Picture this: You live rent-free with a family friend, own your car outright, you are debt free and pay everything in cash and all the while you have been able to save thousands of dollars since starting a new job three years ago.
You’re in the perfect position to buy your dream home. Right?
“Before applying for a mortgage, clients really need to understand the importance of having established credit and having a good credit score,” said Jill Dobb, loan officer assistant at Michigan Mortgage. “Buying a home requires you to have credit and the better the credit score the better the interest rate you will qualify for.”
“Many believe that just because they don’t have any debt, they are ready and financially capable of financing a home, which oftentimes is not the case.”
Living debt free is a goal for many, but in the eyes of the credit bureaus, debt free sometimes means you’re a credit “ghost,” meaning you’ve been inactive and nothing has reported to the bureaus for six months.
If you’ve had your credit pulled by your trusted mortgage lender and your score comes back 0, Dobb offered a few pieces of advice.
“We suggest that our clients with a zero credit score apply for a credit card or get a secured credit card at any national bank,” she said. “They need to use that card wisely to obtain a good credit score.”
“We recommend keeping all of your credit card balances below 30 percent of your credit limit and make sure all of your payments are made on time.”
If you have absolutely no credit score with all three credit bureaus, it will take a full 6 months to obtain a score with a revolving line of credit.
If you need additional information about credit improvement, or are interested in getting pre-approved for a mortgage, give us a call. We’d be happy to guide you in the right direction.