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How to build your credit
I don’t have a credit score. How do I build enough credit so I can get a loan?
Having no credit score isn’t necessarily a bad thing—but it can prevent you from qualifying for certain loans. Your credit score is a number that reflects how well you manage your debt and pay your bills. The higher your score, the more likely you are to qualify for loans and credit cards with good terms and low interest rates.
Whether you’re young, new to the United States, don’t have recent credit activity, or have what’s called a “thin” credit file, there are ways to turn no credit into good credit. Here are suggestions from HomeSight’s HUD-certified homebuyer education specialists:
- Get a secured credit card. This is a type of credit card that requires a cash deposit as collateral. The deposit acts as your credit limit and protects the card issuer if you default on your payments. You can use a secured card like a regular card to make purchases and pay them off every month. This way, you demonstrate your ability to use credit responsibly and build your credit history. A secured card can also help lower your credit use ratio, which is the percentage of your available credit that you use. A lower ratio is better for your score and shows that you are not relying too much on debt. If you’re in college, you might also qualify for a college-student credit card, which helps young adults establish credit.
- Become an authorized user. Another way to build credit is by becoming an authorized user on someone else’s credit card account, such as a family member or a friend. As an authorized user, you can use the card to make purchases, but you are not legally responsible for paying the bill. The primary account holder’s payment history, credit limit and balance will be reported to the credit bureaus under your name as well. This can help you boost your score and lengthen your credit history, as long as the account is in good standing.
- Apply for a credit builder loan. Unlike a regular loan, you don’t get the money upfront with a credit builder loan. Instead, the lender deposits the loan amount into a savings account that you can access only after you pay off the loan in full. The lender reports your payments to the credit bureaus, which helps you establish a positive payment history. A credit-builder loan can also diversify your credit mix, which is the variety of credit accounts you have. Having different types of credit can improve your score and show you can handle different kinds of debt.
- Get a co-signer. If you have a family member with established credit, they can co-sign a loan for you. This is risky for the co-signer, because he or she is fully responsible for paying off the loan. Failure to pay on your part could hurt the co-signer’s credit—and jeopardize your relationship.
- Contact HomeSight to speak with one of our HUD-certified counselors. This is a free service we provide as a nonprofit lender and CDFI, and we are committed to helping every member of our community prosper. HomeSight is here to help you assess your financial present and navigate a plan for a secure future for you and your family. A credit counselor can help you go over your credit options and can help you create a personalized plan to help you take the lead in your financial life. Another bonus: speaking with a counselor and completing our free homebuyer education classes qualifies you to apply for HomeSight’s non-traditional credit offerings and down payment assistance programs. We specialize in helping borrowers with limited credit find the loans they need to achieve their financial goals. Education is power. Contact one of our helpful staff members today!
Two Windermere agents walked into HomeSight...
Volunteers + HomeSight = Impact
In summer 2020, as the nation reeled from the double blow of the pandemic and the civic unrest following the murder of George Floyd and others, two real estate agents at Windermere reached out to HomeSight. These agents didn’t know one another, but they were thinking the same thoughts at the same time.
These agents had seen the toll racial inequality had taken in their field and wanted to make a difference for the Black community, whose ability to build wealth through homeownership was hampered by the generation-spanning legacy of slavery. Despite COVID’s impact on their own finances, they both reached out individually to HomeSight to ask how they could help Black families with their down payments.
HomeSight was the right door to knock. Loan originators at HomeSight were witnessing the growth of a new type of housing crisis. Despite being eligible and able to afford a mortgage, moderate-income families who earned too much to qualify for assistance were increasingly unable to reach the down payment.
HomeSight lenders wanted to increase down-payment assistance to these families. A relatively small investment upfront could completely change the trajectory of a family, and a community, for generations to come.
As a real estate agent, Paige Dumler had a front-row seat to the soaring cost of starter homes in Washington. She saw as prices soared increasingly out of reach for first-time homebuyers, especially for people of color. She’d seen racial disparity and inequity growing worse. And in the summer of 2020, just steps from her Capitol Hill home, she saw equity and racial injustice explode into the city’s, and the country’s, consciousness.
