Bad credit repair customer Brett emailed me asking a common question about improving credit & buying a new home. Of no surprise, buying a home requires understanding of mortgage underwriting.
Brett wants to buy a new home. In this respect, Brett is no different from 90% of the people contacting me about improving their credit.
In fact, Brett’s general question about “improving credit” also is a frequently asked question I receive.
To “fix your credit” and buy a house, you don’t have to become a credit repair expert. You simply need to create a strategic game plan (and take action on your plan) so you get the score you need without growing old or gray.
Believe me when I say I’m not smiling when I warn you to take action.
More people (for whatever reason) do not take action…they do not create a strategic plan…and (worse) they never get what they want.
Click Read More below now for Brett’s common question and my response. Keep in mind, I am not an attorney and I do not dispense legal advice. I speak from many years of experience restoring my own credit after serious ID Theft & many years of working with people wanting to buy a home.
A+ CREDIT NOT REQUIRED FOR KEYS TO NEW HOME
Credit-Success subscriber asks the most frequently asked (common and generic) question I receive – every day at least 5 times. 
Brett’s question:
Hello Mike I have been receiving your emails and thanks for the knowledge, but I have a question I have been trying to increase my credit score for over a year and it goes up a few points then back down.I need to finance my home and my score will not let me any advice please would be appreciated.
Regards,
Brett W.
To Brett’s email, I responded as you see below.
Important: What makes my suggestions unique is that I KNOW real estate and credit improvement. I have been involved in real estate for many years. Twice as long, I’ve been involved in reporting credit abuses and sharing credit-improvement strategies that worked for me and many others…no gimmicks…nothing illegal…no magic pills or easy buttons. Sorry, but there really is work involved and no “get-good-credit-overnight” scheme here.
I know what mortgage underwriters need to see before approving you for the money to buy the house you like. You don’t need A+ credit to buy a house. With interest rates below 5%, who needs a 720 o higher to get the “best” rate?
With a 640 middle score, you can get approved for an FHA mortgage, requiring 3 1/2% down payment (+ mortgage insurance fee). You can’t have any judgments, or foreclosures or bankruptcies within a certain period of time.
You need to have a job (at least 1-year in same industry) and the necessary documented income to afford the house you want to buy. That is, most responsible mortgage bankers use the 28/36% formula for determining affordability.
Who wants to be chained to a house payment, preventing you from having any fun outside your house because you bought too much house and now can’t afford anything but your house payment?
Mike’s Response:
Hi Brett,
Your credit scores improve in 2 ways:
- Bad credit removed or aged (notice I didn’t say “re-aged”).
- Good “seasoned” credit.
You need BOTH.
On your reports, you need to identity all bad credit. Categorize by least to most serious and by most recent. Beware any “old” debt made to look recent by debt collectors who re-age alleged debt to LOOK more recent than it is.
Also on your reports, look to see what good credit you have. To finance a home you need minimum 3 seasoned credit accounts. That is, you need at least 3 1-year-old tradelines (aka “credit accounts such as credit card, car, furniture, etc).
Strategically, look at all bad credit & determine which accounts are inaccurate, outdated and/or unverifiable. The newer the bad credit account reporting, the more it’s hurting your scores.
Before you ever dispute a bad credit account, know the potential consequences: a debt collector could come after you for payment.
On all 3 reports, look for discrepancies in amount, date, account number – any discrepancy.
Look for 100% inaccurately reported account information. Dispute with each CRA inaccurately reporting.
By the way, in newsletter 2 or 3, I detail the dispute process and strategically how to minimize any risk of getting sued.
On my DVD, I give you 2 powerful credit-building strategies. Secret #2 turns out to be more powerful than secret #1 (AU) for reasons I explain in detail on my DVD and report 8 SECRETS TO A 680 CREDIT SCORE!
In newsletter #1, I hand you another 5 or 6 (and I feature in detail 1 extra powerful credit score-boosting secret).
Now, keep in mind that Authorized User is a powerful score-boosting secret. It works really well…the stronger the card account for the benefactor, the more positive impact to your scores.
However, if you want to buy a house, not all mortgage bankers consider AU accounts during underwriting. That’s why I refer to AU accounts as a “gateway” credit building secret. An AU will improve your scores, allowing you to get approved for your own credit at which time you season your own account.
Still, seasoning your own account(s) takes time.
Alternatively, you can get added as a joint account holder on a trusted friend or family member’s car loan, furniture loan or even credit card account. To do this, your income must handle the monthly payment (though you are not paying the bill). As you know, mortgage lending uses ratios.
That is, typically 28/36 ratio meaning 28% of your gross monthly income can go toward a house payment – PITI. No more than 36% can include house payment + any other monthly credit obligations including that joint account on which you’re named even if you are not responsible for payment.
What do you think of this, Brett?
Okay, what questions, comments and/or suggestions do you have? PLEASE scroll down to share your thoughts. I want to hear from you. CLICK 8 SECRETS TO A 680 CREDIT SCORE! to grab my DVD and to give yourself a strategic advantage when it comes to adding good credit, minimizing getting sued by debt collectors & how to dispute inaccurate, unverifiable & outdated bad credit.
Bad credit repair motivates people who REALLY want something that improved credit demands. What I can admit to you with no hesitation is that ONLY people who really want to buy a house for instance are willing to commit to the challenge. Most people are “toe-touchers.” That is, they dip their big toe into credit repair, realize it’s too “involved” and they bail out. These people think they can throw money at a credit repair company or that magically their credit will improve on its own (actually, your credit will improve on its own if you have years to wait).
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