NO CREDIT HISTORY
We probably live in the most credit driven society the world has ever known. One would think, then, that having never had credit, nor credit cards, if trying to buy a home, would be a good thing. Not always.
Lenders need to see how you handle borrowed money. If you have never borrowed money before, it is impossible for them to determine whether you will repay the money loaned to you. If you do lack a credit history, there are two options for building one: a non-traditional (well documented) credit history, or obtain a standard credit card, or both.
- Non-Traditional Credit History: You can build a credit history by using your utility bill payments, rent, telephone bills, insurance payments, and other items that you can document that are due and paid every month. These items won't appear on a credit report yet help the lender understand how you pay your bills on a monthly basis.
- Standard Credit Card: If you have time (about 12 months) you can apply for a standard credit card or store charge card. But be careful that you don't over do it.
- Warning #1: The idea is to show that you can pay monthly payments on time, not become saddled with debt from frequent credit card purchases. Be sure and budget these expenses wisely so that you can pay them in full each month.
- Warning #2: Be careful that you don't get a credit card that charges extremely high interest, or that doesn't report monthly to the credit bureaus.