Building and maintaining a good credit score can be difficult, even for the most financially savvy among us. It’s easy to rely a little too heavily on those credit cards, or forget to set that utility bill to ‘auto-pay’. One or two missteps, and you can find your credit score heading south in a hurry. Having a bad credit score takes time to repair — depending on the severity, it could be years before you can build your score to a level that lenders will see as "financially responsible".
If you are one of the many individuals today who have a complete lack of credit, you will also find it nearly impossible to receive home financing. The good news is that having a lack of credit is not the same thing as a zero credit score — and your situation can be turned around much faster.
When you have no credit history, it simply means that you do not have any items on your credit report at all. You have not borrowed money in the past; at least, not in the last seven years. Many people who do not believe in borrowing money may not have a credit history, and while that lifestyle can help you avoid falling into bad debt, it also prevents you from building good debt - which is key when qualifying for a mortgage.
So where do you go from zero? A FICO score requires you to have at least one account that’s been open six months or longer. You’ll also need at least one creditor reporting your activity to the three major credit bureaus (Experian, Equifax, and Transunion) in the last six months. To establish your credit presence, you might try one of the following:
By following any of these steps — and showing a little patience — you can prove to lenders and financial institutions that you are financially responsible, and a quality candidate for a mortgage. At Midwest Lending, we're here to be your home financing experts for life. No matter how far along on the path to home ownership you may be, we are always here, ready to help.