier it can be to get depending on your income and debt level.
The easiest companies to get credit through can be the following:
- Companies such as Capital One, Canadian Tire, President’s Choice, etc. These will be much easier than the big banks.
- Look into secured credit card companies – secure via putting cash down. Here are some great options for these types of credit cards.
- Another strategy would be to get a car loan even if it is a high-interest rate. This will help build your credit and then six months or so down the road you may be able to get a credit card. This timeline differs depending on the client.
Acquiring credit is possible.
Credit can be very tricky but each year the banks are making it more and more important when it comes to qualifying for any type of loan. Your credit situation will be unique to you but this blog gives you a place to start from.
If you want to get a mortgage, you will need credit. If you want to improve your credit and aren’t sure how to start, give me a call or email and we can come up with a game plan together. Call me at 250-826-3111 or email matthew@yourmortgageteam.ca.