I want to buy a house in Jan. My credit score is 581. What can I do to improve my score and loan qualify?

Question

I have no credit card debt, all my bills are on automatic pay from my checking account, and my car is paid for. Good income and I have saved 15% for the down payment.

Answer 1

get free credit assistance from http://www.ezcreditrepairsolutions.com

Answer 2

Here are the factors that impact your credit rating...Payment history, how long have you had credit, debt to income ratio (for example if you make $30K and your debt is $10K, your debt to income ratio is 33%, you generally want to keep this number under 30%), your debt in relation to your credit lines (are you maxed on your cards, or do you have a lot of available credit), the amount you have available to charge (it's not good to have a lot of credit, the banks view this as a potential to go on a spontaneous shopping spree and rack up a bunch of debt, so close all the account you're not using), in addtion, the number of inquries (don't apply for more credit). Unfortunately, 581 is a low score and it will take some time to improve it. Based on the information in your question, I would guess you had some payment history issues in the not so distant past. I would recommend getting a free copy of your credit report and make sure there's nothing on there that shouldn't be on there. Other than that, you're looking at holding off on getting the loan, or going for a high interest loan and refinancing when your credit is cleaned up.

Answer 3

That's a short time period to work with but something you mentioned intrigued me. You said you have no credit card debt. Do you have cards with a zero balance or have you never opened any credit card accounts?

I'm a Mortgage Specialist in PA. If you live in Pennsylvania, send me a message and I can work with you directly. Otherwise, visit my blog to learn more about the mortgage process: http://explaintome.blogspot.com

It can actually help you to have up to three credit card accounts open and active. Lenders check your credit to make sure that you have a habit of paying bills on time. If you have no credit cards, they have no proof you can pay on time. You've got your car loan, but that's only one thing. They reason that almost anyone can keep one thing on time.

You're best bet is to use these credit cards every one or two months to buy a candy bar or something rediculous. Pay the balance off in full before the due date. All we want to see is a monthly payment being made on time, no matter how small.

If you haven't already, go to www.annualcreditreport.com for a free report. This comes straight from the government so there's no "subscription" that you are getting duped into. Check it to see if there is something you missed that's giving you that low score.

As it is right now, a mortgage broker may be able to get you 100% financing with your 581. If you're not in PA, contact a local mortgage broker. Don't waste time with banks as they won't touch this high risk loan without a substantial down payment.

Important Disclaimer : Applying for new credit will always lower your score temporarily. You should consult a mortgage specialist before doing anything just in case. You'll be better off in the long run with this method but expect a quick dip in your score.

Answer 4

You may want to hold off buying right now and get your credit up and check your credit report which you can get all three bureau reports for free at www.annualcreditreport.com. Keep your credit card debt at zero and let your down payment accrude interest so you push it up to 20% so you can cut your notes down even more. The last thing you need is a high loan because of your low credit score. Don't allow the loan companies to review your credit because it will lower your score by several points. Just try and get your score and down payment up to 20-21% so you got at least close to half the money to put down on a house. Hope that helps.

Answer 5

A more exceptable credit score when financing a house is 700-750.
Ways to get your score up is paying alot on credit card accounts, repaying outstanding debts,paying on time & contacting old creditors if you have unpaid accounts that have been turned over to 3rd party collections.
Our credit haunts us for a long time if ignored.
You can check thru your state website in housing and can find out about Fannie Mae & Freddie Mac financing.
Good Luck,stay positive and keep the dream to be a home owner.

Answer 6

For the lender to be able to use a line of credit it has to be active for at least a year. If that doesn't work, then, if you're paying rent even if you're living at your parents' home, they can use them as a credit line. If you're a first time home buyer, there's a lot of incentives and products that they would be able to help you out with, and you might not even have to give the fifteen percent down since it will virtually make no dent in your monthly mortgage payment. If they see all of the history in your bank accounts and realize that you have enough "rainy day" funds available, that will most definitely be a plus.

Answer 7

if you don't have any credit cards debts and any other loans, so what happen to you in the past? your credit score is below minimum to qualify for conventional loan, but you can apply for FHA loan, because there is no min. credit score requirements.
your 15% down payment money will make a big difference even with your current credit score.
i don't know what to suggest to you in improving your credit score, because the faster and easier way is to reduce your debt little bit, but you don't have any and only thing you can do is to see mortgage broker, and ask them to rescore your credit score. maybe there is some info you can update.

Answer 8

if you have no bad debit then you score should be over 581. with a 581, you should look at your credit report because with that score you probably have some accounts in collections. you should think about paying the collections before you apply for the mortgage loan.

Answer 9

If i were you i would find a friend or relative that has good credit and have an account that you could piggyback off off. Your score would go up instantly cause it would give you a credit history as well as on time payments. Especially if they have accounts that they dont max out the cards.

GOOD LUCK7

Answer 10

My husband and I bought a house with his credit score at 590 and mine at 540! We did a balloon note with a fixed interest rate of 7.5% for five years, then after the five years we can refinance the remaining balance. We paid 20% down, plus the closing cost. In total we paid out of pocket $6000+ a little more. We bought a house for $83,000. We went through our local credit union; banks wouldn't work with us. Now the credit union has all of business, including our company's. And his credit score is 650 and mine is 640. Good Luck!

Answer 11

Reduce your debt to income ratio. Make more than the minimum payments on all outstanding debt. Close any accounts that are not in use. Refuse to sign up for more accounts. Restrict credit inquiries on your account. Never pay late.