Goal: Buy a house. Obstacle: Credit Disaster
January 31, 2014 8:12 AM Subscribe
We want to buy a house but my credit is less than perfect. How bad is it? Well, you'll have to look inside.
posted by anonymous to Work & Money (17 answers total) 6 users marked this as a favorite
Here's the situation: my wife and I would like to buy a home at the end of July when our current lease expires. Her credit is good (710), we have a solid income ($75k), and we'll have about $15k saved up for a down payment by then. What's the problem? I'm a recovering financial disaster.
I made horrible choices in my previous "life"/marriage which have resulted in some problems that linger to this day. First, I have about $25k in student loans that defaulted and are now in collections. I'm paying $500 a month, every month, but they are still listed as is collections which is a huge negative mark on my credit. They were TERI loans through AES, and I can't find anything about getting them into loan rehabilitation. They've been passed off to a collector (WWR) who has been handling them the past two years.
I had a rash of collections accounts (6-8), all of which have been paid and are closed. I had two credit cards that were in the 2k-4k range that went into collections and I was taken to court - settled and paid both of those. I have a medical collection from three years ago I just barely found out about - it was worker's comp so I should be able to clear that up. I've had two auto loans in the past and paid them on time for the duration. All of these things factor together to give me about a 560 credit score, which is abyssal and embarrassing.
So here's the question: what can I do to get myself mortgage-ready in the shortest amount of time? I feel like we're in good shape with our down payment and income; for the price of home we're looking at, we'll actually be paying less than we currently pay in rent. We've been putting $1500 a month in savings to get that down payment built up while also paying off all these other debts I mentioned. We both have relatively secure jobs, so going forward I feel like we are on (relatively) strong financial footing.
My first step is going to be to take $500-1000 of our normal savings deposit next month and get a secured card for small purchases (gas, etc) to get my good credit built up. It has also been suggested that I get added as an authorized user on my wife's CC. The card is in good standing and at 10% utilization; we use it regularly for small transactions and always pay it back down to that 10% amount. Besides these two things, what else can I do in my current position to help myself out?
I feel like an idiot for getting into this hole. We've made really good progress over the past few years getting things in order, but I have a hard time staying motivated when it feels like nothing has really gotten better. Any advice/input would be greatly appreciated. I'm willing to do what it takes - write letters, make phone calls, etc. if it helps me out. I'm just not sure what to do other than keep paying the student loans and wait.