“Hi Gary. I got laid off awhile back and got behind on my bills and hurt my credit. Ive had a good job for two years now and Id like to finally buy a home, but my FICO score isnt that good. Is there any way I can buy a home?”
***ANSWER:
A couple of years ago, I would have told you it was not a problem. You could get a subprime loan, which were plentiful and available to people with challenged credit. But those days are gone and subprime loans are almost extinct.
So Id suggest you work on improving your credit. Here’s some info I saw awhile back on www.MyFico.com on how to do that:
=== Payment History Tips ===
– Pay your bills on time. Delinquent payments and collections have a major negative impact on your score.
– If you miss payments, get and stay current. The longer you pay your bills on time, the better your score.
– Paying off a collection account won’t remove it from your credit report. It stays on for seven years.
– If you have trouble paying bills, contact your creditors or see a legitimate credit counselor. This won’t improve your score immediately, but if you manage your credit and pay on time, your score will get better over time.
=== Amounts Owed Tips ===
– Keep balances low on credit cards and other “revolving credit”. High outstanding debt can affect a score.
– Pay off debt rather than moving it around. The best way to improve your score in this area is by paying down your revolving credit. In fact, owing the same amount but having fewer open accounts may lower your score.
– Don’t close unused credit cards as a short-term strategy to raise your score.
– Don’t open a number of new credit cards you don’t need, just to increase your available credit. This approach could backfire and lower your score.
=== Length of Credit History Tips ===
– If you’ve had credit a short time, don’t open a lot of new accounts too rapidly. They lower your average account age, which has a larger effect on your score if you don’t have much other credit. And rapid account buildup looks risky if you’re a new credit user.
=== New Credit Tips ===
– Do rate shopping for a given loan within a focused time period. FICO scores distinguish between a search for a single loan and a search for many new credit lines, in part by the length of time over which inquiries occur.
– Re-establish your credit history if you’ve had problems. Opening new accounts responsibly and paying them on time raises your score in the long term.
– It’s OK to check your own credit report. It won’t affect your score, as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.
=== Types of Credit Use Tips ===
– Apply for and open new credit accounts only as needed. Don’t open accounts just to have a better credit mix – it probably won’t raise your score.
– Have credit cards – but manage them responsibly. In general, having credit cards and installment loans (and paying timely payments) will raise your score. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.
– Closing an account doesn’t make it go away. A closed account will still show up on your credit report, and may be considered by the score.
