Purchasing After a Short Sale? First Step: Improve Your Credit Score
Lynnette Phillips
July 14, 2008
With the nationīs rampant foreclosure rate being called the worst since the Great Depression and Californiaīs foreclosure ranking the second highest in the country according to RealtyTrac.com, I am asked many questions regarding the trials of foreclosure. Not surprisingly many of these questions are on the subject of short sales.
Q: " how long after a short sale before I can get financing?"
A: The short answer: 18-24 months.
Why?
Since a short sale is usually negotiated because of payment default or foreclosure proceedings an important issue to be addressed is your credit score (FICO). A short sale definitely harms your personal credit far less than any other foreclosure solution such as a Deed in Lieu but your home loan payments were at the very least behind even if the lender had not yet issued a Notice of Default.
Interest rates are FICO driven meaning that the higher your credit score the lower the interest rate you receive on financing of a home and the lower the payments will be.
Ideally youīll want to raise your credit score to at least 620 and 680 or higher is better.
Tips to Help You Get There
Get a free copy of your credit report at annualcreditreport.com and scrutinize it for any errors or discrepancies. Contact the reporting creditor to find out how to correct any misinformation.
Make all payments, even your rent, cell phone, utilities, etc., on time. Lenders typically donīt want to see any late payments in the past 12-24 months so you have time to plan. Major credit lines such as those for your car loan are vital but when rebuilding credit (or in the case of no credit history) simple everyday payments can come into play.
Pay off any collection accounts. The account balances can often be negotiated down by contacting the creditor and a lower amount accepted as total payment on the account. A charged off account is also considered an open account so be sure that if you have any charge offs negotiate a settlement!
Lenders considering new loans wonīt make a loan when there are open collection accounts.
Keep the balance of any credit card paid down. Credit cards can become voracious monsters very easily. Use caution here. You want to keep the balance on each credit card to 25-30% of the approved credit line. In other words, if your credit line is $5,000 your balance shouldnīt be more than $1,250-$1,500. This takes in the point of your borrowing power.
A couple of donīts: 1) Donīt close unused credit card accounts as a quick solution to raise your credit score—there is no quick fix, 2) Donīt apply for new accounts you donīt need simply to increase you borrowing power.
Should you find yourself struggling you can contact the non-profit Consumer Credit Counseling Services (National Foundation for Credit Counseling) at 1-800-388-2227 or on the web at www.debtadvice.org
© 2008 by Lynnette Phillips
Q: " how long after a short sale before I can get financing?"
A: The short answer: 18-24 months.
Why?
Since a short sale is usually negotiated because of payment default or foreclosure proceedings an important issue to be addressed is your credit score (FICO). A short sale definitely harms your personal credit far less than any other foreclosure solution such as a Deed in Lieu but your home loan payments were at the very least behind even if the lender had not yet issued a Notice of Default.
Interest rates are FICO driven meaning that the higher your credit score the lower the interest rate you receive on financing of a home and the lower the payments will be.
Ideally youīll want to raise your credit score to at least 620 and 680 or higher is better.
Tips to Help You Get There
Get a free copy of your credit report at annualcreditreport.com and scrutinize it for any errors or discrepancies. Contact the reporting creditor to find out how to correct any misinformation.
Make all payments, even your rent, cell phone, utilities, etc., on time. Lenders typically donīt want to see any late payments in the past 12-24 months so you have time to plan. Major credit lines such as those for your car loan are vital but when rebuilding credit (or in the case of no credit history) simple everyday payments can come into play.
Pay off any collection accounts. The account balances can often be negotiated down by contacting the creditor and a lower amount accepted as total payment on the account. A charged off account is also considered an open account so be sure that if you have any charge offs negotiate a settlement!
Lenders considering new loans wonīt make a loan when there are open collection accounts.
Keep the balance of any credit card paid down. Credit cards can become voracious monsters very easily. Use caution here. You want to keep the balance on each credit card to 25-30% of the approved credit line. In other words, if your credit line is $5,000 your balance shouldnīt be more than $1,250-$1,500. This takes in the point of your borrowing power.
A couple of donīts: 1) Donīt close unused credit card accounts as a quick solution to raise your credit score—there is no quick fix, 2) Donīt apply for new accounts you donīt need simply to increase you borrowing power.
Should you find yourself struggling you can contact the non-profit Consumer Credit Counseling Services (National Foundation for Credit Counseling) at 1-800-388-2227 or on the web at www.debtadvice.org
© 2008 by Lynnette Phillips
Print
Email
_327-8600.jpg)
