Question: I’ve recently graduated from college, pay cash for everything, have no credit cards and live at home. How do I establish credit since I ultimately want to buy a house?
Answer: In the usual case mortgage lenders might measure your credit standing by looking at utility bills, car payments, savings and rental information. However, your situation calls for a different approach: You need to build a credit history. Here’s how.
Apply for basic credit cards with a gasoline company and a department store. Make purchases each month. Pay your bills in full and on time. Then apply for a general credit card with Visa or MasterCard. Same deal. Make small purchases each month and pay your bills in full and on time. In six months or so, speak with local mortgage lenders and real estate brokers. Explain your interests and ask about entry-level mortgage programs. Be sure to have a lender review your credit report.
Track your credit program. You can get a free copy of your credit report once every 12 months from each of the three major credit reporting agencies at AnnualCreditReport.com. While there is a difference between a credit score and a credit report, if you have a solid credit report you will have a good credit score in time. However, lenders like to see experience — seasoning — so you will not be able to instantly bulk up your credit score through credit usage.
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