I put a future client the other day. The reason I call him a prospective client is that, like many people, he has less than ideal credit. Like many people, it wasn’t his fault.
You see, this young man served his county completing two tours in Iraq. He came home with his young wife, only to discover that she was ill and sadly passed away.
He took care of her and stayed by her side until the end. Her work suffered, and she was on the list when the layoffs occurred. Medical bills piled up, house payments piled up, and she lost her home.
He couldn’t find a place to rent or buy due to his bad credit and the fact that he didn’t have a job, so he bought a truck and lived out of it. She did it from her library and her office. She worked, went to school and got a degree, but she still had bad credit.
That’s when we put. He knows a friend of mine, and my friend thought I could help him. I bought him dinner. He wouldn’t let me pay for it, until I made him understand that it was a business meeting and not a charity one.
I started by telling him to write a letter, explaining why he has bad credit, and send it to the credit bureau. I told him to have the credit bureau put the letter on his credit report. Then I told him to request a free annual credit report.
I suggested that you review the report very carefully and dispute anything that didn’t seem right, like debts you don’t acknowledge. You must dispute these debts by writing a dispute letter. I told him that this report would not show a credit score, but it would show the information used to calculate his credit scores, from the three credit bureaus, TransUnion, Equifax and Experian.
I told you that a Fair Isaac Corporation (FICO) score ranges from 300 to 850. Then I wanted you to know that a credit score becomes questionable when it falls below 650. A credit score is divided into the following areas:
- Payment history 35%
- Outstanding debt 30%
- Length of your credit history 15%
- Types of credit 10%
- Employment history and identity
- Inquiry made on credit within fourteen days
- How long did it take to pay off debts in the past?
- Late payments
- Bankruptcies, Foreclosures and Bonds
Here are some things I told you to do to start repairing your credit:
- Pay rent and other bills in advance
- Do not take out additional credit cards
- Pay two months rent as a security deposit, instead of one month
- get a roommate
- Pay with direct deposit
- Get recommendations from employers and other businesses you’ve bought from
- Use a credit repair company to validate debt, prevent providers from reporting bad debt and questionable accounts. Some credit repair companies are Lexingtonlaw.com, Skyblue, creditrepair.com, and Ovation
- Find a good mortgage broker
Lastly, it usually takes about two years to do the things listed above before your credit is repaired. When someone who does not have ideal credit is ready to buy a home, she should try to purchase the home through a company, such as American Rent To Own. This way they could lease and then buy the house. American Rent To Own allows part of the rent to be used to purchase the home.