Credit what is it and how do you establish it?

Recently I visited with a young couple who was looking to be preapproved for an  FHA Home loans so that they could buy a home. Their excitement was apparent as we went through the application and discussed the different first time homebuyer benefits and options that are currently available. Unfortunately, the excitement soon dissipated when I pulled their credit report. The couple thought that they had been able to build good credit history, but they were wrong. The husband’s credit scores were below 500 and the wife had no credit scores at all. The only items on their credit report were two recently opened credit cards that were maxed out and a couple of collection accounts. The couple was disappointed to learn that they could not qualify for a FHA loan under current FHA guidelines. After gaining an understanding of  FHA loan requirements they were fearful that they would never be able to establish good credit. Fortunately, we were able to design a plan to help them build their credit history and increase their credit scores so they could qualify under the current FHA guidelines. I explained to them that, despite this setback, they are still only months – not years – away from home ownership and qualify for a FHA loan. It is critical that anybody who has a desire to buy a home and going to try to obtain an  FHA Home loans knows how to establish a strong credit history. Doing so properly will reduce your expenses and increase your buying power and earning capacity throughout your life. So how is it done?

The following are some key steps to establishing excellent credit history that will qualify under FHA guidelines and starting the path to home ownership.