First Time Home Buyers Guide: Establishing Your Credit Rating

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.
As always, remember that if you have any questions, we are here to help. Regardless of credit history, we can help you find the best options to the path of homeownership. Contact us for more information.

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