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.
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.
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.
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1) Have a really big down payment (AT LEAST 20% of the home value).
2) Look for a property that is inexpensive AND put a really big down payment on it.
3) Continually work on repairing your credit score, but that does take time. Go to the FICO site and input your information in the area where it gives you advice on what you can do to bring up your score. Credit scores are affected by several things. On the FICO site, it will show a distribution of how your credit score is come up with. A very large part of your score is your debt ratio. How much credit you been approved for and how much are you using of that approved credit. If you have charge cards charged to the limit and no real available credit, that is not good. That is something you need to take care of. If this is your problem, pay your credit cards down as much and as quickly as possible. Another problem with your score could be late payments. You need to make sure that you don't make any of your payments late (especially mortgage or rent payments) and if this is your problem, then it takes usually a year (if it's not a mortgage payment, it could be 6 months) before your FICO improves from this.
Check out Suze Orman or Dave Ramsey and consider the advice they give concerning your credit and your credit score. It could be that you are going to have to tough it out for a while and get your credit up. With the money you're making, you could live frugally for a while and you should be able to do what is needed to improve your credit score.
The only other thing I can think of is to look for a 'rent to buy' or 'buy on contract' selling situation. You might be able to pull it off that way, but make sure that you are keeping within your financial means, or you will end up not having a home at all and having a much worse score than 603.
I hope this helps. Give me a call if she gets you pre-approved and I'll help you find a home.
Best of luck...
Keller Williams Realty
Tell her Josh sent you.
Hope this helps,
Josh Barnett, Realtor
If you need help evaluating what should be paid off first, to help you get in position to buy a home, I can refer you to a great mortgage advisor who would be happy to help you with that. Feel free to email me at email@example.com and I'll send you her name.