Q&A: If You Have Credit Troubles

As a Real Estate professional… as Michelangelo once stated… “I am still learning” Here is a very good article from Francis Solomon at MOVE Inc. I thought I should share with you. Don’t hesitate to give me a call at 340-690-9177 or shoot me an email at [email protected] if you would like more information about Real Estate from one our professionals here at RE/MAX St. Croix in Americas Secret Paradise.

Reformed credit offender
Q: I am a 24-year-old, stay-at-home mom. In the past, I’ve had poor credit but have since paid off all bad debts. I am using my student loan as a source of credit to prove I can pay off my current debts.

My husband, on the other hand, has perfect credit. He has never missed a payment and pays in full every month. How will my history–I had four #9s on my credit report and a judgment–affect us trying to buy a home in two years?

A: First off, let’s explain your credit report terms to everyone. A #9 means a credit company has either enlisted the help of a collection agency or marked your debt as a charge-off. A charge-off means they wrote off your debt with no hope of repayment. A judgement is a court-appointed payment policy that has legal repercussions if you are delinquent.

Despite your bad credit history, you are doing the right thing. If you keep up with your good payment record on your student loan, you and your husband will likely get a mortgage in two years.

Remember that lenders look at your most recent credit behavior. So if you have a perfect record for two years, they will look favorably at your application.

Use your home to repair credit
Q: My credit looks bad. Is it better for me to sell my home and use the equity to pay off bills or should I rent it out for a year (thus re-establishing my credit) and then sell it? Would it make a difference in buying my next home?

A: Either way you will be paying off bills. Lenders are not as concerned about how much you owe as they are with how prompt or delinquent your payments are. Whether you sell or rent and re-establish a good credit history for a year, document your payments and apply for a loan a year from now.

Can’t get credit
Q: I have no credit. Do you think I could qualify for a mortgage? I do have a car loan but no one wants to give me credit.

A: If you have a car loan, you definitely have a credit history. This is good, because people without any credit history often have a harder time getting a mortgage than those with a so-so credit history.

That’s because lenders need a gauge to assess you. If you have a blank record, lenders don’t know if you are a credit risk or not.

Whether you can qualify for mortgage depends on your income, debt, assets and liabilities, and the payment record of your car loan. Try talking to a loan officer about your plight.

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