I got into some financial trouble a few years ago due to unexpected bills, some really bad investment advice and my own fiscal stupidity. Long story short, I was never as much as a day late on my rent or my car payment, but my credit card payments were constantly in arrears (sometimes past the 90 day black magic number), I was overextended, I had accounts (mostly medical) in collection, and my utilities, while never as late as my credit card payments, were occasionally 30 days or more past due.
I recently inherited some money from my mother and will be inheriting some more (how much more I’m not sure, but the “big money” I’ve already gotten). I used it to pay off all of my bills: every creditor was paid every penny they said I owed.
I now have money in the bank (not a fortune or enough to live on by any means but equal to a few months of my salary), I’m employed at a middle middle class salary and save for a low interest student loan (the payments are under $150 month) I have no debt. I also have the opportunity to buy my mother’s house, which while it is not paid for it has about a 35% equity.
The problem is that my credit has never been worse.
A part of it is that the creditors I paid off have not reported to credit companies yet (60-90 Days from payoff seems to be the standard time for this) and then the other part is, of course, that I’ve had payments in arrears and collection accounts in the last 2 years. I do not EVER want to see another credit card (I don’t count debit cards) but I would like to be able to qualify for a mortgage at a decent rate and without a co-signer. Making the payments will not be a problem; as I mentioned, I am employed, was never late on a rent payment and the mortgage payments on the full amount owing + closing costs and including tax/insurance would be less than I’ve ever paid in rent.
Admittedly I’ve only checked at a couple of banks so far, but they essentially have now way or no policy for updating the credit report or whatever. (The credit card company to whom I owed my biggest balance [far bigger than all the other accounts combined] has agreed to mail me a “paid in full” letter until the credit reporting companies are updated.) I cannot imagine ever again being in the mess that I was in as my circumstances have changed all around.
Does anybody have any advice for how to expedite my credit rehabilitation? Any advice appreciated.
Go onto the three credit agency’s sites and contest everything that’s on your credit report. Set up payment plans and accounts to make payments on everything on your report. That’s about all you can do as far as I know.
When it comes to credit reports, I don’t think ‘expidite’ is in their vocabulary. Everything moves really slow and takes a really long time. I think you’ll just have to be really really really good for the next seven to ten years or so. Of course the longer ago these things are, the less they’ll affect your score, but no matter how you look at this, it’s going to take a long time.
As an aside, my credit report had an account on it that wasn’t mine…it took about a year to get it removed.
Everything is paid off, I believe the OP is just looking for the fastest way to 1)get the reports up to date and reflect that everything is paid off and 2)get the score back up a few points.
You say you don’t ever want to see another credit card, but actually having some revolving credit, that you keep the balance to less thatn 30% of the limit and you making regular payemnts can do a lot to help your credit score. In fact, and I maybe mistaken, carrying a lot of debt and then paying it all at one time is not that beneficial to your credit rating.
Get a credit card and routinely pay on the balance every month. It doesn’t have to be a big balance. Paying off everthing every month gets a “no reported actiivity” and doesn’t help the credit score.
Other than the advice already given (get a credit card and use it responsibly), if you’re serious about getting a mortgage right now go for rapid rescoring. The bank will have to request it for you, but it can mean a more up-to-date credit report within 72 hours.
The best thing would be to wait. Even 6 months of good behavior (using small amounts of credit wisely) can make a big difference.
Sampiro,
…I am NOT a credit expert but have been a Real Estate appraiser and have worked with many Loan Officers and banks, I ALSO have horrible credit (due to many extenuating circumstances)…I bought my best house with a credit score of less than 500.
Find a reputable mortgage broker…take the bite in interest for a year or two…make your payments on time, keep everything else current. Next step, a year or two later, refinance…you CAN and should by a home for yourself ASAP… just my $.02.
FTR I have followed your threads for a while…you crack me up…in a good sorta way.
Go ask over at the The Creditboards. (I feel like a broken record recommending this site but somebody on this board recommended it to me and it’s been such an amazing resource.)
In particular, on the mortgage forum, ask the same questions. There are several professional mortgage brokers who post over there who can give you excellent advice about finding “subprime” lenders and the type of mortgage you might qualify for. You’ll probably need to go through a mortgage broker who can look at a whole array of different loans; bank mortgages tend to be very picky about credit.
Also, go the Credit Forum and read all the pinned threads about how to clean up your credit. There are lots of techniques to boost your scores.
BTW, if you don’t know your FICO scores, go get them at myfico.com. It’s usually about $45 for all three reports but there’s a discount thread at the Creditboards where you can usually find a code for 10% off. Get the myfico report so you have your actual numbers; the free credit report the government requires the agencies to give you does not include your FICO score which is vital to know.
A less desirable route is to ‘buy back’ your credit with a large purchase, such as a car. Make it something relatively inexpensive, like a Hyundai. Since your credit is not good, the dealer will have to shop your loan. He should be able to find takers, since your DTI ratio is non-existent, but the rates (because of your credit rating) will be high (like 20-30%). You have to grit your teeth and just pay off the loan as quickly as you can. This will boost your score, since you have shown that you can successfully take on debt. Your next loan should be easier to obtain.
Hopefully, you didn’t have a bankruptcy. That’s ten years for forgiveness.
If you have paid off your creditors, rapid rescoring should be a help. It’s not clear how much the payoff will help your credit score, but in the subprime business, the score is part of the credit puzzle. You can’t get rapid rescoring by yourself–only a lender can do it. Do not pay an organization to “rapid rescore” your credit for you. Don’t go to a credit repair place. Talk to some mortgage lenders about your situation. There are lots of programs for people like you.
Taking on new credit will indeed improve your score over the long term.
Taking on new credit might lower your score over the short term.
Taking on a new debt will surely increase your ratios, which might not be helpful if you want a mortgage right away.
BK’s stay on your credit report for 10 years, but their effect on your credit begins to diminsh quickly.
I doubt you will have any trouble getting a mortgage. Where do you live?
It can actually hurt your credit to pay off very old debts that had already been reported as a “written off bad debt” and were about to drop off your report due to age anyway.
If you’re interested in buying your mother’s house, could you simply take over her mortgage payments? It may be worth contacting the lender to see if you can transfer title to you, while continuing with the current mortgage (which I’m assuming is at a lower rate than you could qualify for on your own).
I’m guessing that the house was left to you and your sibs in equal parts. If they would be agreeable, they could then hold a mortgage for the balance, and you could pay them: a win-win situation.
Say the house is worth 100K, the current mortgage is 35K, and you want to borrow 45K from your sibs (putting 20K down of your inheritance for your 20% down payment). So you’ve got 2 mortgages: one payment goes to the bank, and the other goes to your sibs. Alternately, maybe your sibs would be able to pay off that 35K and you’d pay them on an 80K mortgage. They get an income stream, you get an affordable mortgage. Everyone is happy (I hope).
Then the mortgage itself wouldn’t be reported to the credit agencies, but your cleanup of your other stuff would gradually let your FICO score rise. And in a year or two you could refinance through a commercial bank using your shiny new FICO score.