No credit / building credit toward a mortgage

[Anonymous]

This is for people like myself who spent years not caring about or using credit and then started thinking about owning a home.

This is a chart showing changes to my mortgage scores over the first 6 months of having credit cards for the first time in my life.

• I had no credit history and no public records 1 year and 6 months ago.
• I opened a credit builder loan for $500 and made monthly payments on it for 12 months before I applied for any credit cards.
• Your mileage may vary. I think it might be a lot better to open a secured card and a credit builder loan at the same time.
• Even better advice: See @Revelate's reply below. (Message #3)

The chart starts 12 months into my credit building adventure. I was approved for 2 cards in December and have had them for 6 months.

[Mortgage-Specialist]

Why is your overall goal? Youre buliding for a morgage that you already qualify for

[Revelate]

I would suggest from a pure credit building perspective and wanting to do it as quickly as possible:

Open 3-4 accounts right from the start: secured, unsecured, doesn't matter, but get it done early and get them all aging ASAP rather than dragging out the process if we're talking speed building, otherwise as shown in your graph you get stuck with the AOYA penalty all over again and you run into some issues with too thin a file anyway for certain metrics.

Isn't really any advantage scorewise to dragging out TBH.

[NC_Mtg_Loaner]

I believe Revelate is on the money here---just go ahead and dive into the credit pool and open 2-3 or 4 accounts ASAP and manage them properly right out of the gate.

Credit score isn't the only thing needed for a mortgage loan approval.

Are you saving for a down payment?

Do you have steady and stable employment?

[Anonymous]

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@Mortgage-Specialist wrote:
Why is your overall goal? Youre buliding for a morgage that you already qualify for

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To be fair, just qualifying or getting approved is not enough. Some people want to get the best rates. Usually, that takes a credit score of 740 or above. I've been waiting out my score before I apply for my mortgage.

Also, timing could be an issue. There are credible rumbles that the Fed will lower rates in the coming months. Why pull the trigger now when better rates are coming?

Delayed gratification and patience are good things.

[Anonymous]

You can ignore the rumbles about the the Fed lowering rates. The federal intrest rate is not directly tied to mortgage rates. Any minor adjustment likely won't change a thing. Case in point, mortgage rates have barely moved over the past few years even as the Fed has raised rates multiple times.

[Anonymous]

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@Revelate wrote:

I would suggest from a pure credit building perspective and wanting to do it as quickly as possible:

Open 3-4 accounts right from the start: secured, unsecured, doesn't matter, but get it done early and get them all aging ASAP rather than dragging out the process if we're talking speed building, otherwise as shown in your graph you get stuck with the AOYA penalty all over again and you run into some issues with too thin a file anyway for certain metrics.

Isn't really any advantage scorewise to dragging out TBH.

Yes, you are right, which my chart and FICO 8 scores in my signature show as well. It would have been a lot better to start with at least 2 secured cards, using them every month and paying them after the statement close and before the due date.

I added a link to your reply to the original post, so someone else just starting out doesn't take the same naive approach I clearly took.

In the beginning, before I opened the credit builder (SSL) loan, I had no idea what to expect of my credit rating at 1 year or 2 years. The purpose of my original post was just to let others in the same position know that everything will be fine, and they can do much better than I did.

[Mortgage-Specialist]

If going FHA, you already qualify for the best rate... If going Conventional, youre probably about 1/8th of a point shy from from having the best rate. You might be overthinking this. Home prices are increasing. 

[Anonymous]

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@Mortgage-Specialist wrote:

If going FHA, you already qualify for the best rate... If going Conventional, youre probably about 1/8th of a point shy from from having the best rate. You might be overthinking this. Home prices are increasing. 

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Thanks for that. People who have no credit and are looking to get a mortgage quickly should feel even better now.

I'm a few years away from being able to settle down in a new home. Our next 'regularly scheduled recession' might come at the same time I start looking.

[Revelate]

That is probably a good plan Cassie: especially depending where you live.

Long term I think housing will go up, shorter term in various markets YMMV. Recently it was going down in the Bay Area (or at least the expensive parts) and a buddy of mine noted that the Redfin plot of his neighborhood down in LA was covered in pins which was not typical... which suggests prices may well have peaked at least here.

If I were going to move now would probably be the right time to do it, but I am in an absolutely good economic niche right now and just holding steady is the only rational course currently.

It would be a totally different calculus if I didn’t have a mortgage and was still renting... I really don’t think I would be buying right now out here and to that point what money I am putting into real estate isn’t going on the west coast.