[sudofdisk]

In the interest of brevity I will provide the following facts:

My credit score is bad. 510 ish
I have about 22,000 in debt, the biggest chunks are 8k in student loans, and one large unsecured loan that I ignored for far too long.
I have many other dings on my credit, no active lines of credit.
I have a good job now with a fairly decent income.

My goals are as follows:

1. Buy a home ASAP
2. Bring up my credit score
3. Repay all debt

I won't bore you with the details/excuses but this is the position I am in today.

I am tired of renting, I feel I would be serving myself best by getting into a house ASAP as even with some debt over my head I am putting some money away rather than buying someone else their house for them.

I have one large unsecured loan that is in collection with a judgement against me. The debt is 9K, they want $500 a month or will entertain an offer for lump sum settlement. The original debt was about 4k (I know, I know)

Now my questions:

1. I have heard step one is get a secure credit card. Right? Any recommedations about one that has the most reasonable fees I can find?

2. I recently got a call saying that because I have made 9 consecutive payments on my student loan it is going out of default and back to the original lender. The person I spoke to told me this might help my credit score, is this true? How much?

3. The "lump sum payment" offer on the unsecure debt, the lady I spoke with was evasive on what kind of offer they were looking for. How much should I offer? I have a couple options. If I get on a payment plan I can have it paid off in about a year or I can tuck away $500 a month, letting the interest add up, and offer them a lump sum which might end up being cheaper in the long run. What is my best move here?

4. I have been told getting a car loan is a good move too, I get a bonus in June and have heard that putting 50% down and having a low payment is a good idea. Any input from the pros is welcome on this point.

5. What am I missing? I will be a first time homebuyer, but with poor credit and nothing down it will be awhile before anyone will take a chance on me, what else can I do to pump that score up as quickly as possible?


Thanks

[jlynn]

Originally Posted by sudofdisk

I
4. I have been told getting a car loan is a good move too, I get a bonus in June and have heard that putting 50% down and having a low payment is a good idea. Any input from the pros is welcome on this point.

5. What am I missing? I will be a first time homebuyer, but with poor credit and nothing down it will be awhile before anyone will take a chance on me, what else can I do to pump that score up as quickly as possible?


Thanks

You have alot going on. I'll give my take on a few things.

"Car loan" - getting an INSTALLMENT loan will benefit your FICO over time, as it likes to see a mix of credit types. However, with a judgment hanging over your head, I wouldn't be buying anything that might can be attached to satisfy a judgment (depending on your state's laws). IMHO you are better off trying to become established with a credit union, and obtaining a small installment loan, and paying it back on time.

You will likely not be able to get a home loan until that judgment is satisfied - but on the flip side, once you start paying things off, it will be a feeding frenzy, and collectors will likely come out of the woodwork to get a piece of the pie.

Your goals - To buy a home, a credit score needs to be increased. So, I would change that to 1. Depending your debts - some will probably have to be paid before you can buy a home. If you have brought the student loan out of default and it is back with the lender that is a good thing. Now whether it will bring your score up, who knows - it all depends on how it is and how it was reporting.

Reestablishing credit is a two-step approach you are right on that. You need to get your reports as clean as possible, and reporting accurately, and yes, you do need to reestablish credit. A secured card is one way. I'm not so sure that it is necessarily first.

Have you pulled your credit reports directly from the credit reporting agencies? Do you know what your FICO scores are now?

[sudofdisk]

Thank you for your reply . I have a couple follow up questions:

Originally Posted by jlynn

"Car loan" - getting an INSTALLMENT loan will benefit your FICO over time, as it likes to see a mix of credit types.

...

IMHO you are better off trying to become established with a credit union, and obtaining a small installment loan, and paying it back on time.

This idea intrigues me, if I could get even a small loan I could put it to paying off some debt and kill 2 birds with one stone, what would it take to "become established" with a credit union? Do you really think they would give me a loan?

Have you pulled your credit reports directly from the credit reporting agencies? Do you know what your FICO scores are now?

I have opened an account with truecredit.com, I don't know my FICO score but I know my "credit" score... what's the difference?

[Hedwig]

First of all, you should get your reports directly from the three bureaus. What you get from truecredit is called a "trimerge" report. The problem is that it puts the data from all three bureaus into one report with a common format, but the different bureaus actually use different formats. Therefore, you have a better view of what each bureau is reporting by looking at the report from that bureau.

The score you get from truecredit is what we call a FAKO score. It's there version of the score, but not the real FICO score. You get that at myfico.com. The FAKO score can vary quite a bit from your real FICO score.

Something like truecredit is good for monitoring changes in your report, but not really accurate for your score.

As for the credit union, each one has different standards. The best thing is to go and talk to them. Perhaps take a copy of your credit report along. Tell them you don't want to have the inquiry unless you decide to do it, but you'd like them to look at your copy and see if they think you could qualify.

I also agree with jlynn that fixing your credit and getting your scores up is most important. And you won't get a mortgage until you get rid of the judgment.

There is nothing wrong with renting. When you are buying a house, you are not necessarily "putting something away." Values can go down, causing a loss in your net worth. Houses take a lot of maintenance and repair. When you rent, someone else takes care of that. If you don't have the money, you'll be borrowing more and paying more than you could earn if you invested the money.

You may well come out ahead by renting and putting any money left over after your expenses and payments on bills into some good investments. They will earn you money and won't cost you for repairs. When you get the debt paid down, you'll have the added advantage of having an emergency fund.

Find out what a mortgage would cost you. Add on taxes, insurance, utilities, and at least several hundred a month for maintenance and upkeep. If that is more than you are paying in rent, put the additional away into a savings account. That way you'll see if you can really afford a house. If you can, you have the savings to get you started. If you see that you can't afford it right now, you're still saving money and you won't be facing a foreclosure.

[drivel]

[quote=sudofdisk;66372]
My goals are as follows:

1. Buy a home ASAP
2. Bring up my credit score
3. Repay all debt



I would start by renumbering these goals.