What If You're A 'Credit-Invisible'

What If You're "Invisible" to the Credit Bureaus?

RIS Media recently published an article about people who have not used credit in the past, and are therefore "invisible" to the credit bureaus.

As you probably know, Credit is one of the Four Cs that lenders use to determine if you qualify for a home loan in the Louisville KY real estate market. (The others are Character, Capacity and Collateral). Back in "the day", people who paid cash for every purchase were considered to be careful and honorable.  However, in today's world, judicious use of credit is important in developing a "Credit Score" which lenders use to determine whether they will or won't be able to approve you for a home loan. If you don't have one, you're "invisible"!

So, if you don't have any credit cards, car loans, mortgage payment history, store accounts with large merchants, etc., it may be time to take a few steps.  Don't wait until you are thinking of buying in six months -- do these things a couple of years before you try to get a mortgage -- if possible.

Mortgage companies will look for at least two or three "trade lines" -- in other words, companies which  have granted you credit that you have used prudently.  

What to Do:

  1. If you don't have any credit established, START SMALL -- open a couple of credit accounts with $200 credit limits, use them,  and pay the bill on time!  Perhaps take a small car loan and pay down the balance as agreed.  
  2. Don't borrow more than you can afford, as credit bureaus will look at the amount of credit you have, vs the amount of credit you are using.  You don't want to be at 100% of your limit, as this suggests that you may be short on income or cash.

A couple of things not to do:

  1. Don't make late payments.  If you don't have much history, the last thing you want is to have "negatives" in your short credit record.  Be sure that your payments arrive on time, or set up "auto pay" and allow the company to take your payment out of your accounts at a certain time each month.
  2. Don't borrow more than you can easily afford to re-pay.  Lenders look at your ratios -- what do you owe as compared to what you make.  If your monthly payments PLUS the desied mortgage will take this ratio over the mid-forties (as a percent), you won't get the loan.
  3. DON'T try to jump in and correct any old credit problems without talking to a credit professional or lender first.  Sometimes, making a payment against an old unpaid debt will make it a "current problem" instead of an "old problem" on your credit report.

Bottom line -- no matter when you think you might want to buy a home, talk to a lender now so you will know what you need to do to be ready.

We would be happy to refer you to a great lender to get this process started.  Just call, or complete the form below and we will get back to you quickly!

Steve

First Name:
Last Name:
Email Address:
Phone:
Questions / Comments:

Post a Comment

SEARCH LISTINGS
More Search Options

BE THE FIRST TO KNOW

SIGN UP NOW

HAVE A QUESTION?

JUST ASK

Track MY HOME'S VALUE

LETS GET STARTED

Why LIST WITH US?

FIND OUT MORE

Our RELOCATION RESOURCES

We have the resources, local knowledge and expertise to help make sure your transition is as smooth as possible.

Moving to Louisville Moving from Louisville