How do you build credit?
Dude asked:
I just opened my bank account about 6/7 months ago. I’m 19 & I’m looking to purchase a car but don’t have the credit to do so. How would I go about building my credit so I can buy a car?
I just opened my bank account about 6/7 months ago. I’m 19 & I’m looking to purchase a car but don’t have the credit to do so. How would I go about building my credit so I can buy a car?
Think of credit as the same thing as earning a person’s trust.
It can take a lifetime to earn and seconds to lose.
Try opening a secured credit card account. Always make full payments and on-time.
Keep a job for more than a few months. The more secure you are in your life (steady job for at least 2-3 years), the better your score will be.
Pay all of your bills on time. If you start running into problems, quit spending and get a second job. An old saying: If you find yourself in a hole, the first thing you do is quit digging.
First you need to understand how credit scores work. FICO bases scores on the following factors & 90% on the last 24-months of activity.
1. Payment history 35%
2. Time in bureau 15%
3. Types of credit 10%
4. New credit 10%
5. Debt to credit ratio 30%
To have the very best credit score and profile people need 3 credit card accounts (revolving) with balances below 30% of their limits and 2 cars, boats, homes, computers, furniture, motorcycles or personal accounts (installment) all with good long payment history’s.
Auto finance is what I do for a living and deals are based on the following factors;
1. LTV (loan to value).
2. Term.
3. Age of vehicle.
4. Miles on vehicle.
5. Down payment.
6. Time on job.
7. Time at residence.
8. Monthly income before taxes.
9. Credit score/profile.
10. Total debt to income ratio including new payment.
This is what lenders look for;
1. Between 85% & 115%.
2. Between 24-72 months.
3. No older then 8-years.
4. No more then 65,000.
5. No less then $1000.00 or 10% of the sales price.
6. At least 2-years.
7. At least 2-years.
8. At least $1,500.00 to $2,000.00 depending on lender.
9. 540 or higher with 3 years in the bureau, 4 paid as agreed trade lines with 1 being installment for at least $150.00 a month paid 12-times.
10. No more then 45%.
Now in your case you would be whats called a first time buyer so you would be able to get away with 1-years job and residence time but everything else would apply unless you had a really ggod co-signer.
there are two ways you could start credit one or them is taking out a small personal loan which you might need a parent or an adult to co-sign for you meaning if you do not pay the loan they will. Or you could apply for a credit card for bad or no credit which most likely will get you approved no matter what, but if you are a student you could get a student credit card which will offer you lower rates and no annual fees, check out and go under bad or no credit or student cards. good luck