How can I fix my bad credit?
Question: I screwed up my credit by charging for things that I couldn’t afford. >I had to see a credit counseling service so that I would be able to >pay back all my creditors with a payment plan. I should be debt free >in about 3 years. I’m 25 years old and would like to be able to buy a >house in 5 years. With my credit rating in the dumps I would like to >know if qualifying for a mortgage in 5 years is realistic? What steps >should I take to able to qualify for a mortgage and to repair my >credit, if this is at all possible? Srewing up my credit is the >biggest mistake I’ve made so far. I would do anything to be able to >qualify for a mortgage in the future. >Thank you.
Answer: If you are aggressively working towards paying off your debt, this will probably count for a lot. I’m no expert, but I was qualified for a mortgage this summer and closed on a house August 31 of this year. While my credit is quite good, it is not perfect. There were a few things I was asked to explain. I was able to provide explanations for everything the bank considered questionable. I qualified for the mortage in less than 4 weeks!
I think that the banks and mortgage companies really want to lend you money. When they ask you to explain something to them, it is based on the principle of CYA. They just need to be sure to collect paperwork to document that they checked you out thoroughly before giving you the loan. That way, if you default, they won’t be in trouble the way they would if they hadn’t checked you out carefully.
You don’t say how long ago you visited credit counselors. Was it just recently? A year ago? Two years ago? It is my understanding that bad credit expires off your record after 7 years. If you started getting things under control 2 years ago, then you will find that in 5 years, you’ll have a clean record. Even if you just started getting things under control, they will certainly be impressed by the fact that you will (at that time) have busily spent the last 5 years paying debt and cleaning up your act. It is not hopeless. You might also want to look into those standard steps which are always recommended for cleaning up credit. Get a copy of your credit report; protest any inaccuracies and get them removed. Then pay off that debt as fast as you can, squirrel away as much as possible, and be very, very good for the next five years.
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