I think another concern is downpayment / closing costs... would paying off the accounts still allow you to pay for downpayment plus closing costs on your new home? If you could save that 3 accounts at $5,000 = $15,000, maybe you would qualify for 10 or 20% down which would potentially open up new loan options.
A good rule of thumb is that banks like to see 3+ active / open tradelines, but there is no specific standard requirement. You could possibly add a verification of rent or utilities to show credit.... more
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://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.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm
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.
As a recent homebuyer who didn't have a lot of credit history, I can tell you the banks wanted at least 12 months of history on a credit card for it to have any weight in approving me for my loan. My lender wound up calling my car insurance company, cell phone service provider and landlord as secondary, non-traditional forms of credit.
Also note, too many inquiries into your credit score (i.e., opening a new line of credit or shopping for a home loan) will ding your credit score. I've always heard you should try and limit the inquiries to a short period if you can.... more