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Building Credit from Scratch: A Guide by O1ne Mortgage

If you have no credit score, there are specific options available to help you start a credit file, enabling you to obtain new credit in the future. At O1ne Mortgage, we understand the importance of building a solid credit foundation. Call us at 213-732-3074 for any mortgage-related needs.

What Is a Credit Score?

A credit score is a three-digit number calculated using information from your credit reports from the national consumer credit bureaus: Experian, TransUnion, and Equifax. This score helps lenders decide whether to work with you and what interest rates and terms to offer. Without a credit score, obtaining certain types of credit can be challenging.

Why Don’t I Have a Credit Score?

You might not have a credit score if you have little or no activity with credit. This can happen if you have a thin credit file or if there’s little recent activity on your credit reports. To keep your credit file current, consider making small purchases with a credit card and paying them off right away.

What Are My Credit Options With No Credit Score?

To establish credit, you can choose one of the following routes:

Secured Credit Card

Secured credit cards require a deposit as collateral, which usually serves as your credit limit. This is a low-risk way to build your credit and can set you up to use a traditional card in the future.

Store Credit Card

Store cards are offered by specific retailers and can be easier to qualify for with no or poor credit. However, they often come with a lower credit limit and a higher annual percentage rate (APR), making them riskier for those new to credit.

Getting a Loan Cosigner

If you’re applying for a private student loan or car loan, you can ask a loved one to cosign. The cosigner’s strong credit can help you qualify for the loan and get better interest rates and terms. However, failing to make payments means your cosigner becomes responsible for the loan.

Becoming an Authorized User

As an authorized user on a relative’s or friend’s credit card account, you can use the card without being responsible for payments. This can help you build a credit score, but additional credit history will be needed to get credit in your own name.

How to Build Credit for the First Time

Once you’ve chosen a path to build credit, follow these best practices to strengthen your score:

Consider a Credit-Builder Loan

A credit-builder loan is specifically for establishing credit. The lender holds the loan amount in a savings account while you make payments. Once paid off, you receive access to the funds. Ensure the lender reports payments to all three credit bureaus.

Make All Payments on Time

Payment history is the most significant factor in calculating your credit scores. Ensure you pay your bill on time each month.

Try Experian Go™

Experian Go creates an Experian credit report for you for free, even if you don’t have any credit accounts. It also provides suggestions on how to jump-start your credit history.

Add More Payment History to Your Credit Report

Some services allow additional payments, like rent, to contribute to your score. Experian Boost® can add eligible rent, utility, insurance, and other monthly payments to your Experian credit report for free.

Track Your Progress

Regularly check your score and credit report to ensure all information is accurate. You can access your credit reports for free through AnnualCreditReport.com and check your credit scores through various sources.

Starting Your Credit Journey

With no credit score, you have a unique opportunity to start fresh. By choosing the best credit-building products and managing them well, you’ll build a reliable credit score. A good or excellent credit score will allow you to take advantage of low rates and beneficial terms, saving you money in the long run.

For any mortgage-related needs, call O1ne Mortgage at 213-732-3074. We’re here to help you every step of the way.

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