I have a 505 credit score and would like to purchase a home within a year.

[caedy12]

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 ($10-$15k of this would be a gift of equity) 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 raise my credit score? I have also been at my current position for 9 consecutive years and we have a flawless rental history over the past 10 years (we could get letters of reference from all of them.) I am hoping that these will be considered positive factors when applying for the mortgage. We would be first-time home-buyers and so I also need to find out if it makes the most sense for us to apply for an FHA mortgage or another type of mortgage. I would appreciate any advice.

Thank you.

[basballguy]

without knowing the details of what makes your credit score so low, couldn't you take some of that cash available for a down payment and use it to pay off some of that old debt to repair your credit score?

realistically you'd have to be minimum of 640 for an easy FHA approval....620 for harder FHA approval....and 580 for miracle FHA approval. 

I'm not sure of any bank that will provide a loan even with 25% down with such a low score (based on what i've seen here).

[HoldingOntoHope]

You should probably jump over to the rebuilding your credit board and do some reading and post some information on your negative accounts over there. It is going to be a stretch of hard work to increase your score to mortgage levels within the year but it has been accomplished in that time by more than one poster starting from where you are. Best of luck to you and welcome to the Fico Forums. I can promise you if you follow the proper advice on these forums you will be in an amazing position in the future.

[justjunie928]

+1

[jkwheaton78]

I agree. I don't really know what your credit looks like but I will say I pulled my scores up from 575 to 710 in 6 months by following the advice of these forums. I did not have an extremely complicated file just a lot of stupid collections and a couple charge offs.

[tooleman694]

You could go conventional if you get to a 620.

[JM-AM]

You also if its available to you in your area can try NACA.

[caedy12]

To jkwheaton78- Thanks so much. This is very encouraging. I have the same type of credit report. Some collections and charge-offs. Can you tell me some of what you did to raise your score that much in only 6 months?

[jkwheaton78]

The collections I had were mostly medical.  About 10 of them I think and 2 other collections that were pretty old.  All the medical collections were bogus, insurance screw ups from when I had my daughter in 2010 and I was just dumb and never paid attention to my credit report.  I worked with my insurance company to get them fixed and then filed disputes with the CRAs (only TU and EQ, nothing was on EX) and they were not able to verify and they were all deleted.  

The other 2 collections I had I was able to do PFDs.  The most expensive one I think was only about $85 and they were due to fall off in like a year so I'm not sure if that's why it was so easy to get rid of them. 

I had 2 charge offs from 2008 both with 0 balances, I had paid quite a while ago.  1 is still there but somehow I got them to remove one by a massive amount of GW letters with promises that I wanted to do business with them in the future but I needed to be able to rebuild my credit score.  I'm not sure if that did it, or that they were just tired of hearing from me.  

Somehow, my one of my parents cards showed up on my reports, I was not an authorized user or anything, I think they just matched me by address and my dad's first initial is the same as mine and of course at the time last name was the same so I assume that's how.  But it was hurting me more than helping me because the utilization was so high.  So I had that corrected and removed. 

The only good credit I had was my car loan that was only a year old and a credit card that I've had for about 5 years.  No lates on either but my CC was almost maxed out.  I opened a secured card and paid my balance off and that boosted my score tremendously.  

Now every month I just made sure I use them both at least once and pay the balance down to $5 or $10 before it reports.  

I really think by getting all the collections off and paying my utilization down helped the most. 

It really was not that hard.  I had the collections removed within about 3 months.  I spent more in certified letters than I did on paying off collections.  

What kind of collections do you have on your report?  

[caedy12]

Unfortunately I do have collections from a couple of credit cards, and a cell phone company. Many of them are very old now (but not quite old enough to just drop off) and since I have no new credit, my credit score is very low. I did just also get a secured credit card and my plan is to do the same as you and use some of the balance and then pay down every month before it reports. I am hoping that doing that and paying off the collections will improve my score. I am going to look into some of the collections to see if the company will remove them from my report if I promise to pay the full balance. I have heard of some people also doing that. I would rather pay the full balances if I can rather than settling. I know that will look better to the banks. I know that I am asking for a lot to have my credit score go up so quickly, but any progress will make me feel better at least. I do actually check my credit report often, but I am now finally beginning to formulate a plan to pay off everything. Hopefully it will work out as I hope. Thanks again.