2: Bad Credit-- Fixing the Problem

Defining the Problem

Before we get you into your own home, first we have to ask, why you are having credit problems? Poor credit is nothing to be ashamed of. It is far more common than you may realize. Often it may not even be your fault, like Gerald and Lisa.

They invested five years and all they money they saved to start a small sign company. Then one summer someone broke into their business office and stole all the computers and expensive sign-making equipment. Unfortunately they did not have any insurance to cover what was stolen, so they had to takeout loans to replace the items so they could stay in business. It took them years to recover financially from that, leaving them with bad credit.

On the other hand, like Paul, some people make poor credit decisions. After Paul got his first card, shortly after graduating from college, he suddenly became flooded with offers for more credit, which he promptly took up. He wanted to show everyone that he was a success at his new career as a sales manager, so he filled up all his credit cards. Then he began the juggling game of “robbing Peter to pay Paul,” which only got him deeper in debt. He took out a consolidation loan to pay off all the cards and put the debts in one big payment, but the temptation of all the empty cards was too much for him and he filled them all back up again. He finally had to declare bankruptcy because he was so deep in debt it was beyond what he could ever pay off.

So, take a good look at what is going on in your life. Why do you have credit problems? Are you in debt because of circumstances beyond your control or is it a chronic situation? Are you still getting deeper into debt or are you fixing the problem? There is no point in getting a home of your own if you will just end up losing it.

Solving the Problem

The first step in getting a home is fixing any money problems you may have.

• Get a credit report on yourself and check out what is on it. (To getone go to www.free creditreport.com).

• If your credit needs repair, start work on it now.

• Do not get into any new debt.

• Live within your means. Make a budget and live by it.

• Cut up (or lock up) the credit cards, if they are a problem for you

• Start saving money. If you have poor credit, it is much easier tobuy a home with a down payment, than without.

There Are Many Sources of Help Available

For help clearing up credit and getting debt under control, see Consumer Credit Counseling Service at http://www.cccsintl.org. They provide budget counseling, educational programs, debt management assistance and housing counseling. There are also many local branches of this nonprofit organization. There may be one where you live.

Beware of some “for profit” organizations that will help you consolidate debts. Often they are very costly. Why go to them when you can get free reliable help from a respected non-profit organization like Consumer Credit Counseling Service?

Some other places to go online for more credit advice and help:

Warning—Watch Out For Scams!

If you are trying to get a real estate loan, consolidation loan or fix your credit, beware of advance-fee loan scams. They prey on people who needmoney and credit by guaranteeing you will get a loan or credit, but you mustpay before you apply.

According to the FTC (United States Federal Trade Commission):
“...if someone guarantees or suggests that there is a strong chance they can get or arrange a loan or other form of credit for you, it's against the law to ask you to pay- or accept payment - for their service until you get your loan or credit.

Here are some points to keep in mind before you respond to ads that promise easy credit, regardless of your credit history:

• Legitimate lenders never "guarantee" or say that you are likely to get a loan or a credit card before you apply, especially if you have bad credit, no credit, or a bankruptcy.

• If you apply for a real estate loan, it is accepted and common practice for lenders to request payment for a credit report or appraisal. However,legitimate lenders never ask you to pay for processing your application.

• Never give your credit card account number, bank account information, or Social Security Number over the telephone or Internet unless you are familiar with the company and know why the information is necessary.

• If you don't have the offer in hand or confirmed in writing and you are asked to pay, don't do it. It's fraud and it's against the law.”

For more information see The Truth About Advance-Fee Loan Scams on the FTC website at: http://www.ftc.gov/bcp/conline/pubs/tmarkg/loans.htm.

Important Information for Real Estate Investors:

Important Information for Real Estate Investors:
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