I have in the past written about how to increase your credit score by purchasing a credit action report and making some minor changes that can have a big positive effect on your credit score. If you have a low score, this is something you should look into.

But what if you have NO credit score? What to do then?

Even a better question – how can I prepare my kids? Should I encourage them to open credit cards in order to “build their credit history”?

You don’t need to give that advice.

It is possible to borrow money for the purchase of a home without a credit score by building your own credit history. Four simple steps:

1. Find three or four bills that you pay at least quarterly. Examples include Car Insurance, Cell phone bill, Life Insurance, Cable, Internet, Apartment rent, Energy Bill, Phone bill, Medical Insurance Payment, etc. Any bill that you pay every month or at least quarterly will qualify.
2. Pay these bills using a check or by setting up an automatic bill payment through your bank or Credit Union.
3. Make the payments on time for 12 months and be sure not to bounce any checks or allow your account to go negative during that time. All pages will be reviewed and must show good cash management.
4. Collect 12 months of your bank statements (all numbered pages).

These 12 months of account statements are your credit report.

Once you have a mortgage on your credit report and have made payments on-time for a few months, you’ll not only have a credit score, but it will soon be a very good one.

Borrowing money to prove that you should be able to borrow money is no way to start out in life. So if you’re committed to living the rest of your life without consumer debt, then don’t start.

Keep good records and you’ll be just fine.

Image: (tableatny per this)

  • Laura Morton

    In today’s tight credit market, and even tighter underwriting guidelines, you need a credit score. The lender need to see a history of at least 2 years.
    A hard money lender will lend to buy a house with 50% downpayment. No questions asked.

  • Cynthia Tilleman

    This is great advice for anyone trying to live without credit card or bank debt.
    Almost everyone has utility or insurance bills that would qualify as credit history if paid on time.

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