How to Build Credit to Buy a House

Build Credit to Buy a House

Did you know you can learn how to build credit to buy a house using 6 simple strategies?

If you’re in the market to buy a new home, then you’ve certainly been thinking about your credit. And if you’re someone who doesn’t have a lot of credit or even credit that’s not the best, you can find yourself in a less than desirable position.

Building credit is a process, but it doesn’t have to be a difficult one. There are some strategies you could easily implement that will not only help you build credit but also maintain it.

In this article, I’ll go over several ways you can build your credit to buy a house and maintain that good credit going forward.

Let’s begin with ways to build your credit.

Obtain a Secured Credit Card

Cash Secured Credit Cards to Build Credit

First, let me explain what a secured credit card is. A secured credit card is one that is essentially backed by money. A deposit is made in order to secure the card when you get it, and if you default on your payment, that deposit is used to cover the balance.

Activity on secured credit cards is reported to the credit bureaus by the issuer. As long as you are meeting your payment obligations on time, you can easily build credit to buy a house by using a secured credit card.

Get a Credit Builder Loan

Credit builder loan to build credit

A credit builder loan is exactly what it sounds like – a loan to help you build credit. It is designed for people with little to no credit, and doesn’t require good credit for approval. However, there are some income requirements to ensure you can meet your payment obligations.

With credit builder loans money is held in a bank while you make payments on it. Typically, you can’t access the money until the loan has been repaid in full. Payments made are reported to at least one credit bureau which is what helps to build credit.

The benefits of a credit builder loan include the ability to have positive payment activity reported to the credit bureau, the ability to build savings as you’re making payments to the money already sitting in the bank, and you don’t have to have established credit to get the money you need.

Become an Authorized User on Someone Else’s Credit Card

Become an authorized user

If you have someone close to you that is 1 – careful and responsible about their credit, and 2 – willing to add you as an authorized user on their credit card, this option can be a goldmine for you. When someone adds you as an authorized user to their credit card, you can literally get the benefit of their credit card usage and payments. 

However, you need to be very careful with whom you collaborate. If the primary person responsible for the card runs up their balance, you will see the impact on your credit report. Also, if they miss a payment or make a late payment, you will see a negative impact on your credit report. 

When your goal is to build credit to buy a house, this is one tool that requires very little action on your part, with potential for a huge benefit.

Try Experian Boost

Use Experian Boost to Build Credit

Experian Boost is a program designed by Experian to help participants build credit by including payments for expenses not typically reported to the credit bureau such as utilities. Typically, only delinquencies on payments like these are reported to the credit bureau. So being able to have a positive impact on this activity can be very beneficial.

This is a very good way for someone with little to no credit to show proof they are responsible enough to make consistent and timely payments. It provides an opportunity for future lenders to take that payment history into account when determining creditworthiness.

Decrease Credit Utilization Rate by asking for a higher credit card limit

Credit utilization is one of the many factors that help determine your credit score. It is essentially the amount of credit you’re able to use. When you have high balances on credit cards, your credit utilization rate is high – meaning you’re using a higher amount of your available credit. Conversely, when your credit card balances are low, you have a lower credit utilization rate.

The credit utilization ratio is calculated by taking your total outstanding credit card balance divided by the total credit limits multiplied by 100. That means the larger your denominator, i.e. the available credit balance, the lower your credit utilization rate will be.

Take a look at the example below. Scenarios 1 and 2 show how the credit card balance you maintain can impact your credit utilization ratio. Scenario 3 shows the impact of increasing your credit card limit.

You can contact your credit card company at any time and request a credit card limit increase. In the eyes of potential lenders, lower credit utilization gives confidence that you will be able to meet your payment obligations, thus making you a more favorable loan candidate.

Check Your Credit Report for Errors

Check Credit report for errors

Errors on your credit report can mean the difference between getting qualified for a loan and not. Even something as simple as a payment still showing as active on your report for a car that you paid off months ago. 

That exact error almost stopped me from getting approved for a mortgage loan. I had to challenge both the lender and the bank where the old auto loan was to get it fixed so I could move forward with the loan process.

Don’t let that be you. Check your credit report for errors and dispute ANY inconsistency prior to obtaining a loan. Once the errors are removed, especially if you have derogatory marks, you should see an improvement in your credit.

If your focus is to build credit to buy a house, a thorough review of your credit report can be invaluable and definitely not a step you should miss in the process.

Good Credit, Now What?

Good Credit Now What

Now let’s move into ways to maintain that good credit once you’ve built it up. There are few things you can do to keep the momentum once you’ve started to build your credit to buy a house. After you get the house, there’s no need to stop there. 

Keep these things in mind going forward:

  • Pay Bills on Time Every Month
  • Keep Balances Low
  • Limit the Number of Inquiries per year (no more than 2)
  • Lock your credit so you won’t be tempted to use it
  • Use to check your credit reports for errors and/or fraud

If you’re someone who uses credit cards regularly, I go into more detail on how to use credit cards wisely in this article.

Final Thoughts

When learning how to build credit to buy a house, the end result can seem out of reach for many people with little credit, no credit, or bad credit. However, it doesn’t have to be. Using the tools described above, a home purchase could be just around the corner for you.

As I mentioned, it doesn’t have to stop there. Having credit opportunities available when you truly need them can have a significant impact on your overall financial journey. Plan ahead and ensure your credit is clean and positive just in case.

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Krystal Norwood-Morales, MBA, CFEI

Krystal is a Certified Financial Education Instructor and founder of Wild About Wealth, LLC. As a financial literacy advocate, she writes posts geared toward helping others improve their financial education and build generational wealth.


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Krystal Norwood-Morales, MBA, CFEI

Personal finance blogger

As a certified financial education instructor and financial literacy advocate, my mission is to teach young adults how to build generational through financial education. So let’s get WILD about WEALTH!

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