Building Credit

[hatothebib]

I basically have no credit, other than the student loans that I have gotten and will begin to pay back in July. I am hoping to purchase a house before I move for my residency next year (I am going to do a prelim year at my current location), and I know that I will need to boost my credit score between now and then. My question is, if it is even possible, what are some simple ways that I can get my credit score up (hopefully high enough to qualify for a Dr. loan) within this next year? Thanks!

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[randomedstudent]

I basically have no credit, other than the student loans that I have gotten and will begin to pay back in July. I am hoping to purchase a house before I move for my residency next year (I am going to do a prelim year at my current location), and I know that I will need to boost my credit score between now and then. My question is, if it is even possible, what are some simple ways that I can get my credit score up (hopefully high enough to qualify for a Dr. loan) within this next year? Thanks!

Your credit score may actually be fine. It is a common myth you have to "build" credit by getting credit cards, financing cars, etc. My husband was just like you, had no credit history what so ever, had never even paid rent or a utility bill (he lived in campus housing all through college and at home during med school). When we applied for a mortgage recently his credit scores were all in the mid-700's, just slighly lower than mine and I have had a credit card since I started college 9 years ago. Our lender did not bat an eyelash at his lack of credit and promptly approved us for way more than we would ever need.

That said, it certainly doesn't hurt to have some credit history, provided you do it the right way. Don't believe all the people who will tell you that you have to "carry" a balance - you don't, I have never carried a balance on a credit card in my life and I have excellent credit. So perhaps start by opening a credit card (make sure there is no fee involved - I have Citibank Rewards and love it), start using it to pay for groceries, gas, etc, but DO NOT start buying anything that you wouldn't normally buy - DO NOT go buy a giant LCD tv just to build credit. And pay the bill IN FULL each month. Really this is probably all you would need to do - the only credit I have are credit cards, I have never financed a car, I have never had a mortgage, I have never financed furniture/electronics. None of that is necessary as my credit scores are all between 750-800. That's my .02, good luck!

 

[doctorloans]

Definitely get a credit card or two, but BE CAREFUL! Try to use it on normal purchases and pay it back asap. Don't carry a balance (this has NO effect on building credit). What builds your credit is a proven track record of borrowing money and paying it back on time.

Also, once you open an account, don't ever close it. Contrary to popular belief, closing accounts may even hurt your credit score. Leave them alone, just don't use the cards.

 

[hatothebib]

thanks for the replies!

 

[CorpusERdoc]

Definitely get a credit card or two, but BE CAREFUL! Try to use it on normal purchases and pay it back asap. Don't carry a balance (this has NO effect on building credit). What builds your credit is a proven track record of borrowing money and paying it back on time.

Also, once you open an account, don't ever close it. Contrary to popular belief, closing accounts may even hurt your credit score. Leave them alone, just don't use the cards.

I disagree. Opening new credit accounts (especially when you are getting near buying a house) can effect you negatively in two ways. Your credit score will automatically go down by opening these accounts. Additionally, many banks will not grant you a doctor loan if you have opened recent credit counts---especially if there is an outstanding balance.

It's easy to make your credit go down. Having it go up takes time. If you are doing this in a short time period, you are risking having it go down instead of up.

Leave it alone and your student loans will be good enough for your credit. I had an excellent credit score with just student loans.

 

[gman33]

If you truly have no other credit, at least open up a credit card. You don't even have to use it. You take a little hit on your credit score initially if you have a bunch of credit inquiries, so don't go applying for a bunch of stuff. Besides payment history, a big portion of your credit score is determined by the ratio of used/available credit. Even if you pay in full each month, this can still be high at the time it gets reported to the credit agencies. Just open one card and don't use more than 20% of the available credit. This will help in the short term.
Also, get a copy of your credit report and check to see what's on there. You may be surprised. I used to work in lending and many people have all sorts of unexpected things on their credit report.

 

[CorpusERdoc]

If you truly have no other credit, at least open up a credit card. You don't even have to use it. You take a little hit on your credit score initially if you have a bunch of credit inquiries, so don't go applying for a bunch of stuff. Besides payment history, a big portion of your credit score is determined by the ratio of used/available credit. Even if you pay in full each month, this can still be high at the time it gets reported to the credit agencies. Just open one card and don't use more than 20% of the available credit. This will help in the short term.
Also, get a copy of your credit report and check to see what's on there. You may be surprised. I used to work in lending and many people have all sorts of unexpected things on their credit report.

This is not necessary. I had a credit score of 740 with only medical school loans. I've never had a credit card. This qualified me for the top of the top doctor loan.

Check your credit before doing things that will lower your credit score (opening a credit card) prior to gradually increasing it. The gradual increase may be beyond the time you want to get a house.

 

[gman33]

OP is not applying for a mortgage for another year. Having more available credit with no balance will not do anything except improve his or her FICO score.

Agreed that the first step is to get your credit report.
Some lenders look at credit factors other than FICO score. You can be turned down for lack of credit history, including too few accounts.

Here's a pretty good link about how FICO score is determined:
http://www.myfico.com/CreditEducation/CreditInquiries.aspx

One inquiry should have virtually no negative impact on your credit.

 

[Stroganoff]

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[hatothebib]

thanks everyone. will my student loans help even if i have not paid any of them yet? i am going to start paying when i graduate over 30 yrs (to keep the payments manageable), to try to help the score a little.

 

[CorpusERdoc]

thanks everyone. will my student loans help even if i have not paid any of them yet? i am going to start paying when i graduate over 30 yrs (to keep the payments manageable), to try to help the score a little.

Yes. Student loans are basically what made my credit score what it is...

I don't have anything else on there...

 

[doctorloans]

OP is not applying for a mortgage for another year. Having more available credit with no balance will not do anything except improve his or her FICO score.

Agreed that the first step is to get your credit report.
Some lenders look at credit factors other than FICO score. You can be turned down for lack of credit history, including too few accounts.

Here's a pretty good link about how FICO score is determined:
http://www.myfico.com/CreditEducation/CreditInquiries.aspx

One inquiry should have virtually no negative impact on your credit.

Exactly. One year is more than enough time for your score to go back up and stabilize. Also, the drop in score for opening one credit account is minimal.