Navigating credit scores can be confusing and frustrating. Even if you have a low credit score or no credit history, there are ways to build your credit without obtaining a regular credit card. You should seriously consider these options if you have a history of late payments or your employment is not secure. It is too easy to get a credit card and quickly rack up a balance and fall behind on payments, which will only hurt you financially and emotionally. This article shares several ways you can build or improve your credit score without a traditional credit card.
by Christian Scully
Credit reports are unfortunately a flawed and necessary evil we have to deal with. They are confusing, can change for no apparent reason, can go down when you think you've done something good and certainly cause a lot of stress for people in today's world. Because financial education is mostly not taught in school and the bulk of that education needs to come from parents and mentors, most kids don't understand the importance of a good credit score. I would argue that most kids don't even know what a credit score is. At least I like to think that because I certainly didn't!
Like a lot of young people with no concept of personal finance, I destroyed my credit score in college, borrowing money to pay for living expenses without a thought of how I was going to back the money back. By the time I first started learning about personal finance and began working towards buying our first house, my credit was in the low 500's... not good. It took about 18 months to get the credit score to above a 620 to qualify for a decent interest rate on a government backed mortgage.
A lot of people will be in this category and will need to commit to digging their way out of the bad credit hole. Another group of people, however, will have never opened a credit account and thus won't even have a credit score. I've had borrowers seeking my help with applying for a mortgage with no credit score. In this case, there are things you can do to get the credit bureaus to calculate a score for you and to start building a good credit history. The following are a few of the best ways you can either build credit from scratch without a credit card, or to start repairing bad credit.
Remember that if you are recognizing that your credit score is less than ideal, and you are motivated to improve it, you are already ahead of the game! So many people never even think about it and just continue missing opportunities or struggling due to poor credit. It takes time to improve, but not as long as you may think! Stay focused on your goals, know why you are trying to improve your personal finances and credit rating, and you will keep doing better every day.
This article will provide you with a list of eleven common mistakes that borrowers often make when preparing to applying for a mortgage or when in the middle of the application process. We will discuss the potentially negative affects that can be caused by each mistake.
by Christian Scully
Applying for a home loan can sometimes feel like a challenge, but the best thing you can do as a borrower is to be informed, prepared and to not make things harder for yourself. If you have already been prequalified for a mortgage, you are going to want to keep your current financial situation unchanged. Consider that you are building an image of yourself for your lender, you don't want to change that image before the lender can make the ultimate decision. If you are working towards getting prequalified for a mortgage, you want to avoid anything that will be detrimental to your credit history. If you are already under contract or in the middle of a refinance application, there are a few easy mistakes to avoid. No matter what point you are at in the mortgage process, make note of the following eleven things you should not do.
1. Don't open any new lines of credit or take out any loans.
Opening new credit accounts could have two potentially negative effects. First, if you open a new credit account you could be adding debt to your credit report. Additional debt could change the loan amount you qualify for. Second, opening new credit accounts will lower the average age of your credit accounts which could lower your credit score.
2. Don't apply for credit with many different lenders.
If you have applied for a credit card and been denied, don't keep applying for more cards thinking eventually one will approve you. Every time you apply for credit there is a hard inquiry on your credit report, potentially lowering your score. Applying to a few different mortgage lenders in an attempt to shop around for the best rate and terms is okay. Typically if you have a few inquiries from mortgage lenders in the same month it will be clear that you are shopping around and your score likely won't be impacted too much. However if you have 8 inquiries for credit card, 4 inquiries for auto loans and a few mortgage inquiries, it does not paint a very good picture of your financial situation, especially if those inquiries don't lead to actually opening a credit account. It shows lenders that you likely are not qualified for credit.
+ Better Note: Hard inquiries stay on your credit report for two years. If you are applying for a mortgage, your lender will likely ask for explanations if you have several recent hard inquiries on your credit report. They want to know that you don't have new debt obligations that have not yet been reported.
This article explores some of the ways that paying off debt can impact your life. The elimination of debt can have both positive or negative impacts on your credit score, which could effect your ability to qualify for a mortgage. Paying off debt could positively or negatively impact your quality of life, depending on your goals and financial situation. Paying off debt could save or cost you money over time depending on the size and type of debt. It is important to have clear goals and intentions when eliminating debt and to take into account potential effects.
by Christian Scully
Paying off debt should definitely be a goal of anyone seeking to live what we consider to be a better life. Being financially free from creditors, not having monthly payments to worry about, and having the ability to save and invest more of our hard earned income should be everyone's goal. The idea that we forever have to have some sort of debt bill, we have to owe somebody money just to live a decent life is engrained in our society. When the Diners Club card was first offered in 1950, it began a shift in the culture's view of money and lifestyle aspirations. It was easier to appear rich as opposed to slowly build wealth over a lifetime. Those who remained frugal, bootstrapped small businesses, bought goods with money they had and invested any budget surplus managed to grow wealth enough to live incredible lives with generational financial security.
When our mindset shift occurred and we began our debt-free journey to financial freedom, we were only focused on the main goal: pay off all debts as fast as possible. We didn't have a target date in mind, but I had long held a personal goal of not having children while in debt. Not having the financial strain of debt interfering with family life and raising children was number one on my list of reasons to be debt free. We used this as a starting point, but over the next couple years we learned about the different types and effects of debt and how we could find a balance to reach our goals and not put our lives on hold.
I think there are two basic things to keep in mind from the start. First, when making any plan for the near or distant future, make a list of what you are hoping to achieve. What is the ideal result? What is the end goal? Then second and most important: fully expect those goals and the plan to morph over time. In fact it is super important that it does. Things come up, events happen, opportunities arise, markets change. Keep your eye on your goals, re-evaluate your list of goals regularly to make sure the targets don't need to be adjusted, and then shift and alter strategies as new opportunities or roadblocks come up. Once you have your goals targeted, consider the following ways paying off debt can effect you:
Real Estate + Money
Thoughts, ideas, lessons-learned, inspiration, how-tos and more from a journey in small business, to owning and investing in real estate, helping borrowers navigate the mortgage process as a licensed loan originator, in an ongoing pursuit to fund the life and retirement that is chosen, not accepted.