You Need To Build Credit: Where to Begin

You need to build more good credit. I recommend opening the following accounts as a way to build credit:pile of cash

  • Sunoco
  • CareCredit: available at your Dentist.
  • CapitalONE secured credit card

A secured credit card works like this: you deposit with the credit card company a pre-determined amount, say, $500. This amount is your credit limit. You swipe and use the card same as a regular credit card; the secured card activity gets reported on your credit report thus building your credit history. My advice: open the account and use no more than 50% of your “limit.” Then make MINIMUM monthly payments; don’t replenish the total amount! This type of activity gets much better results on a credit report.

  • Bank Debit/Credit Card: If your bank offers a card attached to your checking account that can be used as either credit or debit, then you should use the card as credit. Check with your bank to see if they offer this type of card AND if they report the activity to the credit bureaus when you use the card as a credit instead of debit.

Visit my Useful Links page for other great websites that provide accurate and honest advice on building credit.


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NO CREDIT? Not a BAD Thing

In the absence of a credit score and established credit history on a credit report, alternative credit references are perfectly acceptable to help you obtain an FHA mortgage.

This morning I attended an FHA Underwriting web-conference. While I’ve been originating FHA Insured Loans for 21 years, I think it’s important to stay up to date with guideline changes. More importantly, the web conference gave me the opportunity to speak directly with an FHA Underwriter who sees FHA loans from all walks of life and from all over the country.

I had a few questions, but my primary question had to do with clients who don’t have established credit histories.

I’ve blogged about this before here at because this is a situation I encounter frequently here in the NY Metro region. Many of my clients are immigrants to the United States (just like ME!), and often they have limited or non-existent credit profiles.

This isn’t a BAD thing when applying for an FHA Insured mortgage loan. Let me put it simply: BAD credit is a BAD thing; NO credit is NOT a BAD thing.
And let’s not confuse “I have no credit” with the reality I often see after hearing that statement from a client and running a credit report: When you say you have NO credit, you really mean NONE, ZERO, ZILCH, NADA. You do NOT mean no credit cards today or auto loans today because you have seven collection accounts, a car reposession, and two defaulted student loans. That’s BAD.

When I run your credit report and encounter NO credit score due to NO credit history, I may still be able to assist the client with an FHA Insured Loan.

What we’ll do next is to establish what’s called an “Alternative Credit Profile.” We can accept other forms of credit that most established adult consumers have: Rental payment histories (cancelled rent checks), Car Insurance payment histories, Cell phone, utility bill, cable bill payment histories. All of these—and other similar items—are acceptable alternative credit references.

In the absence of a credit score and established credit history with credit cards, student loans, auto loans and etc. on a credit report, these alternative credit references are perfectly acceptable to help you obtain FHA mortgage financing to buy your first home.

The FHA Underwriter happily answered my query about such situations: YES, she is seeing many FHA loan approvals with the alternative credit histories in place of an established credit history and credit score for a consumer with NO CREDIT.


Don’t Close those Credit Cards: Your Score could DROP

I have seen folks with fantastic credit have their credit scores drop dramatically because in the months before they met me for the mortgage prequalification they paid off and closed their credit card accounts

Verify. Check it out. Read all about it. “Just the facts m’aam.” That’s me. I hate spouting off about something of which I know nothing, and which I have not verified. Maybe that’s one of the qualities that’s helped me create and maintain a successful career as a Loan Originator since 1989.

Erica, the wonderful and sharply professional office manager at Weichert Property Works in Brooklyn considered cutting up a credit card after she finished paying it off. I argued strongly against that course of action. Her credit score could actually drop if she follows that path.

It’s a little known fact that closing a credit account is almost as bad as having a collection account on your credit history. I’ve seen the results first hand in my role as Loan Originator. Let’s face it, when you’re buying a house, if you can afford to do it, you pay off your outstanding credit cards so you walk into your new home debt free! I know because I did it, too when I bought my first house. You want a clear mind and a worry-free attitude about extra bills on top of your mortgage payment. But the results on a credit score are contrary to that logic, unfortunately.

I have seen folks with fantastic credit have their credit scores drop dramatically because in the months before they met me for the mortgage prequalification they paid off and closed their credit card accounts. Perfect credit histories are affected with a lower score because 12 accounts were paid and closed and reduced to 2 or 3 accounts. I applaud that conservative thinking, but apparently the credit scoring engines don’t.

In plain English, what happens is that you have fewer active credit accounts, therefore you are using less credit therefore your credit score has less to work with in determining your overall use of your credit. That’s the flawed logic (IMHO) of the credit scoring system.

While this opinion is derived originally from my professional experience, I took the time to verify the facts with the source of all things credit score related: The Fair Isaac Corporation, or FICO, the folks who created the algorithm used in credit scoring. You can find that information right HERE.

Hope that helps! (ERICA!)

FTC Strikes Against ID Theft Protection “Guarantee”

The Federal Trade Commission announced a settlement with LifeLock for misleading claims about its Identity Theft Protection services.

The Federal Trade Commission, in its advancing campaign against scams and misleading marketing with regards to credit reporting, credit scores and Identity Theft Protection, recently announced it had coordinated a settlement with LifeLock for misleading claims about its Identity Theft Protection services.

“While LifeLock promised consumers complete protection against all types of identity theft, in truth, the protection it actually provided left enough holes that you could drive a truck through it,” said FTC Chairman Jon Leibowitz.

LifeLock agreed to pay $12 Million to settle charges by the FTC and 35 States that Identity Theft Prevention and data security claims were false.

“This agreement effectively prevents LifeLock from misrepresenting that its services offer absolute prevention against identity theft because there is unfortunately no foolproof way to avoid ID theft,” Illinois Attorney General Lisa Madigan said. “Consumers can take definitive steps to minimize the chances of having their personal information stolen, and this settlement will help them make more informed decisions about whether to enroll in ID theft protection services.”

More information about the settelment and about LifeLock’s false claims on the Federal Trade Commission website.

Protect Yourself from Identity Theft: FREE

Why pay the Credit Agencies for Identity Theft Protection? You can do it yourself for FREE thanks to free information from Uncle Sam.

Those television commercials will scare you into paying for some kind of ID Theft protection from one (or all, depending on your level of paranoia) of the three major credit reporting bureaus (Experian, Trans-Union, Equifax). Since Congress unfettered these agencies from the constraints of selling credit products to the consuming-public, ID Theft protection and credit score watch (allegedly to make your credit history better) are the hot products that consumers fork over cash money for each month in the form of “ID Theft” prevention monitoring and whatnot. Usually the fees are in the range of $10-15 a month, but they can be higher, $25-40 depending on the level of monitoring the consumer desires.

The problem I have with all these services is that the savvy consumer, by spending just a little time each year (and almost NO money) can pretty much get the same level of protection without subscribing to anything nor sending money to the credit bureaus.

Here’s a link to the Federal Trade Commission website that has a wonderful pdf brochure on all you need to know about Identity Theft and how to protect yourself against ID Theft. It’s FREE and it’s here: FTC: Fighting Back Against Identity Theft

Take some time to read the information, then set yourself on the path to protecting your Identity FREE of CHARGE.

I welcome Comments for all my blog entries. I will be happy to review and approve all legitimate comments provided by readers of I do not permit unfettered access to comments for obvious reasons: mortgage spammers and their ilk. If you wish to Comment on any entry, please do so and I will quickly review and approve. Thanks for reading Hope that helps!