Posted on: 11th Sep, 2009 08:41 am
I'm looking to buy a home within a year, but have so many credit problems to clear up that I'm not really sure if I'll ever be able to.
I lost my job six years ago after earning just enough to remain current on the bills I had at the time (I had been there for seven years by that point, starting with a college internship). This meant that I had no ability to save an emergency cushion, which definitely hurt me; I was unable to secure another full-time job for nearly ten months, and the unemployment benefits I earned were just enough to feed and clothe myself and my daughter. I was eventually evicted from my apartment because of my inability to pay rent, and each of my credit accounts went into collections. Needless to say, my credit score plummeted.
It has taken me five years with another company to reach approximately 70% of my former income, so I haven't exactly been able to take meaningful steps toward recovery. After five years of "couch-surfing," having roommates, and finally renting an apartment from a slumlord (because that's all I could get with my credit rating; my ex-husband has our daughter for now because it was so horrible), my mother extended me the opportunity to come "home" and take care of all my bad debt (there really isn't MUCH debt, but it's all bad). Here's what I'm looking at:
Two judgments -- one for the amount owed to my former leasing company (eviction) and one for a huge medical bill (which, ironically, came from my own employer);
About five smallish credit card accounts with balances totaling $2000 (that's the total for all accounts);
A cable and phone bill from when I lost my apartment;
A student loan (my wages are already being garnished for this, but I'm finishing the loan rehabilitation program and the negative rating will be removed from my report next month, as I understand it).
Some of these accounts were sold more than once, apparently, because I have several entries with a zero balance that I can't explain otherwise. I'm also actively making payments toward satisfying the medical bill judgment and two of the credit card accounts.
Anyway.
I understand that it's best to get the highest balances paid off first, and that's what I intend to do. I'm basically stockpiling my cash and calling each creditor as I have the amount to pay the bill in full and having them report this to the credit bureaus. I am on target to have everything paid off by February, and I will have absolutely no bad debt left. I'm just wondering if paying off all my debt will cause my credit score go up enough in a year's time to qualify me even for an FHA. Is this possible, or is the timeline I'm looking at much, much longer than this? I'm not looking for a shortcut or an easy fix, but my mother has the right to know how long I will be setting up residence in her spare bedroom.
Thanks in advance!
I lost my job six years ago after earning just enough to remain current on the bills I had at the time (I had been there for seven years by that point, starting with a college internship). This meant that I had no ability to save an emergency cushion, which definitely hurt me; I was unable to secure another full-time job for nearly ten months, and the unemployment benefits I earned were just enough to feed and clothe myself and my daughter. I was eventually evicted from my apartment because of my inability to pay rent, and each of my credit accounts went into collections. Needless to say, my credit score plummeted.
It has taken me five years with another company to reach approximately 70% of my former income, so I haven't exactly been able to take meaningful steps toward recovery. After five years of "couch-surfing," having roommates, and finally renting an apartment from a slumlord (because that's all I could get with my credit rating; my ex-husband has our daughter for now because it was so horrible), my mother extended me the opportunity to come "home" and take care of all my bad debt (there really isn't MUCH debt, but it's all bad). Here's what I'm looking at:
Two judgments -- one for the amount owed to my former leasing company (eviction) and one for a huge medical bill (which, ironically, came from my own employer);
About five smallish credit card accounts with balances totaling $2000 (that's the total for all accounts);
A cable and phone bill from when I lost my apartment;
A student loan (my wages are already being garnished for this, but I'm finishing the loan rehabilitation program and the negative rating will be removed from my report next month, as I understand it).
Some of these accounts were sold more than once, apparently, because I have several entries with a zero balance that I can't explain otherwise. I'm also actively making payments toward satisfying the medical bill judgment and two of the credit card accounts.
Anyway.
