Your next big financial move should be to buy a
house if you don’t already have one. Your home is the one major asset that generally appreciates or gains value over
the years rather than depreciates or loses value over the years.
Once your credit reports are updated, and you’ve
got a credit card that’s being reported to your credit bureaus (double check to make sure!), then you can expect to
be eligible for a decent interest rate on a home mortgage within two years of your bankruptcy discharge date. You
can buy a home earlier than that, but it will usually cost you more in the long run, unless you’ve taken major steps
to change your use of and attitude toward your finances.
In general, if you’re repaying your debts through
a Chapter 13 bankruptcy, your trustee won’t let you buy a home until you’ve finished your repayment plan. But there
are exceptions. If you currently have a home your trustee may allow you to sell your current home, pay some of the
equity toward your debts and use the remaining equity as the down payment on a new home, which may or may not be
included in your repayment plan. Once you’re ready to buy a home, there are two steps for you to take.
1. Find out exactly what your current FICO
scores are. This three digit number is widely advertised as the one thing that determines whether you are
creditworthy or not. Creditors would like you to believe that “you are your FICO score.” The truth is, there are
ways to buy a home regardless of your FICO score (including rent-to-own and owner-held mortgages). However, it will
be easier to buy any house if you have taken certain steps to improve your FICO score first. There are many factors
that can raise or lower your FICO score, from month to month. Potential mortgage lenders realize that each credit
bureau uses a different scoring method and each has a different scoring range. Your creditworthiness will depend on
the credit bureau that creditor uses. To level the playing field, some creditors add up your three scores, divide
the total by three and use the resulting average FICO score to determine your creditworthiness. Others simply select
the middle score as your FICO score.
In 2006, the three credit bureaus came together
to find a way to create a uniform scoring method that would be easily understood. The new VantageScore is the
result. Now your credit score is graded A-F. More than two-thirds of all consumers get a passing grade of C or
higher, under the VantageScore system. This should make things easier for consumers to get credit, even if you have
limited credit history. Your VantageScore number ranges from 501-990. A score of 600 or lower is an F. From 601-700
is a D. From 701-800 is a C. Anything above that is a B (801-900) or A (901-990). The national average VantageScore
is 736.
The good news is, since all three VantageScores
will be the same, you only need to order one copy! Experian has volunteered to provide this service to consumers.
For $6, you can order your report on-line or via mail. You can order online at
www.vantagescore.experian.com. I recommend mailing your request,
via certified mail, return receipt requested, using the following letter.......
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