Real Estate Investing

While buyers today are finding they have to actually need to come up with money for down payments costs rather than writing an earnest money check for as little as $100 or $200, the credit score remains king.  Without at least a 620, you won’t be buying that house.

Now there may be independently owned banks that will allow for a lower score, but they are few and far between.

What impacts your score?

• Have you paid your bills on time?  How many 30 days or later pings are there? Bills will include everything from phone to credit card to electric to student loans.
• How much open credit is available to you?  If you have a credit card that has a $0 balance, but a limit of $5000, this could be negative because you have the POTENTIAL to impact your debt to income ratio.
• What is your current outstanding debt?
• What’s your credit history?  Has it only been a month or two since you’ve had a credit card?
• How many inquiries have there been in the last 12 months?  If there have been a lot of people looking into the score, that’s not good.

There are many other factors to be considered … click here for more details.  If you’re financial house isn’t in order, you need to get on it.  Work with creditors to make payment plans (and then make the payments!).  If your income is less than your expenses, find that extra job if you can.  Avoid compulsive spending.  Write menus to buy groceries.  Don’t buy things without planning ahead to buy them.

Be vigilant.

A mortgage lender wrote a post about his experience with a caller named Darren, who was losing his home to foreclosure.  Unfortunately Darren’s experience is no longer unique, but Jason’s words at the end of his post were inspirational,

And Darren, try to relax.  This isn’t the end, it resembles more of the beginning.

Truer words were never spoken.  While Darren will face an uphill struggle to defeat his financial demons, he can use this experience to rebuild the character of his credit scores in the coming years.  Any reader can go online and search “repair your credit score” to find hundreds of pages that will tell you how.  One writer, Richard Lakin, tells how to improve your credit rating in six months. 

• Lower Your Debt
• Correct Mistakes
• Make Contact with your Creditors
• Do Not Use a Quick Fix Service 

His tips are right on the money, but don’t expect your credit score to vault into the 700’s if it’s already in the 500’s.  Rebuilding your credit does take some time.

For example, when a collection shows up on your credit report and you pay it off, it doesn’t automatically fall off the report.  That ding on your credit score can stay for up to 7 years.  You should also strive to keep your debt balances low because whether they’re on a low-interest credit card or a higher interest, the debt is still the debt. 

Finally, who here has gone to a department store and been tempted by “If you open an account with us today, we’ll give you 10 percent off your purchase?”  I urge you to not let the emotions of saving $20 propel you into opening yet another credit card.  The more credit you have available, the more potential debt lenders see.

Time heals all wounds.  If you’ve had a foreclosure, bankruptcy, short-sale, or other credit problems, remember this is the beginning of your healing process.  Don’t be afraid to dig in for the long haul of repairing your financial situation.  But do take the long view by making the efforts to improve your future living situation.

Photo from here.