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Pitfalls when building credit

Being in real estate, you see it all the time! People want to buy a home, but they have no credit. They start building credit, then commit one, if not all of these credit pitfalls and sabotage everything they worked for! Avoid these top


1. Late Payments-Many people open a credit account to build credit, but do not realize the effect that ONE late payment can have! When applying for a mortgage loan, most lenders do not want to see any late payments for 12 MONTHS. However, the effect that ONE late pay can have on your credit is terrifying!

2. Charging too much-Another Pitfall made by the masses, is charging too much on an account simply meant for building credit. All accounts are considered good at less than 30% of the credit line. Less than 10% is perfect! If you have a $400 starting credit line, charge one tank of gas or one meal per month, allow the statement to post, and pay it off ON TIME!

3. Opening too Many Accounts-Too many inquiries count against your credit score. Be sure to only have one or two revolving accounts and one installment. Installment is a loan. A car loan with fixed interest is a good example of an installment loan. Credit Cards are examples of revolving credit. Whatever you keep open, USE! JUST DON’T OVERUSE! Be selective about allowing companies to run your credit.

4. Closing accounts too soon-Loyalty is rewarded when it comes to credit. Banks look at the length your accounts have been open as well as the payment history. Opening store credit cards for promo rates or discounts and closing them will count against a credit score. If you open it, charge less than 10-30% of the credit line monthly, then pay it on time every month. Only open credit accounts with department stores that you would use monthly and pay off immediately.

Stick with it! Having good credit opens more doors than you can imagine, and can simplify life in so many ways!