Looking for your first home or planning to borrow money for another large purchase?

Whether the need to borrow money is for a personal or business purpose, one of the challenges you might encounter is gaining credibility to show lenders that you are capable of paying back the money you wish to borrow. This can be especially difficult if you are a “newbie” with no credit history or track record. However, there are several steps you can take to establish credibility and increase your chances of getting approved for a loan.

First and foremost, learn how to make a budget. A budget is a great tool that can help you throughout your life. A budget will help you understand your income, expenses, and how much money you can allocate to a specific area each month. This will allow you to make informed decisions about where you can cut back on spending and where you can save more. It’s important to note that you should never take on more debt than your budget can manage.

Next, Develop a relationship with a local bank. Establish both a checking and savings account with that bank and transfer something to the savings account each month. This, along with your budget, will not only allow you to learn to save money, but it could provide proof that you can manage your money effectively.

A credit card cand be another tool when trying to establish credit, but if this is your first experience with card charging, it may be more beneficial for you to choose a debit card over a credit card. However, if you do choose to start a credit card, be mindful and shop around for the best card to suit your needs. It could be beneficial to look for a credit card that rewards you with money or credit. Another tip: Avoid high interest rate credit cards; Find a low-rate card. It’s also important to develop a habit of paying off your credit card every month.

If you have student loans, this can also help build your credibility, if paid back effectively. Never miss a payment.

Paying off any debt in a timely manner improves your credit score!

Another step to that large purchase you would like to make is to create a savings plan. For the rest of your life, creating a savings plan for a major purchase can be very beneficial to your finances. A savings plan will allow you to make a down payment on that large purchase. The budget you created can help you understand how much you can put back each month to help you reach that down payment. Understand that this savings plan will take time to complete. So what if it takes you 3 years after you get married to save enough to buy a house? That may not be exactly what you want to hear, but it could benefit you in the long run.

Overall, be patient. Don’t buy what you want until you can afford it. Always buy what you need first. Become independent so you don’t have to rely on your parents to bail you out. And  if you’re married, make sure your spouse is on the same page as you and discuss finances together.

These are only a few steps and tips to gaining credibility for borrowing money. Gaining this credibility as a “newbie” can be a challenge, but it is not impossible. Implement a clear plan and keep an eye on your finances. Don’t overwhelm yourself in debt. This will help you gain that positive credit history.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing materials are accurate or complete. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Gainspoletti Financial Services and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Raymond James and its advisors do not offer tax or legal advice. You should discuss these matters with the appropriate professional.