Good and bad news on rebuilding credit post-bk

[LostOne0069]

Well, we talked to some mortgage brokers and were told to forget it... not going to get a 0 down loan to buy a house one week after discharge... which doesn't suprise us.. but we hoped.

Ya know.... the funny thing here is that if they looked at it logically, they'd be stumbling all over themselves to loan me money to buy a house... I mean, I have ZERO debt (never reaffirmed the car payment) and I make over $90k a year... and I can't declare chapter 7 again for 10 years... and if I ever did a chapter 13, they'd be a priority debtor as a secured debt. AND, if they looked at my credit history, they'd see well over a decade of fantastic credit without even any late payments... and only see the problems that happened a year ago with our move and such... and we never, EVER were late on a house payment.

oh well, I guess we'll just wait a year or two... I really would like to get back into home ownership as fast as I can though.

Now the good news... I had received a month or so ago a "pre-approved" capital one card offer... no annual fee, 14.9% apr etc. etc. I figured "SURE we're pre-approved"... but, since we're not going to be able to buy a house for a year or two I figured it was worth a shot, so I applied... and I'll be damned.... they approved it.

So, now we'll have a Visa card to be able to rent cars and hotel rooms when I go on business trips, we'll be able to use it for all of our monthly expenses, groceries, gas etc.... rather than our debit card... which I hate using due to security concerns.

Of course we'll pay it off in full every month ... although we may pay just the minimum payment once in a while... maybe twice a year... then pay it in full the next month... just to make sure that a payment history shows up on our credit report.

I figure that we won't need to apply for any other credit for a while... we may buy a car in 6 months or so (we only have the one right now) but really I think that our credit is well on it's way to recovery.

[emoney]

As you relate your problem I wonder why would you want to own a house with no emergency fund. Houses take TLC.
My advice save until you have 20% for a downpayment and then get a 15 year fixed rate loan. Then there will be no MIP or high interest costs. You then pay your own taxes and choose the best year to pay them for the highest tax deductions. By that time credit scores will be up and you can call the shots and not the other way around.
Then you own the house and it does not own you.
I hope this helps.
emoney

[BassBoy]

Ya know.... the funny thing here is that if they looked at it logically, they'd be stumbling all over themselves to loan me money to buy a house... I mean, I have ZERO debt (never reaffirmed the car payment) and I make over $90k a year... and I can't declare chapter 7 again for 10 years... and if I ever did a chapter 13, they'd be a priority debtor as a secured debt. AND, if they looked at my credit history, they'd see well over a decade of fantastic credit without even any late payments... and only see the problems that happened a year ago with our move and such... and we never, EVER were late on a house payment.

You and I think alike on this matter. I feel the same as you. Unfortunately, this is not how the world works. Aaahhhh, if only we could change the world.....LOL!

Patience will be a virtue for you. I agree with emoney about having an emergency fund, saving up the 20% downpayment and taking the shortest term loan that is feasible. You'll be in much better shape then, rather than if you do it now and be maxed out.

Hang in there LostOne0069. You're time will come.

[LostOne0069]

Well, considering we were only planning on buying a home that we could afford... and by "afford" I mean easily make the payment, plus be able to contribute the max to my 401k PLUS put 500/month away in savings/other investments PLUS have 250/month available just for "extra" home upgrades... not maintenance, upgrades. Considering all this... we still would prefer to be in a home, even if we wouldn't get the best rate, etc.

I'm not saying that your advice is no good... I'm just saying that different things are important to different people. We happen to really enjoy owning a house. I'm an amature wooodworker and enjoy working on homes... building cabinets, laying tile, that kind of thing... you can't do that when you rent. You also get the tax benefits of owning a home... Not to mention a rental house doesn't appreciate in value.... and yes I know that the market has been going down recently... but bubble to burst... as long as you avoid the most volitle markets there is sustained growth... it may only be a few percent per year, but that still cuts into the value of a rental.

Anyway, everyone has to make their own choices, but buying a home would be cheaper for me in the long run... much because I need a large home due to my family size... large rental homes are rare... and expensive.... I'll be paying several hundred dollars a month more to rent our new home than it would cost me to buy that same house.

[saucey]

Well, we talked to some mortgage brokers and were told to forget it... not going to get a 0 down loan to buy a house one week after discharge... which doesn't suprise us.. but we hoped.

Ya know.... the funny thing here is that if they looked at it logically, they'd be stumbling all over themselves to loan me money to buy a house... I mean, I have ZERO debt (never reaffirmed the car payment) and I make over $90k a year... and I can't declare chapter 7 again for 10 years... and if I ever did a chapter 13, they'd be a priority debtor as a secured debt. AND, if they looked at my credit history, they'd see well over a decade of fantastic credit without even any late payments... and only see the problems that happened a year ago with our move and such... and we never, EVER were late on a house payment.

oh well, I guess we'll just wait a year or two... I really would like to get back into home ownership as fast as I can though.

