12 months and $300/mo to improve my credit

5 Replies

Whats up folks? I am looking to buy my first piece of real estate in about a year. I expect my largest obstacle will be my credit score. I am starting at a 600 and working hard to clean it up. A snapshot of my current position is below. What I would like to know is where do you think I should be contributing my extra money? I have some BAD debts I could eliminate, some debts I could work on, add to savings, or do something else? Any advice is greatly appreciated.

  • I am currently slowly paying down a $2400 balance on a $3000 credit card. I was recently denied a credit line increase.
  • I recently got an unsolicited credit line increase on a store card. 
  • Also signed up for a SelfLender account to build positive history. Its just a credit builder secured loan.
  • I have a car note that is current.
  • I have unpaid rent and fees from 2012 of about $2k.
  • I am making payments on the last two years of taxes. About $4k on those.
  • I have not yet started on my student loans which will be $380 a month. Not eligible for any repair programs: they will go through a consolidation after 3 months.
  • I could get a secured credit card.

Just to add more clarity around the goal, I am aiming to get an FHA loan to buy a du/tri/quad plex.

I would focus on the bad debt. Focus first on the taxes.  The government can put a lien on your assets, and banks don't like to see that.  Likewise, go after the unpaid rent and fees from 2012.  Don't let your student debt go delinquent.  However, the interest rate on them tend to be low, so I would just stay current.  In fact, stay current on all your debt to avoid them reporting to the three credit bureaus and affecting your credit score even more.  I would not sign up for any other credit until the others are paid off.  The payments themselves will help your score, so no need to encumber more debt to build your credit.  Best of luck to you!

I think you should work on all open/active accounts before any collections and of course back taxes first. FHA do not always require you to pay old collections account.

Start with back taxes, make sure you keep the student loan current, and all credit cards, i would then try and bring the credit card amount down ( you do need some dept on the card for a good credit score) banks like to see that the debt is only about 1/2 of what your limit is, so you want to try and get that down to about 1,500 a little less is better, but that's a goal to shoot for. do not try and get more cards or credit lines, try and keep a steady payment schedule on what you have and get the balances down. I agree with @Natelya G. in that the collections are not as important ( only because they do not show up on credit reports any more) but there are ways of checking for that and is still a negative against you.

If you want to buy in a year you are going to need to find a way to pay off more than 300 a month extra towards your current debts. I would look at ways to cut back your current expenses and pick up a side job. Something part time when you are not at your primary job. It will be a lot of work but if it allows you to buy in a year it will be a short term sacrifice.

Depending on the value of your car, perhaps you could sell it and drive a junker car so that you could eliminate your car payment and use the money you were paying on the car loan towards your other debts.

If you are not willing to sacrifice I would not buy in a year. You are setting yourself up for a disaster if anything goes wrong with the house when you have so many debts and little extra money each month.