How do I borrow money for my first home if I don’t have any credit history? Having no credit can make it difficult to borrow money from a bank when you apply for your first mortgage loan. The reason you have no credit may be because you have never taken out a loan from a bank before. It also may be that you never obtained a credit card and used it.
Having no credit is not nearly as bad as having bad credit. If you have bad credit it takes a lot of time and effort to eradicate it. You see, once some kind of credit has been established in your name, whether good or bad, this information is going to be on your credit report for a very long time. And if you have any history of credit in your past, again whether good or bad, a credit report in your name does exist. If you think you may have some credit history but you are not sure, you can contact one of the three major credit bureaus. The three major credit bureaus – TransUnion, Equifax, and Experian – collect, maintain, and provide your report to landlords, businesses, and employers who need to check your financial responsibility.
If you want to do your homework before applying for you first home mortgage loan, request a free credit report on yourself and find out what is in your credit report before the lender does, just for your own peace of mind. If you want to contact one on the Big Three Credit Bureaus, simply do a Google Search on any of their names and you will find them very quickly.
However, if you know that you have no credit history, it is not all that difficult to go and create some very good credit history on yourself in about six months. And it will show up on your credit report for all to see. One method is to obtain a credit card in your name. Some folks don’t believe in credit cards because so many people around them get into trouble using them. I am going to show you how to use a credit card to your advantage, rather than to your disadvantage. And assuming you already have a checking account at your bank, you are ready to get started establishing very good credit for yourself. If you don’t currently have a checking account, find a conveniently located bank and open a new checking account. You will need to have a checking account for the later steps.
Make a trip down to your bank during their normal banking hours when you can go inside and do this transaction in front of a live teller, rather than going through the Drive-Thru. Present the teller with your credit card and ask to borrow $500.00 on your card and place the cash in your checking account. Don’t spend this money on anything, just leave it sit there in your account. A month later, you will have gotten a bill from your credit card company for the money you borrowed on your card. Pay about one half of the balance this time only, or approximately $250.00. Remember you placed the $500.00 in your checking account, so go ahead a write out a check to make this payment. Next month, you will get another bill from your credit card company because you are still carrying a balance of the remaining $250.00 plus a small finance charge on this balance. Yes, you are going to have to pay a small finance charge on the $250.00 but we are talking one month of interest charges on this balance which will be a very small amount, only a few dollars. A very small price to pay for establishing very good credit. OK, you have just started to create some good credit history for yourself. And only after two months, you have demonstrated to the finance world that when you borrow money, not only do you make your payments on time, you also pay off your debt much quicker than required. But don’t stop there, repeat this process a few more times. In six months you will have a very good credit report. You will have gone from having no credit to having very good credit.
For more tips on buying your first home visit the Mortgage Calculator Guide web site.
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