Never had credit now what do I do?

1 Answers

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  +1 Votes 1  0

  ericabiz on May 31, 2010

  There are a few choices here:

  1) You can start using credit by getting a secured credit card. That’s where you put a certain amount of money in a deposit account and that becomes your “credit line”. Think of it like a CD that helps you build credit. If you choose to go this route, I like Citi’s secured card because it pays you 4% interest!

  2) You can continue to opt-out of the credit world and buy a house with cash. Find a person or people who are experienced at buying houses at trustee sales and pick up your own house on the courthouse steps. You will need experienced people (most real estate agents don’t really “get” trustee sales; find someone who works with investors and who has done this before.) You will need a cashier’s check for your full bid; there’s no financing.

  Buying “on the steps” should land you a 20% or so discount over regular price–a nice deal for those who prefer cash. However, there are huge caveats. You’re buying sight unseen. You may have to evict tenants. The house may have issues…the former owner might have torn it apart. You are not guaranteed a clean title; there may be liens on the property. That’s why it pays to have someone with experience, even if they charge you a % (and most good ones will.)

  I have been researching trustee sales heavily and I’m inclined to go this route. I’m happily saving up cash until I can do so.

  3) Of course, you can buy a foreclosure/REO with cash, too, and not have to deal with the hassles of trustee sales. Buying with cash makes you much more likely to land the house, and you’re likely to get a good deal this way. You are guaranteed a clean title and you can usually look inside the house before you buy it. There are also REDC auctions where you can buy with cash, and they have open tour dates where you can view the inside of the property.

  In general, buying with cash gets you a nice 10-20% discount–sometimes even more. Even if you have to wait some years to save it up, that money will be working for you (in an interest-bearing account) instead of against you (in a mortgage payment.)

  -Erica