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I have a 505 credit score right now and need to buy a house in a year.

I have a 505 credit score right now because of some old debts that unfortunately went into collection when my husband was laid off. It has been very difficult for me to get things paid off because of added fees, but I am slowly paying on them. I am hoping that I can raise my credit score to the minimum required for a mortgage because we are leasing my grandparent's house and we are hoping to purchase the house when our lease is up at the end of the year. We have now been renting the house for 2 years. My current debt to income ratio is 24/48 (calculated using my $800/month rent) and we will have about $20,000-$25,000 for a down payment on a $100,000 mortgage. I am just wondering if it seems possible for my credit score to be high enough by the end of the year, will the down payment help and what else I need to do to get this raised? I would appreciate any advice.

Thanks.

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February 27 2013 - Town of Bennington
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Profile picture for wetdawgs
It will be tough to go from a 505 FICO middle score to > 640 middle score in less than a year, but I suspect you could make a lot of progress.     The forums at myfico.com are excellent for helping you develop a strategy.

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February 27 2013

It will be important that you reestablish good credit to help offset the negative items you are working to resolve.    You might have a hard time getting approved for new credit accounts until you have paid back the delinquent one. 

In this scenario, secured credit cards can work very well, ideally you get 2 secured credit cards, likely with limits of 300 per account, use them to a maximum of $50-75 balance each month and then either pay off or pay the minimum monthly payment each month.

For the accounts you are attempting to resolve, it would be wise to see if the creditor will agree to a deletion of the account in exchange for payment.  Deletion will provide the best chance of score increase, as opposed to paid derogatory, or settled derogatory status update.

Lastly, your current rent payment has no bearing on your proposed debt to income ratio on a purchase.    Good luck on your improvement. 

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February 27 2013
 
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  • Posted by user22790113
  • In Mortgage
  • February 27 2013
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