Different Types of Credit Cards That Build and Establish Credit

First Time Home Buyers often ask us what they need to do to get the minimum credit scores required to buy a home in North Carolina.  Because so many first time home buyers here also have tons of Student Debt – we are finding that most folks need to add revolving credit to their credit mix, meaning they need to add Credit Card debt.

There are different types of Credit Cards available to help you build your credit and your credit score.  In general, you need at least 3 trade lines to be able to purchase a home, although USDA Home loans will occasionally allow you to purchase with less than three – provided we can establish an “alternative” trade source, like your insurance, cell phone payments, or other utility.

Different Types of Credit Cards Available

Traditional Credit Card – This is normally referred to as a “Bank” credit card, and is the most widely used form of credit card.  Has a line of credit (with a limit) and minimum monthly payments due. Some traditional credit cards have annual fees and most have finance charges if a balance is carried and late fees if minimum payments are not made on time. The percentage of the credit used and late payments are reported usually to all three major credit bureaus, this is important, because it definitely affects your credit score!

* Secured Credit Card – This card requires you to secure the line of credit with a cash deposit, so that the card issuer is guaranteed payment. Secured credit cards are easier to get than traditional cards even if you have bad credit or no credit. The best secured credit cards are reported to the three major credit bureaus so that on-time payments will help establish their credit file.(some do not report to all three repositories, so find out BEFORE you decide which one to get!)

* Prepaid Credit Cards – These are comparable to debit cards, except that they are not linked to a bank account.  Whatever you deposit  is the card’s credit limit. Most of these do NOT report to the credit Bureaus, however, “some prepaid credit card providers do report payment history to a different credit bureau that tracks specifically payment trends by the individual consumer.” We can not use this type of reporting for a mortgage loan – so we are not familiar with the benefits to your credit score.

* Retail Store Credit Cards – These cards usually have a lower limit and are easier to obtain. It is advised that consumers make a few purchases on these cards and pay them in full each month to help establish their credit file. These do not really give you a great score, so if you want to know more about how this type card (in particular) might be hurting your score, click here.

If you have questions about pre-qualifying for a mortgage loan in North Carolina, or Minimum Credit Scores – please call us!  Steve and Eleanor Thorne  919 649 5058 .  We know how to get borrowers in NC approved, we know what credit scores and reports the Underwriters will take.  We’ll call you back, and if you need to add another credit card, or pay something off – we’ll work with you.  Here’s some GOOD CREDIT Advice (and it’s FREE!)!