Dear Dave,

I would really like to be able to buy a house this winter or early spring? However, I don’t have a very good credit score. Five years ago I had a foreclosure and two years ago I changed careers to get out of the natural gas industry and several bills were late, including a couple car payments and one rent payment. Over the past year everything has been working out great, as my new career is starting to take off and I am getting firmly back on my feet. I am ready to own again!

Can you give me some advice on what to do to improve my credit score? I am really trying to clean up my act and want to have a chance at getting a decent loan.

I would appreciate your advice.

John - Grand Junction, CO

John,

Sounds like you are on your way back to financial stability and you are to be commended for what sounds like “proactive” moves to help get off the instability treadmill and move on to firmer, more predictable ground. When looking into your question, I consulted James Pulsipher, Regional Manager at Fidelity Mortgage here in Grand Junction. He has some simple, yet sound advice:

The good news with credit, is that time tends to heal all wounds, and you have had some time.

For the foreclosure itself--for conventional financing it must be 7 years old, but FHA will allow financing with a foreclosure after 3 years. FHA also allows financing with credit once you have had one year without late/derogatory payments.

The best bet is to take a look at your credit and see what needs to be done, but out of hand, the credit is not something that would prohibit you from buying a new home.

There are a few specific things you can do now, if you are not already doing them to help boost your credit score in fairly short order…six months or so.

1. Payoff remaining debt.
2. Use your credit cards less by charging less.
3. Don’t be late on any more payments.
4. Consolidate your debt at lower interest rates
5. BE PATIENT!

“Sounds like you are already in a position to purchase with an FHA loan, but likely a couple years away from conventional financing.”

These items can start to impact your credit score quickly and significantly and allow your credit score to climb. Sounds like you are already in a position to purchase with an FHA loan, but likely a couple years away from conventional financing. There are some wonderful FHA loan programs out there, with competitive interest rates that will allow you to purchase your new home this winter. I would also suggest partnering with a good lender to help you develop a plan and timeline for becoming a home owner again! Awesome job thus far and I do see home ownership in your near future!

Dave Kimbrough
The Kimbrough Team