When applying for a loan, many first time home buyers run into trouble – not because of bad credit- but because of a lack of credit history. These home buyers simply have not had lines of credit open long enough, and so their credit rating may seem relatively low.
Even with a USDA Home Loan, which is a good option for potential home buyers trying to reestablish their credit, you still have to meet a certain criteria. Primarily, your credit score should be at around 640 or above.
However, even if your credit rating is a little lower than ideal, you can take some minor steps that can have some major impact. These include:
- Get a copy of your credit report: AnnualCreditReport.com lets you request a credit report for free from all three of the reporting bureaus
- Establish a good payment history: 35% of your credit rating is directly tied to your payment history. So make a habit of paying your bills on time – often this can have a major impact in as little as six to twelve months.
- Credit History: Lack of credit history is a major sticking point for some first time home buyers. Keep in mind that keeping a credit line open and in good standing for twelve months or more is a positive.
- Types of credit: Credit cards are not bad – you just don’t want a ton of them. In reality, some people with no credit cards or installment loans are viewed as a higher risk.