Home Buying in Evansville>Question Details

happygirl, Other/Just Looking in Evansville, IN

What is the best course of action to improve credit before applying for a mortgage?

Asked by happygirl, Evansville, IN Sat May 4, 2013

My husband and I are considering buying a house in the next few years. We currently rent and are increasingly frustrated by the overpriced apartments in Evansville when we could buy a home that has everything we want for much less.

The problem is that we have bad credit. My husband had a hard time keeping a job back in 2009-2010 due to the economy and we survived on ramen noodles and paid our bills with credit cards. Eventually we ran out of money on the cards and couldn't pay them all back at the time. The last date of non-payment was 2011. After that, things started to look up and we have been paying our bills on time.

What would you suggest to help improve our credit before applying for a mortgage? Current credit score for me is ~520 and for my husband ~580. We recently bought a used car and will be making payments for 2 years.

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Good afternoon happygirl,

We see many credit reports with low credit scores (anything less than 620), and often many scores in the 500's. This is BAD credit. If you are one of the folks affected by this terrible economy, you have a low credit score and you have a dream of buying a home, here's some simple advice for you.

It is unlikely you could be approved for mortgage financing with that credit score at this time.

Beware of any mortgage professionals promising you an approval with such a low score. Wait on buying a home. I recommend you take the time to resolve your credit issues.

First, settle any outstanding debt. If you owe money on collection accounts, charge-offs and/or judgments, make payment arrangements and get these accounts paid promptly.

Next, begin rebuilding your credit. If you have current accounts with good payment histories, or even some previous late-payment-blemishes, make sure you continue to pay those accounts on time. If you do not have any existing credit accounts then you'll need to establish several in order to create a viable credit history.

I have found that CONSUMER ACTION is an excellent resource for objective advice on all things credit related. You'll find free and sincere advice on everything from settling collection accounts to rebuilding credit to building credit from scratch on their website.
http://www.consumer-action.org/

Beware of anyone offering to "repair" your credit! The Federal Trade Commission issued a stern warning last year that such offers are scams. Find more from the FTC HERE.
http://www.consumer.ftc.gov/articles/0058-credit-repair-how-…

The best way to buy a home is to have a decent credit history combined with sufficient Income and Assets for a home purchase.

The best way to have a decent credit history is to settle negative outstanding obligations and pay all your bills on time for at least two years.

Trevor Curran
NMLS #40140

*If you thought my answer was helpful, please give me a “Thumbs Up” or “Best Answer.” Thanks!
0 votes Thank Flag Link Tue May 7, 2013
The smartest thing you can do is find a good mortgage lender now and work with him or her to repair your credit. They can advise you, or refer you to a credit repair professional. They will be able to determine just what needs to be done and how long it will take to get your credit where it needs to be. You are very smart to start now, you will be prepared and in a great position to buy within the next few years.
1 vote Thank Flag Link Sat May 4, 2013
There are some good answers provided by others that you can follow. If you want to be hooked up with a mortgage broker who specializes in helping and informing you on the steps to take, please give me a call at 459-3751 in Evansville and I will provide you with a couple of choices of good brokers.
0 votes Thank Flag Link Sat Aug 3, 2013
I recommend you seek advice from a credit counselling service to evaluate your credit history and correct any errors while you continue a conservative lifestyle. You need to build up your credit score to 640 and save cash for a down payment.
0 votes Thank Flag Link Mon May 6, 2013
I am a realtor in Evansville. I would be happy to talk with you and help connect you with a mortgage person that can get you on the right track to repairing those scores. Please, let's talk. Call or text me at (812) 499-2865
0 votes Thank Flag Link Sat May 4, 2013
Hi Happygirl

Regret to hear of your FICO score problems.

The best way is to be on time with all your bills, and not open more credit lines.

Good luck
Perry
0 votes Thank Flag Link Sat May 4, 2013
Hi Happygirl,
Fixing credit is a great subject. The basics are easy, pay your bills on time. Don't close any accounts, that will reduce your scores. Keep account balances low. Establish new credit slowly, don't apply for several cards at once, but do seek to expand your credit profile.
If your plan is a year or two away, you may be on the right track. Be wary of "credit repair specialists" who charge up front. While some legitimate services exist, there are many scams.
0 votes Thank Flag Link Sat May 4, 2013
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