Credit is nothing more than “borrowed money” that you promise to pay back in payments, with an additional fee. This fee is better known as interest or finance charge. The total interest depends on the rate established by the loan officer and the time it takes to pay back the loan.

Individuals who shop using cash only find it difficult to buy a car or home, since they must request a loan and have an established credit history.

Establish your credit history
To establish your credit history, take note of the following tips:

• Apply for a department store credit card.
• Request a small loan in a bank or credit entity.
• Open and maintain a checking/savings account and avoid check bouncing.
• Reside in the same address for one or more years.
• Have a stable job.
• If you are responsible about your credit, make your payments on time, and avoid high credit card debt, your credit history will be favorable. On the other hand, if you make late payments, have high credit card debt, have accounts in collection/bankrupt agencies or have judicial seizures, your credit score will become negative.

• Experian: 888-397-3742 (http://www.experian.com/).
• Equifax: 800-685-1111 (http://www.equifax.com/).
• TransUnion: 800-916-8800 (http://www.transunion.com/).

If you have been denied credit in the last 60 days, are unemployed, receive public assistance or if you believe your information is the result of fraud, you can receive a free copy every year. Otherwise, you will have to pay approximately $9 per copy. It is advised that you do not request excess copies of your credit report because it can jeopardize your credit score. It is important that you check your credit report for any errors such as omitted payments. If you find any mistakes, fill out the complaint form that comes together with your report or write a letter in which you explain any discrepancies.

How to improve your low credit score

• Pay off any debts. Make a payment plan: most of your creditors will cooperate with you.
• Maintain your current accounts by making your payments on time.
• Pay more than the minimum payments.
• Apply for a credit card or a small loan, explaining that you have a negative credit history but are willing to improve it.
• Ask a relative who has a good credit history to pledge your credit application.
• Caution: Be careful with companies who promise to improve your credit score. Get as much information as possible before negotiating with any of them.

Can you buy a home when you have bad credit?
Loan officers check for your average credit score. The credit score is called FICO and ranges from 350 to 850 points. A FICO of 720 points or more is considered very high. 600 points or less is considered low.

In the Real Estate market there are many companies that offer programs for individuals who want to buy a home but have a low credit score. These programs consist of loans, known as subprime loans, which are given to individuals with a low credit score and have a higher interest rate than any other loan.

When requesting a subprime loan, it is important that you call many loan agencies and ask for different options. Be careful with companies that take advantage of your situation and offer you a loan at an extremely high interest rate, which puts you in danger of losing your home.