Boosting Your Credit Score After BK

[FS09]

Let me preface this by saying very clearly, I have no intention of racking up ANY bad debt in the future. However, I do want to buy a decent house in 3 years or so. I am willing to borrow on a reasonable house, but not much else. I have learned my lesson, and will be paying the price for years. My wife and I recently "completed" a chapter 7 BK. We have been discharged and the case is fully closed! However, we are still living in "our" house until mid January. (1/6/10 sale date) Now that we are discharged and our case is fully close my credit score is 560. What do I need to do, and how long will it take to get it to a decent credit score. Again, I am in no hurry, just trying to get ready to buy a house in a few years. We walked away from a $530K mortgage that is now worth $350K, $120K in credit cards and $1,200 per month in auto loans/leases. We are looking at rentals that are 1/3 the cost of my former mortgage, have 2 vehicles we paid cash for (nothing to write home about, but reliable transportation!), and no CC's! Long story short, what do I need to do to get my 560 score to 700 plus and how long will it take? FWIW - I would ask my lawyer, but he is "hard to reach" now that my case is closed! No problem. He did a good job, but operates what I'll call a bankruptcy factory! His firm has doubled in size in less than 1 year! At least someone is making money! Any guidance would be greatly appreciated.

[FreshStart01]

FS09

I would go into the Rebuilding Credit and Mortgages After BK threads, there's some great suggestions and ideas there.

[DeadManCrawling]

FS,

In three or five years, I doubt the real estate market will recover. Wife is a Realtor, so we are in close touch with our local market, and keep an eye on other areas.

I see you are in CO. One of the least affected areas, generally speaking, with the exceptions of major metro areas and the ski towns. By that, I mean not affected as badly as here in FL or CA. Still bad, just not AS bad.

Honestly, if I were you, I would not worry about credit ratings. I would never buy another home unless you had at least 75% down. In that scenario, your credit won't matter much. In fact, I would swallow pride and buy it outright. If you can rent for 1/3, then you can probably save enough money in a few years to do this. It won't be the DREAM house McMansion, but it WILL be yours and will be paid for. There is a lot of value, and security, in that.

Probably you will have to go to outlying areas of metro areas, possibly even a county or two away, and make a commute if you work in the metro. Long term, I bet you would find it worth doing so. Especially when you consider the criminal interest paid on mortgages.

I only realized how horrible it was when we were struck by the BK lightning three years ago. In 10 years or so, I paid 500 THOUSAND in interest on a home we bought for 400k. Unreal. If I had known then . . . and so on.

Well, I DO know now, and am doing exactly as I advocate above.

Regardless, all people have different situations. Given what you stated, I would immediately work on getting secured cards in small amounts to get the credit going again. Any account that you can safely pay that is reported to the credit agencies is a good thing for boosting credit. Without a doubt make sure these are paid off monthly. The secured cards can be hard to stomach, and some, but not all, require more fees than they are worth. Essentially, they know they are holding your credit rating hostage, and that is the price they think you will pay. Figure out what you are willing to pay and use them only long enough to move on to cards with better terms.

Vehicle loans, if you need em, can get em, and can afford them take care of transportation and credit reporting at the same time. Ditto with other seecured loans that you actually NEED and are certain you can afford.

Afford. I guess that is what it all boils down to. Just be careful not to step back onto the American Dream treadmill and burn yourself back to this forum.

No disrespect meant by anything I posted above. I am very happy you are getting things worked out and hope you (and I) never have to go through this again.

best wishes,

-dmc

[FS09]

DMC - no disrespect taken! The real goal would be to put at least 50% or more down on a home. Possibly pay it all upfront if the economy gets back to anything close to decent in the next year or two! I can assure you that my wife and I will not get sucked back into the overspending, buu everything you want TODAY on credit lifestyle! Unfortunately we had to hit rock bottom before we really saw how stupid we were. I made a good income so we thought we deserved "fancy" cars and exotic vacations, and 3 HD TV's. All our friends had them, right? Now that we are over the embarrassing part, it's kinda fun to drive something cheaper, and only pay cash for what we need. We just want to gradually build our credit score, mostly for a house down the road, and partly because it will make me feel good having a respectable credit score even though I won't use it like I once did!