Dumler knew equity was a huge, complex, societal issue. She knew that, as one person, she couldn’t solve it, but she was, as she described herself: “the kind of person who asks: ‘What can I do to help?’” So she called HomeSight and asked if she could provide down payment assistance for a family of color, to help them reach homeownership.
Meanwhile, another Windermere agent, April Geneva, had started to develop and voice the same concerns. One of Geneva’s clients was selling her inherited house in the Central District – the client’s mother had purchased it in 1989 for $65,000 – and told Geneva: “My mom made an amazing investment, and I recognize that I am now benefiting from generational wealth. I’m sad, leaving the neighborhood, and knowing that not a lot of black folks in Seattle can afford to live here anymore.” The client asked Geneva point blank: “What are you, as realtors, doing about who has access to housing?” Geneva relayed the conversation to a colleague, and said she wanted more black families to experience the benefits of generational wealth.
After meeting with the agents, HomeSight reached out to other housing leaders to explore the creation of a tailored, down-payment assistance program for moderate-income borrowers. The Windermere agents approached Windermere’s president, OB Jacobi, who committed Windermere’s full support, acknowledging the industry’s history of discriminatory practices and its commitment to diversity, equity, and inclusion.
By mid-2021, the fund was created with a $40,000 contribution from Windermere and HomeSight’s match. Approved by Sam Smith’s family, the fund’s name pays tribute to a Seattle political icon who was key in enacting the Open Housing Law of 1967. The fund provides up to $20,000 in down-payment assistance to Black families earning between 80% and 120% of Washington’s median income.
Like many agents of change, the Sam Smith “Hi Neighbor” Homeownership Fund was the result of people working together to find solutions, and inspiring others to join.
The program has inspired more partnerships. At each closing, Windermere agents are asked to donate a portion of their commissions to the fund. These donations are then matched by the company’s non-profit arm, the Windermere Foundation. Seeing the success of the program, JP Morgan Chase, Zillow, and US Bank pledged their commitment to the cause. To date, the Sam Smith Fund has helped a dozen families reach homeownership.
“We’ve got to be willing to find different ways,” said Geneva. “This market is really, really difficult. We live in a city where housing is insanely expensive. I’m proud of the fact that the work has begun.”
Family, Prosperity and Dancing in the Moonlight: at its first Moon Fest, HomeSight lights up Othello Park with southeast Asian cultural traditions.
While the lunar new year is a familiar celebration in cities with large east Asian communities such as Seattle, fewer people are familiar with the culturally significant autumn festival traditions celebrated in China, Vietnam, Japan, Korea and other east Asian cultures.
“The Moon Fest marks the end of the harvest season,” said event organizer Spring Gin, HomeSight’s community development manager. “It’s a day to celebrate family, and especially children, at the end of the agricultural work year. It’s a time for family reunions. The full moon represents fullness, prosperity, peace and a plentiful harvest.”
Fireworks, lion dancing, food, music, fun and lanterns will light up Othello Park on Saturday, September 30 from 6-10 p.m. at HomeSight’s first-ever Moon Fest. Free and open to the community, the festival will bring the traditions of southeast Asian harvest celebrations to its southeast Seattle neighbors.
The festival will also feature martial arts demonstrations and a fashion show of traditional dress from several southeast Asian cultures. A special moon dance will be performed by senior members of the community, and fireworks will top off the celebration.
With the festival’s special focus on children and families, young attendees will be given treats and lanterns. “In Vietnamese culture, the lanterns light the path for prosperity and good fortune,” said Gin.
Moon Fest is sponsored by HomeSight, a catalyst for community and economic development in southeast Seattle for over 30 years, and Seattle’s Office of Economic Development.
“There’s a lot more to Asian culture than dim sum and pho,” said Gin. “Moon Fest is an opportunity for our large east Asian community to reconnect with their cultural traditions, and for all our community members and neighbors to learn, join in and celebrate with us.”
HUD Secretary Marcia Fudge:
“Don’t Let Them Take Our Neighborhoods”
Key member of the Biden-Harris administration met HomeSight stakeholders and Black Homeownership Initiative Network members this week to give support to Black homeownership efforts.
HomeSight Executive Director Darryl Smith moderated a roundtable discussion with Housing and Urban Development (HUD) Secretary Marcia Fudge, Seattle Mayor Bruce Harrell, Representative Adam Smith and members of the Black Home Initiative Network (BHIN) to discuss hurdles to homeownership in the Black community.
