In order to improve my credit to buy a house?

Question

Would it be good to rent a place for six months to a year to show good payment history? Or should I stay living with my mother to ensure I have the least amount of bills as possible to pay and I can make sure they will be on time even if I have a financial emergency? On the one hand, I think good renting history will be taking an active step to improve my credit, on the other staying at my moms rent free would keep me safe against something bad potentially happening. I have a VA loan, so the down payment isnt a big worry for me, but I want the best interest rate I can get. Now is the time to buy, they say, so I might as well take advantage of that VA loan while the gettings good, right? So over the next year, what should I do?

I have no credit cards except for my government travel card which is always paid off by the military. I only have a car loan. My credits not so great right now because I made some mistakes when I was 18ish, but its not so bad either, I've been pretty good in the past few years.

Answer 1

This a question I get all the time and the answer depends on the person and their credit to begin with. Do you have credit accounts now? Are you close to the limit on any of the accounts? With ALL of your credit accounts the best scores come from 35% of your credit line or less. Once you go above 75% you really start to take a beating on your credit score and over the limit just about kills it. Should you be in the upper end of your credit accounts it would be best to stay at home and pay down all of your accounts. Pay down the highest interest rates first then work your way to each account.
You don't have any credit accounts? Get some but not store accounts, get true credit accounts like Master Card or Visa. Even consider doing a secured credit account with one of them if your credit is not established yet. You will need a min of 6mo's of reporting to really build your credit score.
Now to your VA loan you have my utmost respect and Thanks for serving in our military.
You must have a clean credit history of 24mo's before the VA will allow you to use your VA status. That means no lates, no judgments, no liens and no BK's in the past 24mo's. You can have min credit with VA just not bad credit or late pays.
Well I have rambled on so if you have any questions please e-mail me back and I will be happy to answer them for you.

Best of luck,
Gregg

Answer 2

Rental history has NOTHING to do with credit. Not at an apartment-- and ESPECIALLY not at your parents place. Do you think it magically gets onto your credit report? It has to be a company that reports to the bureaus and 99% of rentals do not do that.

If you are planning to wait a year, you should:
1) Pay down all balances on credit cards to under 35%
2) Keep all good standing accounts open-- history is important.
3) if you have a very limited credit file, get another credit card or to and keep the balances low and the payment history good.

Put some money in savings, as banks love to see a "reserve" equal to two months mortgage.

Answer 3

I went thru the same thing last year. My advice would be to pay rent to your mom for living there AND taking care of the bills at the same time. Your credit score and interest rate will reflect even just living with your parents paying rent. Loan companies will look at that as legitimate payment history. I was asked that. VA loans are a VERY good thing. Don't waste it like I did. You were in the armed forces?

Answer 4

Hi, DO NOT GET A CAR ON CREDIT. If you want to try to get as much loan as possible. It will lower how much house you will be able to buy.

I think you should stay with your mom and save money...not worried about down payment? lucky! well, use your extra money to pay down existing debt. have no debt? build emergency money for when you do get the house. Closing costs are incredibly high and there might be home improvements that you'd like to do or furniture and appliance you'll need to get.

the quickest way to get good credit is piggy back on someone else's good credit. If your parents has good credit then you can ask them to add you as a co-card holder to the credit card that they had the longest and that is in good standing...no late payments...not maxed out...etc. And then you will have all of their good credit scores...just don't abuse it. If you mess up, then you mess up not just your credit, theirs is ruined, too. I suggest just don't use it. Have them keep the card for you.

You can get a cell phone in your name, too. Maybe see if there's any utility bills you can add your name to as well. Those build credit too.

Answer 5

I was in the same situation a few months ago. It all depends on the bank you are using and what type of financing you want. We have decided to go with Wells Fargo, because they said that they only use the score of the person who makes more money. If you make more, you could be in luck. But you should be able to call any bank and ask them this question. They will give you a straight answer. Hope this helps.

Answer 6

Build your credit up by wisely using charge cards, or maybe buying a car on credit.

I personally think you would be in better shape by staying with your mom to save more money.