This is a 2 part question regarding credit.?
First i am trying to find out what is the best way to improve my credit score for a mortgage approval to purchase a home for the first time. Currently, i have two judgements from old credit cards totaling a balance of 3k. Those have both been paid to law firms this week. In addition i have approximately 1000 to 1500 in various and numerous collection accounts approximately 10-15 accounts depending on which report you look at. some of them are six years old some are less than two years old and the highest balance on any one of them is $300. Being that i just paid off the judgements i dont have a lot of other cash lying around to pay anything else. I also have a secured credit card with a 500 limit that i never pay late or carry more than $125 on. only had that account since june. Also an auto loan just opened last month for 5k that is current and will continue to be paid on time. my scores are anywhere from 587 experian to 630 equifax and 617 transunion...how do i get over 700?
Public Comments
- Pay off all those other debts and then continue to pay all your bills on time every time. Eventually your score will go up.
- You don't. Credit is based on your character, your capacity, and your collateral - in that order. Nobody wants to take your collateral in lieu of a loan. If you have $3,000,000 in assets, and no other debt, and you want to borrow $300, someone will say "Yes" because they figure *you* will sell something to pay off the loan, not because *they* figure on doing that for you. You either haven't the money to pay off your loans when they are due, or you can't be bothered to pay off your loans when they are due. A couple of creditors have *sued* to get their money. Do they get paid? Not until you want to buy a house, and need to get a mortgage. What about your mortgage company? What event will convince you to start making your house payments on time? Is it that you want to borrow a few million to buy a business? If you want credit, you need to *deserve* credit. You don't. And it's not something you fix overnight. Get yourself current, and you *might* qualify for a mortgage at an exceptionally high interest rate. But get yourself current and *stay* current for five years, and the mortgage companies will fight for your business. Bummer. You gotta *behave* in order to get people to trust you. Life is *so* unfair, isn't it?
- Unfortunately, you'll need to pay off the other accounts. Keep paying your current accounts on time. Credit companies not only like that you have no outstanding debt but they look at the amount of credit you have available. For instance, I have a credit card with no more than a couple hundred dollars owed but my limit is $10,000 - this looks good to creditors for some reason. You might want to contact a credit counseling center or many communities have organizations that host "classes" for people who want to buy a house - that always looks good to creditors. The important thing is to be patient. It may take a while but it'll be worth it in the long run. Good luck! http://www.pueblo.gsa.gov/cic_text/money/credit-record/crrecord.htm
- Ok, here's the real.... But first, to give you an idea of what you're working with, I'm going to break down what makes up your score: 1.Payment history- 35% 2. Total debt owed vs. availalble credit- 30% 3. Length of time establishing credit- 15% 4. Types of credit established- 10% 5. Inquiries and New accounts- 10% Having said that, here's what you need to work on. 1. Paying those judgements off will help, but it would help more if they were either changed to a favorable rating or removed altogether. Keep in mind that those judgements even though paid, will stay on your report 7 years. 2. As for the collection accounts, there's several ways that you can go with this. You mentioned that some of the debts range anywhere from < 2 years to 6 years. The debts that are killing your score right now are the < 2 year ones. Any debts more than 2 years aren't affecting your score as much. This is when the SOL (statute of limitations) comes in. There's the 7 year SOL for reporting debt called the FCRA, and there's a state statute for collecting the debt in which a collector can legally collect the debt by taking you to court. If a debt is older than 5½-6 years, there's no sense in paying it since the SOL will expire and it will stop reporting after year 7. The more recent debts, you may be able to settle. Here's a link on how to settle debts that you may find useful. http://creditinfocenter.com/debt/settle_debts.shtml http://creditinfocenter.com/debt/neg_rating_after_settle.shtml http://creditinfocenter.com/debt/CanCreditorSue4SettlementDifferences.shtml http://creditinfocenter.com/debt/ActualDebtSuccesses.shtml Now as for the accounts that you have, the car loan will help since it's an installment loan, and the secured card will end up being your ace-in-the-hole. Reason I say that is that 30% of your score depends on how much you have available versus your total debt. A secured credit card can help you change that because you can increase the credit line by adding to the deposit. One thing that would help your score tremendously would be to aggressively start adding to the deposit. This money would also serve as a down payment toward the house. A credit card with a high limit and a low balance definitely helps your score. As long as you keep the balance manageable, when it comes time to convert to a regular card, you'll keep the limit you built with the deposit, which you'll get back anyway with interest attached. And another thing to think about is this, with the recent situation with mortgage lending, I would strongly suggest waiting some before pursuing buying a house, at least a year, if not 2. The mortgage industry's going back to what's called "common sense" lending in which other factors besides credit score will be taken into consideration. Hopefully my answer will have shed some insight for you Good Luck!
- TIME PAY ALL BILLS ON TIME KEEP CREDIT CARD BALANCES LOW. DON'T APPLY FOR ANYMORE UNLESS NECESSARY.