Several representatives from the BHIN—a coalition of 72 housing leaders dedicated to improving homeownership access in the Black community—attended the event, including Darryl Smith and Nicole Bascomb-Green, a HomeSight board member and the new chair of the Washington State Housing Finance Commission.
Secretary Fudge acknowledged the racial gap in homeownership is a pressing and longstanding issue. “It’s been 55 years since the Fair Housing Act was passed,” she said. “We know we have to do better.”
Noting the Biden-Harris administration had increased tax credits available for housing construction, Secretary Fudge said the problem only began with the affordable housing shortage. “We know we need to build houses. We are woefully short. But we can’t just build our way out of the problem,” she said. “We have to preserve the housing we have, and we have to preserve our communities.”
To do that, Mayor Harrell said more robust assistance was needed for down payments in this region that generally ranged from $100k-$150k. “We live in a very wealthy city,” Mayor Harrell said. “This creates a sub-class. You don’t become worth more than $180 billion and don’t recognize the wake you just left.” Mayor Harrell praised HomeSight for its “amazing” work directly tackling the challenges posed by increasingly unreachable starter home prices, saying: “That’s the kind of work we have to do.”
Darryl Smith said HomeSight’s programs addressed a critical gap in Seattle’s housing market. “The reality is that down payment assistance for low-income people is capped at 80 percent of the area median income. House prices have risen so far, and so rapidly, that even people making up to 120 percent of the area median income can’t bridge the gap, and don’t qualify for any assistance.”
At the roundtable, local teacher James Dixon shared his experience purchasing a home with the assistance of HomeSight’s Sam Smith “Hi Neighbor” Homeownership Fund, a loan product created in partnership with Windermere Real Estate designed to increase purchasing power of Black homebuyers earning between 80-120 percent of Washington state’s median income. After years of struggling with rising rent in Seattle, his hometown, Dixon was able to bridge the affordability gap to purchase his home last year with this program.
Bascomb-Green said: “That’s what we see every day as brokers. We have clients who are income rich, but asset poor. They can afford a mortgage, but don’t have the down payment, because they make too much money.”
Darryl Smith said the work must continue on every front. “When we talk about the issues surrounding creating generational wealth, the answer is ‘yes, and …’ It’s supply. It’s homebuyer education. It’s down payment assistance. It’s all of these.”
Secretary Fudge’s message was clear in response: “We want to work with you.”
Quiz: Are you ready to buy a home?
The benefits of homeownership are great, but getting there takes preparation. There are many factors to consider before you buy a home, such as your income, savings, credit score, debt, budget, lifestyle, and goals. How do you know if you’re ready to take this step? Take our quiz!
- Do you have a stable and reliable source of income? (2 points)
- Have you been saving money for a down payment and closing costs? (2 points)
- Do you have a good credit history and score? (1 point)
- Do you have a realistic budget that includes all the costs of homeownership, such as mortgage, taxes, insurance, maintenance, and utilities? (1 point)
- Do you plan to stay in the same area for at least five years? (2 points)
- Do you have an emergency fund that can cover at least six months of living expenses in case of unexpected events? (1 point)
- Do you have a clear idea of what kind of home you want and need? (2 points)
- Are you willing to compromise on some features or amenities if necessary? (2 points)
- Are you prepared to deal with the responsibilities and challenges of homeownership, such as repairs and maintenance? (2 points)
Add up your score:
You’ve prepared financially and done your homework. You’re ready to learn about your mortgage options. Call HomeSight today and learn about all the opportunities we can offer to start building equity in your new home!
You may be perusing homebuying websites, but you haven’t evaluated your own financial toolkit. Even if you’re just surfing on Zillow or Redfin, it’s never too early to lay the groundwork so when the time comes, you’re financially prepared. The good news is you’re not alone. HomeSight’s homebuying classes can help you budget, plan and get you financially ready to take this first step toward building equity.
You’ve got to start somewhere! You may think homeownership is out of reach for you, but HomeSight’s lending experts can show you how to prepare. If you’re at the beginning of your homebuying journey, we’re happy to help you create a realistic budget and timeline. Try our Homebuyer Education class to get your budget in shape.