Q. We want to purchase a home but fear that our poor credit will prevent us from getting financing. How can we repair our credit?
A. Initially, you need to obtain a copy of your credit report and contact your creditors. You will need to explain your current situation and offer to pay a percentage of your outstanding bill.
Often creditors will settle for 30-40 percent of the total bill. Once you have made your partial settlement payment, get them to issue you a signed settlement letter. Copies of these letters will need to be sent to all of the credit bureaus (Equifax, Trans Union, and Experian/TRW). In the eyes of a lender, this is a better method of rectifying your credit than setting up a payment plan though a consumer counseling service. By resolving your own credit problems using the partial payment approach, it demonstrates to lenders your ability to be a responsible credit user. In addition to avoiding the consumer counseling services, you should also avoid filing bankruptcy if at all possible. This act will stay on your credit for a period of 10 years. One of the only ways to redeem yourself in the eyes of a lender after filing bankruptcy is to get secured credit cards. These are prepaid credit accounts that allow you to demonstrate your ability to spend wisely.
When looking for a mortgage after credit problems, look to mortgage brokers. They are often able to offer you greater options than mainstream lenders. Just because you have credit issues, don’t expect that you will be stuck with higher interest rates. Some lenders can offer you great options. Once you have begun to repair your credit history, it is imperative that you make payments on time. Lenders who give you a second chance will not be a lenient with borrowers who have a history of credit problems. It becomes your responsibility to prove to the lenders that you are capable of controlling your credit future.
If you are thinking of selling or buying soon, and require competent and caring representation,
feel free to call me at 405-820-1740 or email me at: rhonda@rhondasrealestate.com.
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