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We Want to Buy a House But Need to Deal With Our Bad Credit. – Alejandra

“Dear Steve,

Im 27 years old, hoping to purchase a home $150,000-$185,000 hopefully in june of 2012. Last years gross combined income was about $85,000. my husband is year 6 post bankruptcy, his score is about 650-680, most of my debt is old, i have a credit score of 584 and 602. I am currently in good standing with auto loans and student loans but I have about 8 old, bad accts: 1 was part of my husband’s bankruptcy that is scheduled to come off in 2012, a couple of collections agencies that are also scheduled to run off in late 2011 and 2012. I have settled with one company and we have decided to paying off or settle with others that are scheduled to run off in 2012.

My question is, what is the best senerio in order for us to acheieve our goal next year? Should I also settle or pay off debt that will run off this year or will i be wasting my money because they are about to fall off my credit report anyway, and how will my credit report and score look after everything is said and done?

Alejandra”

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The Answer

Dear Alejandra,

The good news is it is possible to turn this around. The bad news is that right now your credit scores are not great.

We Want to Buy a House But Need to Deal With Our Bad Credit.   Alejandra

Your scores are in the D range. His scores are in the C range. For the best rates we need to get you up into the 750+ range.

So here is what you should do.

  1. Each of you should pull a current consolidated credit report. A single bureau report does not show you all the information. not all creditors report to all credit bureaus.
  2. On his report, any account that was included in his bankruptcy should reflect that it was discharged in the bankruptcy. Those accounts should fall off 7 years from the date first reported delinquent. If it was a Chapter 7 bankruptcy it will be reported for 10 years. The bankruptcy is not a big deal and not what is holding you back.
  3. On your consolidated credit report I need for you to identify all the open and old collection accounts.
  4. Pay those off as soon as possible. Don’t settle them because the debt forgiven will show as a bad debt. Be sure to keep proof of payment in case one of those collection companies fails to update your credit report. make sure all your old accounts have either fallen off or you have paid them before you apply for a mortgage.

After you do all that, or at the same time, you need to focus on getting new credit and using it responsibly. The debt you have is not going to boost your score. A student loan and a car payment do not show responsible unsecured credit use which actually counts more in a credit score.

I’ve already written a guide on what ti do, just read and both of you follow this guide.

On top of doing all of that, keep in mind that while nearly 100% financing programs still exist for those with good credit, the more money you can put down will help your approval chances.

Between now and the time you find your home next year, open a savings account and save, save, save.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

We Want to Buy a House But Need to Deal With Our Bad Credit.   Alejandra
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If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • Steve Rhode

    Wow, what a blessing it was for me to get your update.

    It looks like you are doing awesome and the timeline you now have looks reasonable and achievable.

    Please keep me posted on your continued progress. I’d love to share in the joy when you move into your new house.

  • Avalles02

    so, an update as of last time i spoke to you, i signed up for my personal bank’s id safe program, it allows me to monitor my credit report and score every month for about 10.00 dollars a month and it monitors me whenever there is any activity on it.  I have been paying off most of my debt, it has been very fustrating to get the documents i needed to pay them off, but i managed to get most of them. 6 out of my 9 bad accounts have been paid off and as a result my credit score has jump 100 points, i am now at 650-658 the highest. I haven’t been able to purchase the secure credit cards yet, that will be my next objective after August.  We have moved our timeframe to buy a house from june of next year to november or december of next year due to getting ready for a new baby. With the new time frame, i believe that i should be able to raise my credit score even higher, i will keep you updated.  Thank you so much for your advice.    -Alejandra P.

  • Avalles02

    so, an update as of last time i spoke to you, i signed up for my personal bank’s id safe program, it allows me to monitor my credit report and score every month for about 10.00 dollars a month and it monitors me whenever there is any activity on it.  I have been paying off most of my debt, it has been very fustrating to get the documents i needed to pay them off, but i managed to get most of them. 6 out of my 9 bad accounts have been paid off and as a result my credit score has jump 100 points, i am now at 650-658 the highest. I haven’t been able to purchase the secure credit cards yet, that will be my next objective after August.  We have moved our timeframe to buy a house from june of next year to november or december of next year due to getting ready for a new baby. With the new time frame, i believe that i should be able to raise my credit score even higher, i will keep you updated.  Thank you so much for your advice.    -Alejandra P.

    • http://GetOutOfDebt.org Steve Rhode

      Wow, what a blessing it was for me to get your update.

      It looks like you are doing awesome and the timeline you now have looks reasonable and achievable.

      Please keep me posted on your continued progress. I’d love to share in the joy when you move into your new house.

      • http://www.facebook.com/alejandra.puente.581 Alejandra Puente

        Another update, WE FINALLY BOUGHT A HOME. 2 years later of paying off debt, saving money, having a child within that time kind of set us back with our financials, but we did it. My score was 765 by the time we applied, my husbands was also in the 700′s. we qualified for a 3.35% on our mortgage, I never thought this day would come, thank you for your advise, keep up the good work, and this is proof that it is possible to clean up your debt and achieve your financial dream, now we have to look into smart investments.

      • http://GetOutOfDebt.org Steve Rhode

        That is such awesome news. I’m so glad you made it and hope you give yourselves a big hug for me for doing such an awesome job.

  • Avalles02

    how long should it take my credit reports to be updated once the payments have been made and is there anything i can do about that one acct that i settled with?

  • Avalles02

    how long should it take my credit reports to be updated once the payments have been made and is there anything i can do about that one acct that i settled with?

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