Best way to raise credit score in 6 months???

Question

Ok, my husband and I was d/c out of bankruptcy in Jan 07, we have only 1 credit card each that we just got and paid our first payment(we paid more than the minimum). We just got our credit scores from Experian and both scores are about 550. We don't want to get too much credit and over extend ourselves. We have a free&clear car, an apt, and I have a couple of student loans in deferment. So, we want a house in Fall of 2008, how do we get our score up in six months??? I'd like to see our score up to 650? Is that too much in a 6 mos period???

Answer 1

First, it is a myth that you need to carry a balance - and thus pay finance charges - to improve your score at the fastest rate. 35% of your score is for payment history. You can score max FICO points by making a small, NECESSARY purchase once a month on each card and paying the card off in full every month, always on time. Post-bankruptcy, you want to show a mortgage lender that you don't need credit for anything except a mortgage loan. Change your lifestyles so that you don't need to carry balances. Look at your TransUnion credit report. It reports up to 48 consecutive months of activity, month-by-month, in a little box. Your goal is to produce a string of 48 consecutive boxes having OK in them, on every account, no finance charges. That will be a beautiful sight to a mortgage lender.

30% of your score is credit utilization: how much of your credit limit is used up by your balance? You need to keep your balance below 30% of your credit limit, or you will hurt your FICO score. For example, if you have an $800 credit limit, you must not have a balance higher than $240, which is 30% of $800.

I've seen FICO scores in the low 700s two years after a BK discharge. If you're willing to be patient and practice good behavior, such a score can be yours. The reward for a higher score is a better (lower) interest rate. FYI, 550 is clearly sub-prime, 650 is below average, and average is 673 - 720, depending on the survey. So, FICO 650 might be too much to ask for in a year, but not in two years.

If your credit cards are secured, you can just pay the start-up fees the first month. After 6 consecutive ontime payments-in-full for 6 consecutive months, ask to have your card converted to unsecured, have your security deposit returned with interest, and have your annual fee waived. If the company refuses, try again at 9 months and 12 months. The company may convert you to unsecured automatically.

Call your student loan company to negotiate getting your student loans out of deferment. Deferment of loans is a red flag on your credit report, and it affects your credit score. As you've learned, government-backed student loans can't be discharged in BK. So you have an opportunity here to show a potential mortgage lender that you can handle installment debt responsibly. In many cases, after 9 to 12 months of your consecutive ontime monthly payments on the student loans, if you ask, the student loan company will remove all negative information from your credit reports concerning your student loan trade lines. Your credit reports will look as though the student loan payments have been on time, and up goes your FICO score. So your potential mortgage lender sees a clean record. Get the details from your student loan company. They have hired people to pleasantly help you to win. Again, changing your lifestyle to make all these payments on time is the key.

In the meantime, visit www.hud.gov, find a first-time home buyer's class in your area, and complete the course. Keep the certificate of completion if there is one, and be willing to show it to a mortgage lender. Continue to learn as much as you can about credit, so long as it doesn't interfere with your earning more income to pay off your cc's and student loans.

For the sake of your marriage, make sure you and your husband go out on a date once a week. Bring a homemade meal and find something that doesn't cost money. Money is a huge source of strife in a relationship, and you two need some together time to take a break from your finances.

Please vote: Did this help?

Answer 2

There are several ways in which to raise your credit score after bankruptcy. I suggest that you do what I did, and purchase this book; Credit after Bankruptcy by Stephen Snyder. I bought the book from Barnes & Noble bookstore, but you'll be able to purchase it from just about any bookstore. Once I purchased the book, the author sent me an invitation to a FREE seminar in which he explains some of the things in his seminar in more detail, plus you could bring a friend with you, which is what I did. It was well worth the purcahse of the book. The book is also christian based, which I found as a plus. I hope that this information helps you.

Credit After Bankruptcy by Stephen Snyder

Answer 3

The best way to raise your credit score is to pay off all your debt, on-time or early. The longer you do that for, the better your credit will be, and the lower your interest payments on the house. You may even want to hold off a little longer on the house. As bad as it will be to delay the dream of homeownership, it will be even worse if you get bad loan terms and are caught in a sea of debt once again.

Answer 4

1. Always pay on time or ahead of time.
2. maintain low balances on credit cards
3. keep your total potential debt to earnings load low - If you have a card with a $15000 credit line, you may ask them to reduce it to something more realistic, like $5000.
4. I was told by an underwriter that having just two cards, a major credit card (VISA, MC) and a consumer card (Sears, best buy, etc...) is the best mix for revolving credit.
5. You should have a recent history of both installment or term (Car or house loans) and revolving credit.

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Answer 5

I have to agree with everything VT posted.

Answer 6

Why did you declare bankruptcy? The rest of us have to pay our bills.