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Building Credit 101

Feb 5, 2007

It takes research and experience to become wise about loans.  The truth is that we all have to start somewhere. Our sponsor LoanWize provides many services that can help you search out the loan products you need or build your knowledge and wisdom about some of the products they offer.

In general there is typically a natural progression for people that are building or rebuilding their credit.

Stage One usually works to show a lender that a person is capable and responsible enough to make payments in full and all time.  Its about building payment history.  However, you have to have a loan before you can build a payment history.  So most people end up taking out a secured loan or getting a family member to cosign on a loan - in essence providing their personal credit as security.

Stage two often includes taking out a small unsecured loan or developing a history of paying off several personal loans.  Sometimes this is done with credit cards or department store cards or even a small bank loan.  Sometimes the bank loan might even be used to buy a car that does not use the title as collateral.

This often then allows a person to transition in to Stage Four, where they buy a new or relatively new car.  The car title is used as collateral or security.  These loans are typically for large amounts of money in excess of $5,000 and often times can be as much as $20 or $30,000.  This again helps build a payment history with a much higher payment.

Stage Five is the time when most people prepare to make the largest purchase and possibly largest investment they will ever make.  They buy a home and utilize the home and or property as collateral for a mortgage.  These mortgages can lead to an entirely extra set of stages that include refinancing, home equity loans, business loans and much more. 

WooHoo ed by Brett Bumeter at 6:59 PM  

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