Sorry I did it but I had to BK7

Start small. You could bring a recent credit report to the credit desk of your credit union and point out that you've had an excellent history of over 24 months on-time payment with your car loan and two other loans through another institution.

Ask them if your rehabilitated credit history is enough to obtain an unsecured credit card through their institution. They may be willing to go with a very small line of unsecured credit, perhaps $500.

Then you use the card very, very carefully. Make a charge then pay the entire balance in full. Do this for six months and always, always, always pay the balance on the card in full *and* on time. Remember, it's not what you charge, you could charge one pair of socks every month for six months, it's a matter of paying the bill in full *and* on time.

If they are only willing to go with a secured card, start there, follow the same directions by making on-time payments in full. They'll soon upgrade to an unsecured card and you'll be on your way.

It'll happen for you.

 

I think you may be selling yourself a bit short with the credit union because they've already been willing to do business with you. And you've established an excellent credit history by repaying the two smaller loans, along with the prompt payment of your car loan over two years.

It's not your income, or your children, it's your credit history that's going to make the case for you and for 24 months you've turned it all around. You've rehabilitated your credit and two years is often deemed more than sufficient.

Go in with the idea that you're aiming for a small, unsecured card, I think they'll agree to it.

Keep saving your money, even if it's only $10 per week, and increase your savings at the credit union.

You really are on the way.

 

Online wouldn't be the way to go for you because you've got a vision to purchase a house.

Think about the big picture. Build a relationship with the credit union, they've shown that they think you're worth the risk and you've lived up to their expectations. You've been a good solid customer.

Know the banker, the credit union, because you won't just be one more nameless, faceless bunch of numbers, you'll be real person to them.

Save as much as you can, build your credit profile, and I am certain that you'll be able to purchase your house.

When you're ready for a mortgage, they'll be ready to talk very competitive terms, and you're the kind of customer that they'll want long-term.

You'll do it.

 

I agree you need to get at least one credit card. Online might not be the way to apply. The credit union is a good idea.

You might also try a store card. Some of them are fairly easy to get, and they give you a mix of credit types.

Where I disagree is paying it off evey month. Pay in full for a month or two. Then one month pay most of the balance, but not all. Then the next month pay it off.

If you always only buy a small amount and pay it off, it's like paying cash. And when you want to get a loan like a mortgage, companies want to know that you can manage credit, not just pay off everything the next month.

In the eyes of a bank or credit card company, declaring BK showed that you couldn't handle credit. To only purchase small items and pay like it was cash doesn't prove that you've learned how to handle long-term obligations. That's what they look for.

You are now seeing the exact reason that I've told people many times to work two or more jobs, get the cable turned off, eat casseroles at home instead of eating out, read the newspaper and magazines at the library instead of buying them, and pay off your debt. If you search my posts you'll see that I pay off over $77K worth of debt (more than twice my annual salary) without BK. I know it's too late for you, but I want to make others who read this post realize that BK isn't as easy and painless as many make it out to be.

My husband had a BK7 over a dozen years ago, and he's just now getting credit in his own name again.

 

Just to be a little more precise perhaps in this particular case, the individual has shown, or is showing, that they're handling a long-term credit obligation by their car loan.

They've also obtained and repaid two small loans.

All of which is not insignificant to a potential lender.

If an individual didn't have any credit history, post BK7, I'd agree that a department store credit card or a gas card would be a good first step to rebuilding credit.

[Just curious, and I've seen passing references here, how long did it take you to repay the 77K debt? That's a remarkable achievement.]

 

Have ANYONE put you on three accounts as an authorized user. try to get accounts that have a limit of atleast $1500. Get the house and work on the credit afterwards as a side project...

good luck!

 

You're very wise to try to be as independent as possible.

I'll be looking forward to seeing what the results are with your application to the credit union. Good luck with it!

 

It took me about 8 years, I think. I'm not exactly sure, I just lost track of time, and besides, I had some debt from before that I was paying. I did have a small legal settlement in 2000 that helped some.

Now I have very good credit and intend to keep it that way.

 

You could get someone to put you on for a few months until you get the effect on your score, then get your mortgage and get them to take you off. As an AU you don't have any responsibility for the card but you get the benefits of the history. The longer and better the history, the better.

There are several reasons I suggested a store card (or a gas card). One of the components of the FICO score is the mix of cards, and having a store card or gas card seems to help increase the score.

Yes, the installment loans and car loans show some ability to handle credit. But again, a big part of score is the mix, and you need history with revolving credit to increase the score. I believe that one reason is that in an installment loan there are set payments for a set period of time. Revolving credit is a variable amount without a set repayment period. I believe a big part of the score is based on revolving credit.

I assume your (at least short-term) goal is to get a mortgage. If you didn't care about getting your score up, I might have different advice.