I understand that it's best to get the highest balances paid off first, and that's what I intend to do. I'm basically stockpiling my cash and calling each creditor as I have the amount to pay the bill in full and having them report this to the credit bureaus. I am on target to have everything paid off by February, and I will have absolutely no bad debt left. I'm just wondering if paying off all my debt will cause my credit score go up enough in a year's time to qualify me even for an FHA. Is this possible, or is the timeline I'm looking at much, much longer than this? I'm not looking for a shortcut or an easy fix, but my mother has the right to know how long I will be setting up residence in her spare bedroom.
Thanks in advance!
At this point in time I think you need to work on things you cna take care immediyely and grdually
So first thign is work on improving your credit by paying your debt and any bills or loan on time
Save some money for security.
If you still have money save money for down payment. That may not be the first step you want to take. This you cna do once you get your old debt under control
If possibel consolidate your loans dn see refince them for lower rate
So first thign is work on improving your credit by paying your debt and any bills or loan on time
Save some money for security.
If you still have money save money for down payment. That may not be the first step you want to take. This you cna do once you get your old debt under control
If possibel consolidate your loans dn see refince them for lower rate
welcome geust ,,
i think u need to improve ur credit score first after that u will be able apply home loan and also work hard and save money for ur home also.
i think u need to improve ur credit score first after that u will be able apply home loan and also work hard and save money for ur home also.
forget that last thing.
i suggest precisely the opposite concerning who to pay first. i think it is encouraging to you to pay the smallest bills first, moving up the scale - this will give you a sense of satisfaction to see one gone, then another and so on. you'll find that you can generally negotiate a reduced amount with the larger creditors of course, and that may move you in that direction first.
the main thing is that you need to be intentional and you need some encouragement along the way. it's difficult to see little progress, and you could be discouraged, especially with all the issues you've already been handling.
saving some money is an excellent idea, because you want something in reserve. now you didn't give us any indication of your score, but i'd surmise that it is probably in the 500s. given that, if you can make sufficient progress in that year you've mentioned (the earlier the better), then you'll see increase in your scores that much sooner.
don't be discouraged when you discover that the scores haven't leaped as you might expect them to (and some people will mislead you into thinking that it's an overnight process. i trust you know it's not). you didn't get into a mess overnight and you won't get out overnight either.
i'm glad to see your student loan situation will turn around for the better shortly. that's going to be a definite benefit and will help you get started with improving scores.
last, please make every effort not to fall back on anything that you may have at current (student loan, or anything else). one 30-day late on a current account will undo a great deal of what you accomplish by paying off collections, so please be careful.
i wish you well in your endeavors - feel free to update us, or to ask "what next" or any other questions you'll come up with.
i suggest precisely the opposite concerning who to pay first. i think it is encouraging to you to pay the smallest bills first, moving up the scale - this will give you a sense of satisfaction to see one gone, then another and so on. you'll find that you can generally negotiate a reduced amount with the larger creditors of course, and that may move you in that direction first.
the main thing is that you need to be intentional and you need some encouragement along the way. it's difficult to see little progress, and you could be discouraged, especially with all the issues you've already been handling.
saving some money is an excellent idea, because you want something in reserve. now you didn't give us any indication of your score, but i'd surmise that it is probably in the 500s. given that, if you can make sufficient progress in that year you've mentioned (the earlier the better), then you'll see increase in your scores that much sooner.
don't be discouraged when you discover that the scores haven't leaped as you might expect them to (and some people will mislead you into thinking that it's an overnight process. i trust you know it's not). you didn't get into a mess overnight and you won't get out overnight either.
i'm glad to see your student loan situation will turn around for the better shortly. that's going to be a definite benefit and will help you get started with improving scores.
last, please make every effort not to fall back on anything that you may have at current (student loan, or anything else). one 30-day late on a current account will undo a great deal of what you accomplish by paying off collections, so please be careful.
i wish you well in your endeavors - feel free to update us, or to ask "what next" or any other questions you'll come up with.
Thank you so much for your replies! I decided to go ahead and sign up for membership, because I'm sure I'll be coming back for advice. :)
George -- I've read on a great number of these forums (here and elsewhere) that getting a secured credit card might be advisable for someone looking to reestablish good payment history. Is this something you would also advise, or would the impact be negligible?
