Re-Establishing Credit To Qualify For FHA Loan

This BLOG On Re-Establishing Credit To Qualify For FHA Loan Was UPDATED On July 11, 2017

Consumers who recently went through a bankruptcy or foreclosure, you should seriously consider reestablishing your credit as soon as possible.

  • Consumer credit scores will definitely drop by more than 150 plus points after bankruptcy or foreclosure on credit report. 
  • The good news is that the sudden massive drop in credit score is just temporary and will eventually go up as time passes. 
  • It might take a long time but it will naturally go up as bankruptcy and/or foreclosure ages.
  • Adding positive credit such as three secured credit cards will expedite boosting credit scores.  
  • After a few years, although bankruptcy and/or foreclosure record remains on credit record, it will have little or no impact on scores.  
  • Home buyers planning buying a home in a few years, it is recommended  they start Re-Establishing Credit To Qualify For FHA Loan.
  • They should start Re-Establishing Credit To Qualify For FHA Loan right away after filing bankruptcy and/or foreclosure.

Re-Establishing Credit To Qualify For FHA Loan To Prepare For Home Purchase

Home buyers who are planning in getting a residential mortgage loan in the near future, here are some tips and advice:

  • At least 3 credit tradelines such as credit cards and/or installment loans that have been established for at least a year.
  • No late payments after a bankruptcy or foreclosure.
  • Verification of rental income.  Make sure when to pay rent payments with check and never cash. 
  • When it comes to applying for a mortgage, the mortgage lender will ask for 12 months cancelled checks and/or bank statements.
  • No overdrafts or bounced checks in the past 12 months.

Quickest Method Of Re-Establishing Credit To Qualify For FHA Loan

The quickest way of reestablishing your credit is not by hiring a credit repair company, but by establishing new credit via the use of secured credit cards.

  • Getting a unsecured credit card after a bankruptcy and/or foreclosure will be next to impossible to get approved. 
  • However, getting up to secured credit cards will definitely boost credit scores. 
  • Three secured credit cards is the optimal number with at least a $500 credit limit. 
  • Anything over three credit cards will not have more effect. 
  • Each secured credit should boost credit scores by at least 20 to 30 points for a total of 60 to 90 points with three secured credit cards.

Secured Credit Cards To Improve Your Credit

Consumers who are timely with three secured credit card payments for six months to a year, the secured credit card companies will raise credit limit without having additional deposit.

  • After a year of having a timely historical payment history, consumers will be able to apply for unsecured credit cards.

Hiring Credit Repair Companies

  • Consumers can also hire credit repair companies to help repair credit and improve credit scores.
  • However, many times, credit repair companies are not needed because as derogatory credit ages, it has no impact on credit scores.
  • All derogatory information on credit report will remain on credit report for a period of 7 years. 
  • As time ages, the derogatory information will have less impact on scores.
  • However, the negative item will remain on credit report for 7 years from date of last activity. 
  • Anyone can repair their own credit.
  • However, for those who do not have the time to tackle such task, they can hire a credit repair company to dispute the errors on their credit report.
  • Credit disputes during mortgage process is prohibited.
  • and possibly derogatory information from their credit reports.

Mortgage Borrowers do not have to pay off outstanding collections and charge off accounts to qualify for FHA Loans. Home Buyers who need to qualify for FHA Loans with bad credit with a lender with no lender overlays, please contact us at 1-800-900-8569 or email us at gcho@gustancho.com.

Related> Mortgage Rates And Credit Scores

Related> Secured Credit Cards To Improve Credit Scores

Related> Re-Establishing Credit

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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