If part of your life plan is to own your own home, you need to understand the importance your credit score plays in obtaining a mortgage. Starting now on building your credit score, even if you don’t plan to purchase a home for a few years, will make the process much smoother when you’re ready to buy an Austin, TX condo.

Establishing a good credit score is not only needed to buy a home, but it’s also considered in the purchase of a car, renting an apartment, or even getting hired for certain jobs. Here are some simple steps to help you understand where to start and how to better your credit score.

Know Your Credit Score

You have to know where you’re starting before you can begin to establish or maintain a strong credit rating. Get access to your credit report through AnnualCreditReport.com or CreditKarma.com. Look through your entire report and be sure all information is accurate. Mistakes are recorded on the wrong credit reports, so make sure you report any errors that could potential damage your score.

How To Build Credit History

Your three-digit credit score will play a vital role in the whether you’re approved for a mortgage. The minimum credit score needed for a conventional loan backed by Fannie Mae or Freddie Mac is 620, but the lowest credit score to buy a house with an FHA loan is 580.

It’s important to start building your credit right out of college when you’re young and presumably have a few years to build a history before becoming a homeowner. Despite what you may have heard about using credit cards, it’s actually essential to have some type of card in your name so the scoring system has information it can track. That doesn’t mean you need to run up the total on the credit card. Using it occasionally and paying of the balance in full each month will help establish good credit.

Decide On A Credit Card

Use a website like LowCards.com to find a credit card that fits your financial situation best. There are cards specifically designed for those with little to no credit history, you just need to ensure that the company reports your actions on your credit report.

Gas cards and department store cards are also generally easy to obtain for first time card-holders.

Secured cards are another good option for those with little or damaged credit history. The cards are similar to credit cards, but they are obtained by putting down a security deposit – typically around $200 – which becomes the credit line for the account.

Build Your Credit Score

Keeping or gaining a high credit score is obtained over time by showing potential lenders that you can properly borrow and spend money. Living within your means is not only financially responsible, but it also makes you a more appealing customer to future mortgage lenders. Aim to never spend more than 30% of your available credit and pay off balances in full each billing cycle. Your payment history accounts for about 35% of your credit score – so pay your bills on time!

Monitor Your Credit Score

Whether you’re trying to find ways to better your credit score to ensure you can purchase a home or you just want to keep an eye on what’s being recorded on your report, monitoring your credit score is important. You should run a full credit report once a year to monitor for errors and to keep your credit score on track.