George -- I've read on a great number of these forums (here and elsewhere) that getting a secured credit card might be advisable for someone looking to reestablish good payment history. Is this something you would also advise, or would the impact be negligible?
dl, a secured credit card is one of the very best ways someone brand new to credit can begin to establish a track record, so i readily recommend it to people. if you are in the process of re-establishing creditworthiness, then it can also be a valuable tool to use. in that case, it depends on just how much other favorable accounts you might have, and how poor the poor credit accounts are.
okay...now read this very carefully: there are companies out there that will blatantly rip you off (legally) when issuing such a card. i find that first premier is a major contributor to this game. they'll give you a limit, for example, of $300 and then zap you with fees to the extent of over $200, which then immediately 1) puts you in debt and 2) limits your ability to use the account. and when i say $200, i'm being conservative in stating the amount.
for secured cards, you will find some credit unions that offer them (at very reasonable rates) and you will also find that bank of america offers them - also at a reasonable rate. i don't know of other banks that are in the market with decent deals, but i urge caution on all those who surf the internet to find such deals. they simply aren't deals.
okay...now read this very carefully: there are companies out there that will blatantly rip you off (legally) when issuing such a card. i find that first premier is a major contributor to this game. they'll give you a limit, for example, of $300 and then zap you with fees to the extent of over $200, which then immediately 1) puts you in debt and 2) limits your ability to use the account. and when i say $200, i'm being conservative in stating the amount.
for secured cards, you will find some credit unions that offer them (at very reasonable rates) and you will also find that bank of america offers them - also at a reasonable rate. i don't know of other banks that are in the market with decent deals, but i urge caution on all those who surf the internet to find such deals. they simply aren't deals.
I was actually going to go with Bank of America because I did the research and found out about the First Premier scam. My hospital has a credit union, so I'll check into that, as well.
Thanks again!
Thanks again!
it's a pleasure always.
So a secured credit card allows the CC company to come after a specific asset of yours if you default on payments?
gmackerley, I know what you mean about getting the smaller debts paid off first to get a sense of achievement, but shouldn't the focus really be in paying down whichever debt has the highest % interest rate?
gmackerley, I know what you mean about getting the smaller debts paid off first to get a sense of achievement, but shouldn't the focus really be in paying down whichever debt has the highest % interest rate?
propertyinfo
Secure credit card is one, where you put soem money in the bank and the bank will give you a credit card for the same amount. If you default on the credit card the bank will take the money you have put as security deposit
Gettign smaller cards paid off will help you build some confidence and also lower some of yoru debt quickly. If you go after the big one then it wiltake time to clear them
Secure credit card is one, where you put soem money in the bank and the bank will give you a credit card for the same amount. If you default on the credit card the bank will take the money you have put as security deposit
Gettign smaller cards paid off will help you build some confidence and also lower some of yoru debt quickly. If you go after the big one then it wiltake time to clear them
so it's basically a prepaid card?
last, first: no, wretched, it is not a prepaid card. the bank is holding security in the form of a pledged bank account in the event of default.
to propertyinfo: i recommended paying the small ones first because we are discussing collection accounts, not open accounts that are accruing 30% interest, etc. i understand what you're saying, and i agree that if you were simply paying back current credit card debt, that's the way to do it.
as for the secured credit card, the specific asset is the bank account that gives the credit card company a willingness to issue the card to begin with.
i hope each of these is now a bit clearer.
to propertyinfo: i recommended paying the small ones first because we are discussing collection accounts, not open accounts that are accruing 30% interest, etc. i understand what you're saying, and i agree that if you were simply paying back current credit card debt, that's the way to do it.
as for the secured credit card, the specific asset is the bank account that gives the credit card company a willingness to issue the card to begin with.
i hope each of these is now a bit clearer.
Thats absoutley correct, once the debt go in tocolelction agency, they are accoumulating more debt at a ver high interest rate
So pay off as much as you can and as soon as possible
So pay off as much as you can and as soon as possible