Steps to Set Yourself Up for Success

Getting ready to buy a home starts long before you find the perfect property. By taking the right steps now, you can set yourself up for a smoother, more successful purchase when the time comes.

Why does credit matter?

Years ago, people saved and paid cash for big purchases. As loans and mortgages became more common, credit became the system lenders use to decide who they can lend to.

If you want a mortgage, you need credit.

Step one: Check your credit report

Whether you know you have credit, think you have credit, or are pretty sure you don’t have any credit history, everyone should pull their credit report www.AnnualCreditReport.com.

• You can access your report once per year from each credit bureau,
• Review it carefully for errors or accounts you don’t recognize,
• If you find inaccuracies, dispute them directly with the reporting bureau.

Important note: This site does not provide your credit score. There are many reputable places that do, but this is still the most important first step.

How to Establish Credit

You can start building credit at any age, but 18 is when you can open accounts in your own name. These tools can help build credit, but if misused, they can also hurt it.

Ways to start building credit:

While you can do this at any age, 18 is when you can get a credit card on your own. Things that you can to establish (…but if used wrong, can hurt your credit):

• Open a bank account in your name,
• Put utility bills in your name and pay them on time,
• Rental payments:
  • Some landlords report on-time payments, but many do not
  • Self-reporting options exist, though they may be cumbersome or involve a small monthly fee
• Open a credit card and use it responsibly
  • A secured credit card (backed by your own cash) is often easier to qualify for

Important credit card tips:

• Do not pay the balance off in full during the first billing cycle—it needs to report,
• Aim to carry about 10% of the limit if you’re disciplined,
• Keep limits and balances low. “I’ll pay it off next month” is how balances snowball.

Other options:

• Small personal loan
• Authorized user (piggybacking)
  • Someone adds you to their card, and their payment history reflects on your credit.
  • Pros: establishes credit and can increase your credit score.
  • Cons: Not all lenders count authorized-user credit; late payments, high balances, or poor habits on the main account affect your credit too.

How to Improve the Credit You Already Have

If you already have established credit, here are steps you can take right now to improve it:

• Pay every bill on time, even if it’s the minimum
  • If you’re struggling, contact creditors; many offer hardship programs
• Avoid opening new lines of credit
• Pay balances down strategically
  • First to 50%, then 30%, and eventually 10%,
  • Focus on the card with the highest interest rate first.

Example:

• Card A: 29% APR
• Card B: 25% APR
• Card C: 32% APR

Start with Card C, paying it down to 50% of the limit. Then move to Card A, then Card B. Once all are at 50%, repeat the process to get them down to 30%, then 10%.

Extra support

If you’d like guidance beyond this, consider working with a financial coach or exploring resources through Mid Central Community Action.

If you feel like you need more help or feel you are over your head, I have some credit repair professionals who have done wonders for my buyers. Email me for suggestions.

Here’s a document you can print if it helps.