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Need advice

Question: Hi…..my hubby and I have decided to save money by all means necessary. Here is our situation: It is just the two of us, we have no credit cards, we have approximately $5,000 debt in small loans(2 computer loans, another generic small loan), two car payments, we rent, we have a debt with the IRS that we are paying in monthly voluntary installments, we have a student loan that we are paying in monthly installments, we have all the other usual payments(utlities and such). We want to buy a house…..the bank won’t loan us money because of poor credit in the past. We don’t qualify for FHA or any of those types of loans……

This is what we are going to do: put ourselves on a tight budget(budget in spending/expense money, postage, etc), put all extra money in a savings account that will be used to make large payments on the $5000 debt. We see ourselves being able to pay off the computer loans by the end of the summer, the other small loan as rapidly as we can, and then work towards paying a large amount on both car payments by the end of the year.

My question…..advice that I need: what things can we do to save even more money? We are going to attack our food budget(we eat out too much), our utilities, our phone bill, and find ways to reduce the “little” things. I have several “tightwad” books that offer lots of great advice, we are very committed to this. We have made tremendous mistakes financially in the early years of our marriage(we have been married 7 1/2 years) that we are having to pay for now.

If we are able to pay off our small loans, push forward in paying off our IRS and College loan debts, and our car payments, will this make a difference to the bank??? Will it make it easier to overcome our past bad credit?? The banks that turned us down wouldn’t give us any advice on what we should do to correct the past problems…..so, our thinking is that if we keep all our payments current, pay off as much debt as we can, as quickly as we can, this might help.

We have lived in this area for nearly two years, and have had late payments on utilities. We have not gotten behind terribly in our loan payments. Our late payments are not due to lack of money, but instead of lack of money planning/budgeting. We look at our debts and our money coming in, and on paper there is a lot of surplus.

So…….anybody want to offer any advice?? I have a lot of web sites that I have visited that deal with daily savings ideas, etc. I was just wondering if there was anything that I had missed. —

Answer: Well, skimping is one thing, but you should also try to establish a good credit record. Banks want to know that you can borrow and pay back money. As to the bad credit record, these _records_ last 5 years. During this time make sure you never pay late (this is what goes on the credit record) and that you save up enough for the down payment. You might want to get a copy of your credit record from Equifax or TRW just to see what it looks like. Credit companies report the delay in payment something like this

Past history 1993 days 30 60 90 0ver 90 Amount $25

For the credit record, it is more important to keep all these overdue bins to zero than it is to have zero debt. There are, of course, limits on total indebtedness that the banks use to determine how much they will loan. The total debt figures in the amount the bank will loan you. Weather or not you get a loan at all is influenced by the credit record itself, which is more a record of timeliness of payment.

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Filed under: Bad Credit Loan