Credit Troubles Q & A

Q: I am a 24-year-old, stay-at-home mom. In the past, I’ve had poor credit but have since paid off all bad debts. I am using my student loan as a source of credit to prove I can pay off my current debts. My husband, on the other hand, has perfect credit. He has never missed a payment and pays in full every month. How will my history affect us trying to buy a home in two years? — Christine

A. Despite your bad credit history, you are doing the right thing. If you keep up with your good payment record on your student loan, you and your husband will likely get a mortgage in two years.

Remember that lenders look at your most recent credit behavior. So if you have a perfect record for two years, they will look favorably at your application.

Use Your Home to Repair Credit

Q: My credit looks bad. Is it better for me to sell my home and use the equity to pay off bills or should I rent it out for a year (thus re-establishing my credit) and then sell it? Would it make a difference in buying my next home? — Wayne

A: Either way you will be paying off bills. Lenders are not as concerned about how much you owe as they are with how prompt or delinquent your payments are. Whether you sell or rent and re-establish a good credit history for a year, document your payments and apply for a loan a year from now.

Can’t Get Credit

Q: I have no credit. Do you think I could qualify for a mortgage? I do have a car loan but no one wants to give me credit. — Erica

A: If you have a car loan, you definitely have a credit history. This is good, because people without any credit history often have a harder time getting a mortgage than those with a so-so credit history.

That’s because lenders need a gauge to assess you. If you have a blank record, lenders don’t know if you are a credit risk or not.

Whether you can qualify for mortgage depends on your income, debts and liabilities, and the payment record of your car loan. Try talking to a loan officer about your plight.