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We Need to Raise Our Credit Scores So We Can Buy a House. – Cassie

“Dear Steve,

My husband and I would like to purchase our first home, but are having difficulty getting approved for a loan in the amount we desire and can afford. My husband has bad credit (score 585) and quite a bit of collections on his credit report. It consists of an old unpaid loan, unpaid hospital bills, etc… He has approximately 10,000 worth of bad debt and all of it is from more than 5 years ago. He opened a credit card with a $300 limit to help improve his score. $300 is all they would approve him for.

My credit score isn’t the greatest either but it is better than his. It is about a 635. This has increased over the past year because of on time, consistant payments and new opened credit card accounts. My previous score was a 585 as well. We have worked really hard to fix my credit. I even paid off a couple of old debts.

Currently, I have 3 Delinquent records, 2 collections, and 1 judgement. I have 3 open credit cards, several student loa ns, and an auto loan. All of the above loans have been paid in a timely manner 100% of the time.

However, I do have a lot of credit inquiries due to many denials of credit cards, loans, etc… In an attempt to fix my credit, I applied for a lot credit cards, etc.. not knowing that it would have a negative effect.

My credit cards do not have very high limits on them and 2 of them are somewhat close to the limit, so I am currently working on paying them down. I applied for a house loan and was approved, however it wasn’t for the amount I requested.

They also told me I had to pay off my 2 collection accounts, which wouldn’t be a problem because they are not very high. I was only be able to use my annual income to apply for the loan and unable to put my husbands name on the loan.

His credit didn’t qualify and the lenders told us that he would have to pay off at least $3,000 of old debt before he could be added. My husband makes more money than I did and it would be nice to be able to add his income in order to purchase a nicer home. Anyways, I am just trying to figure out what my options are and what the best possible solution would be to my problem.

What should I do to get aprpoved for a house loan in the amount that we desire and to improve both my and my husbands credit scores?

Cassie”

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The Answer

Dear Cassie,

It seems like you need to take a step back and regroup and focus on cleaning up your old credit situation before you run out to apply for a new loan or mortgage.

Getting this back on track so you can get the house you want is actually a three stage approach. You can do it all at the same time.

  1. Get a copy of your consolidated credit report which shows all three credit bureaus on it. You want to see what each of the credit bureaus are saying about you and your husband. It’s important to get a consolidated credit report since the information on each credit bureau is different.
  2. Armed with that information you can begin to pay off the old collection and delinquent accounts. Get as many satisfied as you can. In order to improve your credit we need to stop the current reporting of the delinquent items.
  3. At the same time you need to open a couple of secured credit cards for your husband. Make sure he does not run the balances up more than 30% of the available balance. These need to be Visa or MasterCards that report to the credit bureaus. Do not get store cards.

I did not suggest any new cards for you since it sounds like you have some open cards already that you are current on.

If you follow this plan, you’ll get the house in due course.

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

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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.

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