Buying a home is arguably the biggest and most important investment you’ll ever make in your life. And you’re most likely going to need to borrow money to do it. And for a bank or other lending institution to give you that huge amount of money, they need to know that you have a history of being responsible with borrowing money and paying it back. Yes folks, we’re talking about your credit history.

I had a chance to sit down with Ryan Buckholdt from Cross Country Mortgage to get the inside scoop on credit and buying a home. He is a Santa Cruz native and gives credit counseling seminars to high school and college students all around Santa Cruz County. “CREDIT IS EVERYTHING!”, says Ryan. “The better your credit, the LESS LIFE COSTS!” So True! So, let’s hone in on his insights, tips, and strategies to help you understand, manage, and improve your credit.

MANAGING YOUR CREDIT – KNOW WHAT YOUR CREDIT IS!

The first tip Ryan shares is to start with a free app or website that offers you access to your credit history AND your credit score. He says most credit card companies, banks, and investment brokerages these days offer a free management tool with your account. Look at the report in detail. Here are some red flags to look for and what to do:

1. Are there any late payments? Have they gone to collection? This is the worst thing you can find on your credit. But sometimes they are reported in error. There are specific steps you can take to remove these derogatory posts from your credit report that we will discuss later in this article under “REMOVE DEROGATORIES!!”

• Are there any open accounts that you haven’t used in a while? If so, use them! Even if it’s just a small charge that you pay off every month. By using credit and paying it back, your credit score will improve over time. It will also prevent your creditor from closing your account for non-activity (which can lower your score).

• What are your credit cards limits? Are any of your balances higher than 30% of your limit? If so, pay each of them down to 30% or less of your maximum limit. This is one of the markers that can make or break your score.

NO CREDIT HISTORY? START CREATING IT NOW!

If you’re one of those people who love to pay everything in cash because you don’t want to be in debt, you must change your thinking. In a way, Ryan says, “NO credit history at all is sometimes seen as worse than bad credit!” Ryan’s tip is to get a secured credit card to start with. He recommends the Capital One Secured credit card. Th is NOT a debit card. After using it and paying it back, you should start to have a credit score within 6 months. Once you have established this credit history, you should be able to get approved for department stores, gas stations, and eventually a regular credit card.

REMOVE DEROGATORIES!!

If you have late payments and collections on your credit, you must get them off! This is the single most important step you can take to repairing your credit. Ryan laid out the general actions to start the process immediately. He said if the process is done methodically and consistently, eventually you can get the derogatory marks removed and your score will greatly improve.

First, order a copy of your credit report from each credit reporting agency; Experican.com, Transunion.com, and Equifax.com.

Second, File disputes with EACH of the 3 credit reporting agencies (Experian, Equifax, and Trans Union) on any and all derogatory tradelines on your credit. DO NOT go to the creditor or collection agency.

By law they each must investigate. Continue to do this every 30 days. If the credit company does not respond in 30 days, by law it has to be removed from your credit.

Once you have removed all derogatory marks, your credit score will improve. If you leave derogatories on your credit it will take 7 years to completely fall off.

WHAT MY SCORE MEANS FOR A MORTGAGE

580+ Minimum score. You’re not going to love the rates and terms, but you CAN get a loan.

680+ Average. You’ve got good options.

740+BEST! You have great credit, and you will be rewarded!

MORE DO’s and DO NOT’s

Do pay the monthly bills that report to credit agencies first!

Do use your credit regularly.

Do pay down each card strategically to 30% or below max limit.

Do pay your credit accounts BEFORE the due date. This can improve your credit.

Do not close accounts with a long history of credit.

Do not co-sign for anyone.

Do not max out your credit limit.

Do not pay late! If you are 30 days or more late it gets reported to the credit agencies.

I hope you’ve gotten a good framework here for establishing, repairing, and maintaining your credit. For a deeper dive into your personal situation, reach out to Ryan Buckholdt of Cross Country Mortgage. ryanbuckholdt.com, 831.818.2339, ryan.buckholdt@myccmortgage.com and tell him I sent you!