Here’s the thing about credit-- it’s a system built on trust. It’s the same basic concept as personal relationships: if someone tells you they are going to do something and then they don’t do it, you lose a little bit of trust in them. With a little bit of grace, we can overlook these small transgressions every once in awhile, but if they become frequent enough, trust is eroded.

It’s also the same with no credit. When you first meet someone, you usually don’t distrust them (unless they’re super creepy and then always trust your intuition) but you don’t trust them either. Real trust is built on time and history, and if you have no credit, there’s no history there. If you’ve never borrowed money you’ve never showed that you can and will pay it back. It’s not a bad thing, but it’s not a good thing either.

While I am by no means an expert on credit, my personal experiences over the years have taught me a lot. My ex-husband had terrible credit when I met him (should have been a blazing red flag) and he wasted no time opening several lines of credit in my name. When I was 22, I decided to leave that disaster of a marriage and ended up filing bankruptcy. The house that we had bought together ended up in foreclosure within the year. When I called Team Neal two years later, my credit score was a whopping 480.

The credit rating system gives a person a numerical score based on how much they “trust” them. The credit rating scale runs from 350 to 850; any score under 600 needs work (under 500 is pretty horrible). Your credit score is primarily based on the past twelve months; the past twenty-four months are also considered. The better your credit score, the better rate you’ll get on your mortgage and the more options you’ll have.

All of this comes into play when you decide to buy a house because you are basically asking a bank to trust you with their money. They’ll loan you the money and you promise to pay it back. They don’t know you from Adam- this is where your mortgage professional comes into play. Of course, this is an oversimplification of the process and I am not a mortgage professional, so be sure to contact Team Neal if you have any questions. Credit can be tricky and the more informed you are, the better off you’ll be.