What would you do?

[Anonymous]

Trying to rebuild credit.  Between me and spouse, I had credit score hovering around 620 and spouse around 600 last December when I checked.  We've been trying to rebuild since then - would really like to get a house.  Goal is upper 600's by December.

We have 4 credit cards between us both - 2 each.  I have a 500 CL and a 300 CL, and spouse has 2 300 CL's.  This is our only debt currently.  We have nothing financed, we have no loans, no mortgage.  We just have utility bills, cable, cell phone, and car insurance.  We DO have a car, but as it was bought at buyhere/payhere, I don't think it gets reported to credit?  It is paid on time every month regardless, and we only owe $1100 on it, can probably pay it off in October if I try. 

The credit cards are nearly maxed.  I have realized after reading these forums that I really need to get the balances down on them for them to be helping us, so I'll be focusing on that before I focus on paying that car off.  I should be able to get them all down decently in September - I just paid $300 between them all yesterday and plan to do so again every 2 weeks at payday.  So that is my priority, and then the car.  The car will be paid off by December at the very latest.

I think my big question is that - I know we need (ideally) to have varied lines of credit.  Currently, we have only the CC's.  Would it be smart to try to trade the car in once it is paid off to open a car loan?   Could probably come up with more money on the side to assist with down payment.  My only "real" fear about this is getting into a loan and then having it hinder our chances at buying a house later.  We'd pay it off as soon as we could, but regardless, paid in full would probably be a few years at the very least, and we'd like to take advantage of the low housing market before things start going up again.

My other big question is that we had a bankrupcty in 2007 and we foolishly opted to keep our cars (which we couldn't afford and quickly fell behind on because we had to move, etc. after the bankruptcy - money went to moving costs instead of payments, and just stupid stuff like that).  One car was repo'd in Nov. 2007.  Not too worried about that one as it is so old... the other car was never repo'd, but was reported as a charge off (I believe late in 2008 or early 2009).  We still owe $4600 on the car, but the motor had blown and now it just sits.  Would it be a good idea to write the lender and offer payment in full if they remove the charge-off?  This would probably help our credit greatly... but as it is 2 years old now (and will be even older by the time we are ready to seriously look into buying a house), not sure if it is worth it when its $4600 we could put towards a down payment.  Also not sure if it is worth it because the car is more or less junk now. 

BTW, this credit history worries me slightly on our chances at getting approved for anything, but I'm kind of hoping that if we can get our rating high enough and have decent downpayments for everything, it won't be too much of an issue.  Our worst offenses (the cars and bankruptcy) are several years old, but they ARE pretty bad offenses.  I'll be happy when they're off our reports completely, but... I don't want to wait that long to buy a house.  The amount we currently pay in rent is already equal to a mortgage, and it goes up by $30/mo. every year.

What would you do in regards to whether or not to try to get an auto loan, and whether or not to negotiate paying to remove the charge off?  We'd like to buy a house in early 2013, but it would be absolutely WONDERFUL if we could get approved sometime in 2012 instead.

TIA

[Booner72]

Hi - I think you will get the scores you need to qualify, easily, by paying your revolving debt down per myficoforum guidelines (all to zero except one w/ small balance).  For both of you - each do that (leave one).  I just got 5 more points today for one of my cc's reporting a zero.  And that was on top of the inquiry from Tuesday.

The car's outstanding debt worries me (the blown up one) because it's an outstanding debt and you could get a judgment.  The UW won't want to give you the money if they think you stand to get sued.

I was preapproved and flew through automated underwriting with a 2006 BK and a 2010 judgment.  8 collections to boot.  But everything, in my case, was paid to zero.  I also have strong compensating factors like low DTI and steady employment (same field 13 years).  You also have low DTI as you mentioned that is your only debt.

You could always get your scores up, then go into a loan officer and see what they say about that outstanding unpaid car loan.

Good Luck!!!  If I can get approved with my FILTHY DIRTY credit history, anyone can.

[Anonymous]

Thank you for that advice.  We'll definitely have to talk to somebody when the time comes, then.  We have no assets (as we are renting, own nothing - even our current car is a 2002 and not really worth much) so I don't think anyone will waste their resources suing us just yet...  But what do I know!  We need to discuss things with somebody anyway just because employment is through a small company and checks/check-stubs are not computer generated (another worry of mine, but there must be some way for people to get mortgages, not EVERYONE has computer generated checks... if anything, tax returns and bank records can show it... but I don't know.)

The dead car is a complicated issue.  A friend wanted it, and had taken over payments in 2007.  Because of that, we chose to keep the car when we filed bankruptcy... but then he stopped making payments.  We took the car back.  I called to see if we could possibly refinance and get back on track in late 08 (or early 09), only to be told that the cosigner was going through bankruptcy and nothing could be done on the car until that was done, so I'd have to call back another time.  I finally called again several months later.... they worked out a deal where I'd pay $900 and then monthly payments for a year and it would be paid off.  But I was not able to come up with the $900 at that time (was on unemployment) and the deal never even got started.

And then I never heard another word about it, only saw it was a charge-off when I checked credit reports last December.

It does give me hope to be on this forum, though.  I am surprised at how many people are in similar situations, and how many scores are around or even lower than ours.  I was feeling like we were pretty horrible people for a while, there. 

[Shogun]

If you're horrible people then I guess I'm a horrible person as is most others on this site.  Dwell not on the past but push towards the future.  When the time comes, get with your loan officer.  If they are worth anything they will help you get to where you need to be.  Good luck and hope to see you house hunting soon!