Repair Credit Score

Archive for July, 2009

Question: Mortgage Loan---chances of approval? how much? rate?

My husband and I want to buy a house (basically tired of paying $1800 in rent in city), details:
credit scores: 574 (mine) and 629 (his)--old undergrad stuff
income: $30,000+ each (fixed for next 4-5 years, research fellows)
investments: both have IRAs, average each is $4000...mutual funds $5000
savings: combined $7000
debt: me (~$3500) him (~$19,000)

We will have cosigners (retired parents, with substantial income and great credit history)
Will we be able to get a mortgage, if so about what amount would it be, interest?? We kind of need specifics (as much as possible) so we know what we should be looking at. I know it maybe crazy to think about buying but if you were paying $1800/month in rent for the past two years you would do the same----thats less than our neighbors pay in mortgage (but moving out of the city is not an option due to our schedules and public transp. needs)
Should he apply by himself with our parents since his stuff is better?

Answer: Talk with your bank, find out what their process is- find someone you trust. Don't listen to everyone like the guy above who may just be trying to make a buck. The bank will tell you what their debt ratios are- something to check on...

Is a Pre Approval an Approval? Mortgage Financing

But, Have Some Open Accounts so you can establish your credit

If you don't have any open accounts, then it's a good idea to try to get some credit in order to prove you can handle it. If you can't get approved for a credit card, talk to your bank about a secured card. You will need to tie up some money in a special savings account that you won't be able to touch, but the bank will not deny you the secured card.

For example, you put $500 in savings. You are issued a credit card with a $500 limit.

There is no risk to the creditor, because it will just take your savings if you don't pay. However, you must pay to establish your credit. Then you use that credit card normally, paying off your balances in full every month. After 6 months of that, the bank will probably give your $500 deposit back and make the card a legitimate unsecured credit card. When this happens, your credit is established. Now you can start improving your credit and Credit Score.

How long does it take to establish new credit?

Sometimes it will take a year to establish the account and new credit this way. The important thing to know is that credit ratings are reported in 6-month increments. Say you buy a refrigerator on credit from a department store with the intention of paying it off quickly in order to build your credit. But, make sure you pay it off over at least a 6-month period. If you pay it off too quickly, it won't be reported at all, and you will receive no benefit.

Removing Inquiries you did not authorize

If there are inquiries on your Credit Report that you did not authorize, but which appear in the authorized column, you should contact the companies who made them and request that they remove them.

Length of Credit & how length of credit help improve Credit Score

The length of time you have established credit is important. This is referred to as length of credit. The sooner you get started building your credit, the longer you will have to create a high Credit Score. Get credit history started young. Buy things on your childrens' credit so they have some established when then need it. In general, the longer your credit history is, the better your Credit Score. Credit bureaus generally don't like new credit.

Types of Credit & how type of credit improve Credit Score

There are different types of credit. Mortgages are good (unless you have a lot of them). Some credit cards are good credit and some are not good credit.

Don't open department store cards. If you have department stores cards, you may want to cancel them. Lowes and Home Depot are okay because they may be beneficial. However, do not cancel your department stores cards right before you are about to borrow from the banks.

If you only have department store cards, don't cancel them because you need some form of credit history. Work on opening a new card (see possible good cards below) then cancel your department store cards.

New Credit & how new credit affect Credit Score

Getting new credit cards, cars, etc. can hurt your Credit Score because your credit is checked each time you apply for something new. Sometimes when your credit is checked it lowers your Credit Score by a few points.

Soft hit and hard hit credit pulls

There are hard-hit and soft-hit credit pulls. A hard-hit credit pull is not good. This is when you have a mortgage broker, car dealer, etc. pull your credit -- it lowers your Credit Score every time you do. A soft-hit credit pull is okay. This is when you pull your own credit. You can do this as often as you'd like.