When you are trying to buy a house, or make any big financial purchase in your life, your credit score plays a huge factor in loan interest rates, approval for a loan, and ultimately how much money you end up being approved for. Now, there are little tips and tricks that can help you raise your credit score which we are going to share with you. Credit is not something that can be fixed overnight, but over time, credit scores can improve and that is something to look forward to.
One organic way to boost your credit score over time is to become an authorized user on someone else’s credit card. Now, there are a couple of things you need to know before you start asking people in your life to be added to their credit card! First, this is a great option to gain a larger credit balance without having to apply for a new credit card or ask for a balance increase on your current credit cards.
When you are added as an authorized user on someone else’s credit card, you gain that available credit on your credit score. For example, say your girlfriend has a Visa credit card with a credit limit of $10,000. If she added you as an additional member of the credit card or authorized user to her card, you would also end up gaining the $10,000 worth of available credit from being added to her already established credit card.
Becoming an authorized user is great for people who might not have the best credit score, and who also don’t want to apply for a new credit card or are unsure if they would be approved for a credit card and may end up getting approved for a low available balance. It’s important to note that if you are added to someone else’s credit card as an authorized user, you are not responsible for making payments on the other user’s card. However, because you are an authorized user, if the card owner misses a payment or maxed-out the card, then that will have a negative effect on your credit and credit score.
So, there are pros and cons to becoming an authorized user on someone else’s credit card. If they are a trustworthy person and handle the responsibility of credit and credit usage very well, it might be worth asking them to add you to their already good credit card. Asking just anyone to become an authorized user is not recommended. Asking your significant other(who you trust/have been with long time) or close relative is highly recommended.
Thinking about becoming an authorized user on someone else’s credit card? Here are some credit card guidelines you should follow for success:
The reason you want the longest standing credit card with on-time payment history and a zero to low balance is that because all those years that the credit card has been in use and paid off on time, all that positive data will transfer over to your credit score when you become an authorized user. Authorized users on credit cards are obviously not the primary cardholders and therefore not responsible to make payments on that credit card. Being added as an authorized user on a family member's credit card won’t drastically change your credit score, but it will help your score organically grow over-time as long as that card stays open, and payments to that card are made on time.
Credit Karma defines credit utilization as, “Your total credit balance divided by credit availability. In other words, your credit utilization rate is a percentage that represents how much you use your available credit. For optimum credit health, this percentage should remain under 30% of your total credit limits at all times.”
This is great credit advice and practice to follow for your own credit health! Anything under 30% credit utilization is considered excellent and can help positively boost your credit score. Home lenders want to see that you can use credit wisely and how well you manage your credit.
The higher your credit utilization score, the more money you owe to the credit cards. The higher your credit card utilization, the higher of a risk you appear to lenders which is not good when you are looking to buy a new home, new car, or any large purchase where you might need a bank to loan you money.
Credit Karma is 100% free to download and free to use. Credit Karma is a great visual way to track your credit and make smart financial decisions when it comes to overall credit health. Once you download Credit Karma and enter in all your personal information, you will be able to see your TransUnion score and your Equifax score. Make sure all the information listed and all the accounts are correct.
Be thorough when checking over all your accounts, and, if you see something that isn’t correct, make sure you notify them in the app.
If you want more information about the difference between TransUnion, Equifax, and more credit help, check out Credit Karma’s Youtube channel for helpful videos. Credit Karma can help you fully understand what your credit history entails and how all your credit cards, student loans, and car loan affect your credit score. As we mature, the more important your credit score plays a role in making those big financial life decisions.
If you are thinking of owning your own home in the near, or distant future, check out our blog post about Home Buying 101 for lots of great tips on how to start your mobile home buying journey. Since June is National Homeownership Month, we want to share as much information with you about the mobile home buying process as possible.
Do you have any first-time home buyer advice you wish someone would’ve told you? Leave us a comment down below! We look forward to hearing from you!