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Poor Credit and Purchasing a Home

If I have poor credit but have a good income what should I do to purchase a home?

Hi, I currently was able to increase my income to $120,000 a year. I am renting and with all my debt, utilities, car payments, credit card debt is about $3,000 a month, plus my wife's separate credit card debt it is about $1,000 a month.I spend $4,000 a month. I was going to consolidate with I think Care One, they would lock me in I think at 9% for 5 years, but know I have a good income now and I wanted to do it on my own because I want to buy a home, Fha loan possible for 500,000. Does consolidation hurt getting a mortgage. Second my wifes credit is fair mine is poor. I work she is a student, Can she cosign with me or is it better to have my father inlaw cosign with me because he has about the same income as me and rents and his current credit score is poor too. Is it better to reduce my debt income ratio by using my father inlaw as a cosigner, or use my wife with better credit. It is more important to get a bigger mortgage because my inlaws are elderly and eventulally would move in with us help.

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Let me begin by explaining what it means to enroll in a credit counseling program, also known as debt consolidation, and what this means for your credit. Credit counseling, or signing up for a debt management plan, is a very common form of debt consolidation. There are many companies offering credit counseling, which is essentially a way to make one payment directly to the credit counseling agency, which then distributes that payment to your creditors. Most times, a credit counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors.

It is important to understand that in a credit counseling program, you are still repaying 100% of your debts -- but with lower monthly payments. On average, most credit counseling programs take around five years. While most credit counseling programs do not impact your FICO score, being enrolled in a credit counseling debt management plan does show up on your credit report, and, unfortunately, many lenders look at enrollment in credit counseling akin to filing for Chapter 13 Bankruptcy -- or using a third party to re-organize your debts.

There is another form of consolidating debt that is called debt settlement, or debt negotiation. You should understand how this program works as well if you are considering a debt consolidation program.

Debt Settlement

Debt settlement, also called debt negotiation, is a form of online debt consolidation that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years. It is important to keep in mind, however, that during the life of your debt settlement program, you are not paying your creditors. This means that a debt settlement solution of online debt consolidation will negatively impact your credit rating. Your credit rating will not be good, at a minimum, for the term of your debt settlement program. However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Chapter 7 Bankruptcy. The trade-off here is a negative credit rating versus saving money.

Credit Score and Mortgages

If you have a poor credit score, regardless of your income, it will be very difficult to qualify for a mortgage loan. Having your father in-law co-sign with poor credit is not going to do much to help you qualify for a mortgage, regardless of his income. If you have your wife co-sign for a mortgage with you it will not benefit you because the bank will take the credit score of the person who earns more income, in this case it would be you.

Qualifying for a mortgage to purchase a home involves having good credit, a good debt-to-income ratio, reserves, a down payment, and other criteria. Your situation may require you to focus on improving your credit before you take other steps to purchase a home. A good way to start is by paying off your outstanding debt.

How to Improve Your Credit Rating

Here are four steps to help improve your credit score:

1. Pay off all debts and keep revolving lines below 25% utilization. Do not "max out" any loans or cards.

2. Diversify you credit portfolio. If, for example, you have only a Visa, MasterCard, or Discover card, get a department store credit card or card from a gasoline retailer. Make your payments every month. Leave a small balance every once in a while to show that you are able to handle debt on more than one account.

3. Keep your oldest credit account active. Remember point number three "Length of positive credit history" discussed above.

4. Pull your credit report and contest any inaccurate information so that it can be corrected by the credit bureaus. Go to the Bills.com debt self-help center for sample dispute letters. The credit bureaus must follow the rules set forth by Congress in the Fair Credit Reporting Act (FCRA).

If you would like to learn more about credit reports, credit scoring, and what it means to you, I encourage you to explore the wealth of material offered by the Bills.com credit information page.

Bills.com makes it easy for you to apply for traditional forms of debt relief.

I hope this information helps you Find. Learn & Save.

Best,

Bill

www.bills.com/

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