Preparing to Buy your First Home: Establishing Good Credit

If you are planning to buy your first home, establishing a good credit history is a critical first step. All three credit bureaus in the United States keep track of your payment history, including past due and delinquent payments on credit cards, student loans, car loans and so on. Paying your bills on time will help you to establish a great credit history that will go a long way towards enabling you to qualify for a mortgage loan with a very competitive interest rate.

Not paying your bills on time, or not at all, will lower your credit score dramatically. Once your credit rating reflects consistently late payments, it can take up to seven years to completely erase a bad line of credit. And this is seven years after the last transaction on a particular account. In other words, if you have a Discover card bill that you owe money on, and you decide to close the account, the derogatory credit item may not “fall” off your credit report for seven years from the time you close the account!

So, in order to establish a good credit rating so that you can qualify for a mortgage loan to buy your first home, it is imperative for you to have at least five lines of credit on your credit report that are in good standing. These lines of credit, as they are called in the mortgage industry, can be any recurring monthly payment, including credit cards, student loans or car loans.

If you only have a few lines of credit on your credit report because you just graduated from college, it is possible to add a good track record paying a utility bill or cable bill onto your credit report if you request that your payment history be reported to the credit bureaus. It is also important to not max out your credit cards. Instead, use your credit cards each month but keep your balance around 50%-%70 of your available credit line. Credit cards that are maxed out, even if the bills are paid in a timely manner, reflect poorly on your credit report and can bring your overall credit score down.

If you find that you have a number of high interest rate credit cards that are maxed out and past due, obtaining an unsecured personal loan through Willow Loans, may enable you to pay the balance off, get back on track with paying any monthly balance in a timely manner and avoid costly late fees. Consolidating the balance of several high interest credit cards into one payment on a personal loan can go a long way towards stabilizing your monthly expenses, help you repair your credit and set you on course for buying your first home.

Obtaining an unconsolidated personal loan is based on both credit and employment history. A company like Willow Loans can help you to find the perfect loan for your needs, while taking into account your credit and employment scenario. The company will forward your application to several lenders who specialize in lending unconsolidated personal loans. In this way, Willow Loans does the leg work for you.

However, before taking out a personal loan it is very important to find out the exact amount of fees and interest you will pay on the loan. You do not want to take out a personal loan that will cost you more than your credit cards would over the course of the repayment term! If this is the case, stick with your credit cards. The other critical aspect of pricing and evaluating the costs and benefits of a personal loan is to make sure that once you are approved for the loan, you don’t spend the money on shopping sprees and so on, instead of paying off your current credit card debt.

If the intention of borrowing money through a personal loan program is to establish good credit in order to buy your first home, if you spend all the loan money and still have the same credit card debt, you will be in much worse shape. If you spend the money wisely by consolidating high interest credit card payments and paying down other debt, you will demonstrate savvy financial responsibility far beyond your years.

This financial prudence will demonstrate to a mortgage lender that your are responsible and will be able to repay your mortgage loan in a timely manner. Do keep in mind that there are also a number of mortgage programs for first time home buyers that can assist you with some of the down payment and closing costs. There are also programs through the Federal Housing Authority, or FHA, that help qualified borrowers to obtain their first mortgage loan. In order to present yourself as a qualified borrow, establishing a good credit history is of paramount importance.

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