A Strategy to Start Your Credit Score Experience

The other day, I met a French student that just started his PHD in engineering (I didn’t mind asking what was his specific field of study as he would lost me at “hello” anyway ). He had an important amount of money he received from his parents and wanted to purchase a property.

The problem is that he only had a student visa and no credit experience at all. Therefore, he couldn’t qualify for any mortgage program. No income, no green card, no credit: no mortgage!

So we establish a strategy to get him going and create a favourable credit experience. This strategy is good for students, new immigrants and possibly for people who have bad credit and want to start it over again.

Apply for a credit card

The very first move is to apply for a credit card. The purpose is not to sell you one but credit cards is the best way to build a credit history. Why? Simply because they have the most reliable reporting credit system. They will send updated information to credit reporting agency on a monthly basis.

Don’t try to go fancy with options, insurance and reward system. Simply pick up the most basic credit card ($500 limit, no options). It will be much easier to get approved for basic credit cards than for a platinum or gold credit card.

Use your card on a monthly basis

Pick up one expense type you will pay per credit card and use it every time you make a purchase. For example, if you choose to pay gas, your grocery or cable; always use your credit card to do it. Therefore, your credit card will be used but not maxed out and pay off every month since it’s already an expected expense showing on your credit card bill every month.

Do not ask for more credit for a while

Each time you request credit through an application (loan, car lease, line of credit, credit card, etc.), there is a hit on your credit score. Since you just start building your credit experience, you don’t want to have unnecessary hit dropping your credit score.

Wait

Your credit score will increase over time. If you wait about a year and you have used carefully your credit card during that period, you should get a good beacon score and start applying (moderately!) for more credit request such as increasing your credit limit, applying for a mortgage or a line of credit.

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