Now the good news... I had received a month or so ago a "pre-approved" capital one card offer... no annual fee, 14.9% apr etc. etc. I figured "SURE we're pre-approved"... but, since we're not going to be able to buy a house for a year or two I figured it was worth a shot, so I applied... and I'll be damned.... they approved it.

So, now we'll have a Visa card to be able to rent cars and hotel rooms when I go on business trips, we'll be able to use it for all of our monthly expenses, groceries, gas etc.... rather than our debit card... which I hate using due to security concerns.

Of course we'll pay it off in full every month ... although we may pay just the minimum payment once in a while... maybe twice a year... then pay it in full the next month... just to make sure that a payment history shows up on our credit report.

I figure that we won't need to apply for any other credit for a while... we may buy a car in 6 months or so (we only have the one right now) but really I think that our credit is well on it's way to recovery.

Thats great! I also got the same deal from capital one and I was discharged in December. I was also very surprised. The limit is for 750.00. I also got the Hooters card with a 1500.00 limit. Im also on my way!(I hope!)

[SinkingFast]

We are polar opposites on the house buying spectrum from you, Lost. We currently rent, and I don't see that changing for the forseeable future.

So far, every house we've owned, we've HAD to sell for a job related move. Only 1 time did we have a safety net of a company buy-out. The other times we got lucky with timing. Except, of course, the last time. Which helped land us here.

Not that I don't love you guys, but I would rather we all not have gone thru our various and sundry ordeals to gather at this meeting place.

Our family is at a point of flux. Kids are all in college. Mom is in renal failure. I can easily see that in a short period of time, 3-4 years or so, our "house needs" will change drastically.

Our lease comes due here the end of May. We've already chatted about moving vs staying. We've pretty well decided to stay put for another year. The Condo is comfortable for us. The neighborhood is quiet. And what's better than walking out the back door and fishing in your own private, stocked pond??!!

[Spartan]

Hmmm.. I smell a business opportunity here. Lending to discharged BK filers!! I am gonna make a killing!! Move over Ditech!

Note to self: I wonder if I should pitch this idea to Donald Trump. Afterall, he knows what it is like to have filed BK.

[onlineuse]

After owning a nice new home (recently built) and still having tons of repair issues to the tune or 2-3k a year beyond normally stuff, I am gladly renting with my spouse and child now for less than our first mortgage on the other place. We're in a much bigger, nicer home but we also lucked out in finding a couple we knew well that had moved and couldn't sell to rent to us. We'll likely turn around and buy in 18 months or so.

I wanted to give you all an update here on FICO scores and how quickly they can rebound.

During the CH7 process my scores were a woeful 490-520 across the board. Everything but a few student loans were gone, IIB everything, cars, home etc. A day after discharge the scores were approximately 520-530 with several accounts showing balances and past dues. Most notably Bank of America was the worst reporting 180 days past due in December and a past due balance on an account included in the bankruptcy. About at the discharge point I applied for and was given a line of credit with Orchard for a meager $300. I have since opened a store card with a $1500 and am going to leave a meager $75 balance on there this month in hopes that it hits the reports faster that way. So far I show no new tradelines on my reports but with some seriously heavy handed tactics the scores are now about 600 on two bureaus and about 558 on the other according to MyFico. That's about a 50 point rise on average just 3 weeks post CH7.

Really nothing has been "removed", I've just cleaned up all but one report to reflect no balances, IIB etc. In a few cases creditors delete the payment information entirely and show in terms, closed IIB. I have a lot of IQ's on the TU and EX thanks to CA's before the filing. Overall I'm pleased with the progress and hope to be about 620-640 by summer 2007. My spouse is still clearing up some of the Bank of America authorized user accounts on her report but is also around 600 with her Orchard already appearing on two CRAs.

I'm finding it's a long road to clear up reports but the effort it takes is worth it. I have someone I'm close to that filed and was discharged earlier this year and is now averaging 675, has a car lease from Honda directly, and is having no trouble slowly rebuilding credit. Long and short of it is I really believe a methodical approach can yield scores approaching 660-680 within 12-15 months of discharge and at that point you will get favorable rates from a mortgage lender. You won't get the 100% finance deals you got pre-bk (I think they are about to be a thing of the past for everyone) but you'll get a rate only slightly worse than the average schmoo.

Keep at it, and keep building wisely

By the way Crapital One - they always pull all three CRA's which isn't good if you are trying to keep your IQ's down. Best to apply for cards that pull one of the three etc. We found out the hard way too