How to fix my credit !!

Question

How can I fix my credit ...  I don't know what my credit I know that's very sad for a 23 year old not to know .. I have never owned a credit card or used my credit in any way . I want to start purchasing some houses cash and from the bank.. I am really looking to start my credit . What should I do ??

Scott Hubbard · Answer

I agree with Paul.  Start with a credit report and here is a link to get a credit report free from three major credit bureaus:

https://www.annualcreditreport.com/cra/index.jsp

You should also go to myficoforum.com or creditboards.com and start educating yourself on how to build a credit history.

If you have not previously been issued credit in the past, then your credit bureau may lack credit history which will in turn produce a lower FICO score.

Since many loan programs have minimum FICO requirements, you may have to wait sometime to build your raise your FICO.

In the meantime, perhaps you can partner with a family member who has a good FICO.
Good Luck!

Paul B. · Answer

A couple things don't make sense here...

If you don't know what your credit looks like, how do you know it needs to be "fixed?"

Also, if you are buying houses for cash, you don't need credit. You're paying cash.

First thing you should do is get a copy of your credit report as well as your credit score.

Then think about your real estate strategy. It sounds like you may not have one fully formed just yet.

Then take a look at your income and cash on hand, and think about what you'll need to execute on your strategy. If you will need loans, get referred to a couple of good lenders who understand investment properties, tell them what you want to do and what you bring to the table financially speaking, and let them tell you what they can do for you.

Bill Anderson · Answer

Apply for a couple of credit cards and use  them  to buy gas and other needed items, but pay them off every month. This will be a good start to get lines of credit started.

Account Closed · Answer

Thanks. Some of it was good advice from friends years  ago. Some of it I got from books along the way: Dave Ramsey, Robert Kiyosaki (Kiyosaki the part about not financing toys), Tim Ferris (if you're discipline, work the credit card companies and get free flights by paying your bal in full every month).

It's all true. That is why I felt qualified to type it up. The numbers I did not change at all in my example are the ratios, the number of credit cards open, the combined total credit limit on all "revolving" debt , and my fico score.

I hope it helps others. That and "credit repair" agencies kind of bug me for some reason. I am not sure exactly why. Though I do remember some credit repair people on this site who did add value with their posts.

The real repair is in changing one's habit and perception. That should only take about six months.

I went from "defaulting on a student loan" to a 770 Fico in under three years in the late 90s.

Account Closed · Answer

It takes a little time. You have to establish credit history. But if you follow the advice in this thread and start slowly you can have a great fico score in two to three years.

You can have a high "debt to credit" ratio. As long as the type of debt composing the majority of the "debt to credit" ratio is "mortgage" debt and maybe some "installment" debt (student loan debt and such).  However, not "revolving" debt. Credit cards are considered "revolving" credit lines. You want to keep the balances (debt) and "debt to credit" ratio very low on credit cards.

The magic number of total credit cards to open appears to be 4 or 5. Do not get more. A good combined credit limit for all your credit cards is around 30K. Only use one. Pay it off in full at the end of every month. You will get free flights and pay no loan costs. It's all about building good habits.  Use the other 4 cards once a year to keep the status of those cards "active".

You can have a fico score of 815 with parameters similar to this on your credit report:

Total Open Accounts:  8
Total Balance:	$300,000
Total Credit Limit:  $352,000
Total Debt to Credit Ratio: 85.23%
Total Monthly Payment Amount $1800.00

However the "debt to credit" ratio on the "revolving" credit in this example is extremely low. (.12% of say 30k). 
The "debt to credit" ratio for "revolving" credit will show up as 0% on your credit report when it's that low.

The "mortgage" or "installment" "debt to credit" ratio can be high and not impact your score much:

Mortgage Accounts ( property loans, HELOCS, etc..):  3
Balances 250K
Credit Limit: 270K

Debt to credit ratio: 92.5%

Installment loan amounts on student loans and cars are hopefully lower as well as their ratios. But they can be high and not hurt as much. But revolving debt has to be low.

If you're really reading this site a lot you are probably not financing anything that goes down in value, like a car or toys.

Start slow with the type of credit card recommended in this thread. Add on a few more cards over the next couple years. Carry very low debt balances on that type of debt. Keep your first credit card open forever to lengthen your credit history.

Good luck!

Nick J. · Answer

I think Scott meant to mention http://www.myfico.com/Default.aspx They have a pretty active forum.

From that main page, go to the far right top and click the 'community' tab. I certainly would like to see more/learn more about this topic without having to go to another site. Maybe someday some will show up without anything to sell :)

Matty, I don't know if or any of that was true but it sure does look good :) where did you get your experience from?

Rudy Butler · Answer

The fastest way to build credit is to apply for secured credit cards and shopping cards like Fingerhut, QVC..etc. They will give you a small amount at first like $400 but after you pay for the merchandise upfront of 33% down and finance the rest they raise the limit to a ridiculously large MLOC around $10k-25k , but I cant find anything in Fingerhut that I would finance that kind of money for. Its good to just get something simple and pay the little $8.99 a month for 12 months to build easy positive history and they report to all 3 bureaus.

How to fix my credit !!

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