 

One way to handle a credit card to build up your credit is to use it to pay something that you HAVE to buy anyway, like gas or the groceries you would normally buy. Then take the amount and deduct it from your checking account like you wrote a check (put in something like "reserve for credit card," or take the cash and put it in an envelope. Then when the bill comes, you have the money set aside (either cash in an envelope, or you've deducted the amounts from you account so the money is there) and you use that to pay the bill. If you deducted the amounts in your checkbook, just put in an entry that says something like "to reverse reserve" and then you add that amount back in and subtract it when you write the check.

 

42 is the answer to life, the universe, and everything.

It comes from the "Hitchhiker's Guide to the Galaxy" by Douglas Adams (not to be confused with Scott Adams of Dilbert fame).

 

I don't have a lot of time to type long answers any more, because I'm busy with work and school, but I'll paste below excerpts of what I wrote back in 2003 below. If you search my posts you may find some more like this. You can read this entire post in this thread. I may have my pages set differently, so you may have to go forward or back a page, but it's definitely in that post.

Here's the excerpt:

I got stuck with over $75K in unsecured debt in a divorce. I didn't even have money to live or get my car repaired without using credit. Then they started jacking up rates. But I am now within $2K of having everything below 8%.

Here's the best way to do it. When I finally realized how bad it was and that I had to do something, I started by making a spreadsheet of everything I owed. Creditor, balance, minimum payment, and interest rate. Sort by interest rate. Figure out how much above minimum you can pay every month. Pay minimum on everything except the highest interest rate. On that one, pay the minimum plus the amount extra you have identified. You have to consider this a required payment, however. Don't go spend the money somewhere else.

If you get any extra money (tax refunds, work you do on the side, etc), put it all on the highest interest rate bill.

When that bill is paid off, add the additional you were paying PLUS THE MINIMUM on the account you just paid off to the next highest interest rate. I put a column in for actual payment amount and added it there. So, as you pay off bills, you pay more per month on the next one but the same total amount over all. Some people think that they should pay off the smaller balances first so they can see progress. But that still takes longer. I just made a total at the bottom for the total balance, then a line for the secured debt, subtract for unsecured debt. You can put in the number from the previous month and subtract to see the change. That's how you know you make progress.

Once you pay off an account, you only use it for things you can pay at the end of the month, like gas that you'd buy anyway. It doesn't count in the debt calculations.

Don't close the cards, just put them away. You need the limit to keep your ratios down.

If you can balance transfer to a lower rate, do it.

Update the spreadsheet every month. The bill that gets the extra may change from month to month, but only the highest rate gets the extra in any month.

It's by "rolling" the minimum from the paid off bill to the next highest bill that helps this go faster....

If you can pick up side work, do it. Use all the money for paying the bills.

You don't have to give up everything, but you might have to make some sacrifices. Take it from someone who's been there, you'll feel better in the long run.

Just some thoughts. As I said, I had over $75K debt. At the time, I made about $50K a year. I also inherited some money in the meantime, and put that towards bills. But I think you can do it. I personally feel much better about myself knowing I paid what was owed, whether it was actually mine or my ex's.

(end of excerpt)

I also have a post around where I talk about how to save money or get some extra money. If I can find it pretty quickly I'll post it, too.

I hope some of this will help someone who is currently having problems. You just have to decide to make some sacrifices in the short term to be better off in the long term.

 

OK, without too much searching (using "budget" and Hedwig as poster, in case you want to try), I found the thread about how to not spend much money and help get the money to pay the extra each month. Again, you can read the full post here.

I'm pasting the post (or most of it, taking out references to that specific post) below. It is a response to someone on how to get more money.

If you have basic cable. Cancel it. Believe it or not, you can live without TV.

Turn on the radio. It's free. I did this about 15 years ago, mostly to save money, and I have to tell you that even when I travel (I was on business travel for over a year) I hardly ever turn on a TV set. I turn on the radio and can listen while doing other things.

If you get the newspaper, cancel it. Same with magazines. Go to the library to read. Only buy clothes if you absolutely need them, and only on sale, preferably at a thrift shop.

Cancel the cell phone contract. Get one of those pay-as-you-go cell phones and ONLY use it in a REAL emergency, not because you want your husband to stop at the store.

If you have a lawn service, cancel it . Buy the cheapest brands of food, etc.

There are almost always things to cut out of your budget.

...
I worked three jobs for a while, and had no life at all. Was it worth it? At the time I wasn't sure, now the answer is a resounding YES, IT WAS!!

 

OK, one more thing and I'll stop!!! But you DID ask how I did it, and you got me started on one of my favorite subjects now that I've been through it and seen my mistakes.

There is a financial planner named Ric Edelman in the DC area who has a radio show and has written several books. He gives some good advice.

Since you're interested in buying a home, start here. At the bottom of the page, click on "more articles" and you'll be taken to a list of articles about home ownership and buying a home.

You might also want to just cruise around his site. Ric gives some very good advice, and his approach is focused on building wealth, not short-term satisfaction for the most part.

 

Bumping for jenz!!

(And see, I had to bring Ric Edelman up again!)