Continuing our series on credit building, in this article we discuss how to leverage credit building to maximize a credit report in order to get mortgage approval. The average denial rate for a mortgage is approximately 16.1% nationwide. Denial reasons vary, but let’s tackle only the credit related reasons. Denial reasons are not limited to those with bad credit only, but those who may have limited-to-no credit. Regardless, credit building can offer hope for those seeking approval. It is simply a matter of knowing why you were denied, and choosing the right products or services to match the needs of your unique situation.
How Credit Building Can Help
Remember the balance scale illustration from Part 1 of this series? Adding new positive items to your credit can balance out the negative items and push your credit score up. Combining credit building with a solid credit repair program from a reputable company by getting some negative items removed and inaccurate items corrected can accelerate the process, and maximize the potential of your credit profile. Many credit service experts can spot other weaknesses or thin areas of a credit profile and use credit building products to reinforce and fill in the gaps of a credit profile to maximize it’s potential.
How To Maximize Your Credit Profile With Credit Building
In Part 1, we discussed the credit scoring factors. Knowing these factors you, or a credit service professional can analyze your credit reports and determine your areas of weakness, or areas you are missing. For example, if your credit usage (debt/credit ratio) is high, you will want to add a new revolving account, so that the available credit of that card will lower your overall utilization. A secured credit card like the Credit Builder Card is your best bet as typically there are no credit checks, which means no hard inquiries. However, depending on your situation the benefits of a new line of credit may outweigh the effect of an inquiry. Using the same example, asking for a credit limit increase on a card you have done well with may be beneficial, or becoming an authorized user on someone else’s card could accomplish the same thing.
Using credit age as another example, if you are building credit for the first time, or you have a young credit profile overall, there are options that can help you increase the age of your credit profile. The obvious beginning would be becoming an authorized user. Because the account owner’s credit history is reported on your profile, you enjoy the benefits of the account age. However, another option has emerged in recent years that can add up to 2 years of age on your credit profile. Rent Reporting is rapidly becoming very popular as you can now get credit for paying your rent on time. Although, this isn’t a comprehensive breakdown, you can understand there are credit building opportunities that can help patch up weak areas in your credit profile, no matter the weakness.
Further benefits of rent reporting
Each month you pay your rent and you pay it on time. Yet, you are never rewarded on your credit profile. Chances are, you are paying more for rent than you would pay monthly for a mortgage. For those who have never had a mortgage, do not enjoy the benefits
of having a real estate tradeline reporting on their credit that would show a lender your ability to handle a large payment (aside from other reported debt obligations vs household income). Having a rent reporting agency such as Rent Reporters on your credit report gives you the benefit of a new positive real estate tradeline reporting on your credit, up to 2 years of positive payment history, and something the lenders can see your ability to repay a large loan with larger payments.
Final Thoughts & Links to other articles in this series
Credit building can be the key to getting your approval for the home of your dreams. All you need to do is check your credit reports, or consult with a credit service professional to find the areas based on the scoring factors, you need to work on. Visit a website with a lot of credit building products, and choose the right product for your credit profile’s unique and specific needs. Your local credit service professional can help you determine the best course of action.
