Buying a house with low credit scores?

Deal Score0

For the past year I have paid old debts and concentrated on improving my credit score and saving for down payment. I have worked hard but my credit is not showing any improvement. It went from a 576 to a 610 (trans-union) from a 512 to a 580 (equifax) from a 512 to a 512 (experian). Just checked my Fico and it says my score is 512.. What is going on? I have paid everything on time and paid everything that was old. Will I be able to get a loan for a mortgage with these crappy number? Please help :0(.. I need to know what to do.. It has been a year and nothing has changed..and I would like to get a house before November.
I have $ 18,000 down payment and have $ 8,000 for closing costs. Old debts and not looking for the $ 8,000 as an incentive to buy but as a great opportunity to put that money back on my savings account.
Have not had a late payment since 2008 (for all open accounts), but have ONE collection that was paid in February of 2009 (Medical) it was over $ 5,000.00 and paid in full. and a Gap credit card that was sent to collections in 2001, paid in full in 2007 but Gap never reported until March 2009 after I kept insisting, but they have marked as charged off when it was paid in full. I don’t know what to do now.. I have copies of everything.

  1. Reply
    mortgage underwriter
    May 17, 2011 at 3:53 am

    The company I work for has a min of 580. We take the middle of your three stores, not your FICO score.

    I had crappy credit at one time also, mid 500’s. I too paid off everything, didn’t apply for credit, kept the credit cards I had open. Part of your number is current balance in relationship with the high balance. It took me a year to get the score up there. Another part of the number is previous derogatory credit, how long has it been since a late payment, the longer the better.

    You may have better luck with FHA.

  2. Reply
    Steve D
    May 17, 2011 at 4:00 am

    Sorry, but with those scores, you have another year to 18 months of on-time payments to get where you need to be to buy a house.

    Credit is still tight and banks aren’t loosening up on sub-primes. FHA, which tends not to use scores, looks back 2 years on your payment history before they will consider guaranteeing the loan.

    In all honesty, if you need the $ 8,000 tax credit to buy a house, you probably shouldn’t be buying one now anyway – the $ 8,000 should be considered as an incentive, not a deal maker/breaker. And don’t forget, you still need the down payment, closing costs, and 2 months of living expenses in the bank before anyone will consider you for a mortgage.

  3. Reply
    May 17, 2011 at 4:18 am

    You need to do more than simply look at your credit files. Examine each entry to verify that it is still valid and is being properly reported. Not all creditors bother to take the time to report that you have now paid off old issues.

    Seek advice from a credit counselor or mortgage broker in this regard. If there are invalid or incorrect entries, your scores will improve when those issues are corrected.

  4. Reply
    May 17, 2011 at 4:31 am

    You are almost there. You need to bring your TU score up 10 points and your EQ up by 40 to qualify for most lenders. I still have 4 wholesale lenders that will do FHA, VA and USDA loans for people with scores under 600 but in all honesty the rates are higher and it would make more sense to review your credit and see what changes can ne made to increase your scores.

    Edit: How many open accounts do you have on your credit that are in good standing?

  5. Reply
    May 17, 2011 at 5:04 am

    It is easy to wreck your credit score but difficult, and time consuming, to repair it. Even though you are paying everything on time now, your previous issues weigh you down for years. You will not be able to buy a house this year, and probably not next year as well.

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