@Anonymous wrote:
Hello everyone! My name is George and I am needing help/mentor with building my credit back up to the 720-740 mark. I have neglected my credit for over 8 years as we decided to live a debt free lifestyle. I have learned that there is almost more stress living the debt free lifestyle than there was living with credit. I choose to live the lifestyle of being debt free, but that lifestyle will hinder your ability to purchase a house. That is exactly what I am looking to do. We (my wife and I) usually pay cash for everything and we have no problem continuing doing so for the rest of our lives. We do not have any credit cards, store credit, revolving credit, loans or car payments. I do have an understanding on how credit works and what it takes to have great credit. I know that it is healthy credit wise to have a couple of revolving credit accounts open as well as a loan all in great standing. I am willing to do this again so that we may be able to qualify to purchase a house.
I have neglected my credit (not opening and using credit) for over 8 years and I know that it will take some time to rebuild my credit to achieve my goals. My credit goal/challenge is to have a 730-740 score. My theory is I wanted to open up two revolving accounts (Snap On for a tool box and Big Box store for appliances) and one loan (Used car with a 12 month payment and 50% down). I normally would just pay this off in cash, but I think this would be a great opportunity to establish a healthy credit history again. I obtained my credit report yesterday and I am troubled to say the least. I knew because of my neglect that there were going to be issues and problems, but I didn't expect to see the marks that I had. They are legitimate marks and they are my fault. I moved from state to state twice and I did not take care of the cable and electricity like I should have. Lesson learned and I will pay that off now. That was my fault and I will correct that. My score was low as expected. My current credit score is 519. I know that correcting the faults that I made will lift that score up some, but not to where I need and want to be.
Please do not judge me on what I am about to say. I know that the absolute fastest way to build credit would be to open a couple of credit card accounts and to keep them in good standing with low balances/paid balances, but I am not interested in opening up any credit card accounts. I would rather be patient and build over a longer period of time than to have credit cards. If I absolutely have no choice what so ever, then fine, but if I don't have to then I don't want to.
I am not looking to have this credit score to be able to buy stuff or to obtain as much as I can. I don't believe in that. I believe if you have the cash to pay for it, then you buy it only when you have the cash to do so. I know that these days it is impossible for the average joe (me) to pay cash for a house that you would want to live in. The reason that I want to buy a house instead of renting is so that I can have a house (paid for) for my kids when I pass away. I am not deceived in thinking that financing a house would be cheaper because it's not. After the escrow, taxes and insurance the payment will likely be more than renting. I am not looking to lower my monthly housing expense or invest in any real estate. I just want to purchase a nice house and pay it off.
I need help in what I am trying to do. Can I open up a revolving credit account and pay it off in 6 months (what I would like to do) or do I need to let the principle mature until the account is paid for in duration? Is 6 months long enough to positively effect your credit score or does it need to be longer? Do I need to open more or subtract accounts to acheive my goals? I know this will not be an overnight correction and I know that this will need a lot of work to reach my goals. This is where I need help. I understand credit and the reasons for it. I understand how to be responsible with credit. I understand that it takes time to establish credit and a great credit score. I just am not sure how to go about it in a mture responsible way. How long do you expect for me to be able to reach my goals?
It is a pleasure to be a part in this and I thank you guys so much for your help.
Again, welcome to the myFico forums!
It is pretty much a necessary evil to have credit cards to establish a credit history to be able to borrow money for a house.
The Fico scoring system looks for at least 3 revolving accounts like CCs and at least 1 installment loan for the scoring elements.
It will seem counter intuitive to you, based on your past habits of using cash only, but you will actually get a decent increase in your scores just by opening a CC account. And it will work for the first 3 CCs you open. If you do nothing else but open one CC, you will get a good 15 to 20 points, maybe more, I dont recall exactly. It doesnt matter if it is secured or unsecured or what the amount is, just that it reports to all 3 Credit Bureaus and it is in good standing.
I started with scores in the 400s and then got one secured CC for 250. Then I got a lousy offer in the mail for a predator company (Credit One), but I took it. I got a good 20 points for opening each CC. A couple months later, I opened a third CC and more points. I would conservatively estimate that you would get 40 to 50 points for opening those first 3 accounts.
Later, you can decide if you want to get higher credit limits, but for now, the amounts are not as important as just having them.
One good place to get a secured CC without a credit check is Opensky, and for as little as 200.
Be prepared for serious questions and maybe even a denial from your credit union with your score as a 519. Also, the rate for an auto loan will be pretty steep.
I would also recommend having an instalment loan open for at least a year to establish a history.
In the end, you will need to conform to the 'rules' of the mortgage lender you use. I would suggest trying to narrow down the list of possible mortgage lenders and then asking for a prequal meeting so you can find out what they look for. In general, I think most of them will want a score of about 620 minimum and most will not approve you if you have any open collections. Many require a 640 score.
As discussed earlier, if you have a 1k credit line, you can still have a zero or low balance. Having the CC doesnt force you to be in debt. You just need to be able to show that you CAN handle the account responsibly. And getting cash rewards for paying your regular bills is a good deal.
HTH
