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Across the Fence:  Anyone in the process of rebuilding credit?  |
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farmmilkmama
True Blue Farmgirl
2027 Posts
Amy
Central MN
USA
2027 Posts |
 Posted - Nov 05 2010 : 7:29:28 PM
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Three years ago we lost our house and filed bankruptcy. The details surrounding it are a very long story. We've always lived very frugally and got by on little. This was not a case of living beyond our means and not being able to pay it back.
Anyhow, we'd like in the next few years to be able to buy a farm. We currently share a home with my parents and have for the last three years.) We thought at first that saving, saving and saving more money would look good to the bank. We didn't want any auto loans. We didn't want any credit cards. And we didn't "need" them. We lived on cash for three years and thought that would be a good thing. Long story short, last time we went into the bank (beginning of summer '10) they basically told us that it didn't matter how many thousands we had in the bank, we couldn't even look at getting a mortgage until we started using some credit and upping our score. (Which, oddly enough, they said wasn't as bad as it should be after filing bankruptcy and foreclosure, I guess because we really didn't have all that impressive of a load of "stuff" to file on.) So after hubby and I stewed about that for awhile (as in, shouldn't cash be enough?) we decided we would take out a small secured savings loan at the bank. Shortly after that, our van ran into major issues (we drove that baby into the ground!!!) and our bank told us to get a loan for our next vehicle, even though we could pay cash for the thing. So we got the loan, all in the name of rebuilding our credit. Then the bank told us what we really needed was a credit card. We chose to get a secured credit card with a low limit.
Here's the issue: we were under the impression that charging up a good chunk of stuff and then paying it off every month was the way to show that you could handle credit and were responsible about paying it back. Now we find out today that you should NEVER use more than 35% of your available credit because otherwise you're being "risky" and it doesn't look good on your report. So...kind of like showing you can "get" the credit, but you don't need to "use" the credit, I guess. Also, we were told today you should use the credit card every month (up to the 35% percent of credit limit) and you should never pay it ALL off every month, because paying it all off shows you don't have a balance, which looks to them like you have a card but aren't using it - which doesn't help your score either.
Anyone else going through a similar situation who knows what you're actually supposed to do to rebuild credit? I'd like to scrap it all and continue to pinch pennies, but I don't know that saving $80-150K is realistic.
--* FarmMilkMama *--
Farmgirl Sister #1086
Be yourself.
Everyone else is already taken.
-Oscar Wilde
www.farmfoodmama.blogspot.com |
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Alee
True Blue Farmgirl
22941 Posts
Alee
Worland
Wy
USA
22941 Posts |
Posted - Nov 05 2010 : 7:47:07 PM
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Amy- Yes it is all a big mix and a mess!
But it sounds like you are on the right path. There are several things that affect credit. #1 is not having negative information which sounds like you are doing good other than the bankruptcy. #2 is having the credit but not using it like you pointed out above BUT you also need to periodically (like once every 5 months or so) max it out and then pay it down the next month because otherwise it looks like you have a really tiny available credit. Some banks don't report what your credit limit is along with what you have charged, so the forumulas that calculate credit score take the highest historical balance. If the highest historical balance is $100, they assume that is all you qualified for.
#3 is credit history- so paying routinely on car payments or credit cards and never being late really looks good- but look to this to take a while. Like one year to 18 months before companies start seeing this as a positive.
Alee
Farmgirl Sister #8
www.farmgirlalee.blogspot.com
www.allergyjourneys.blogspot.com
Put your pin on the farmgirl map! www.farmgirlmap.blogspot.com |
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farmmilkmama
True Blue Farmgirl
2027 Posts
Amy
Central MN
USA
2027 Posts |
Posted - Nov 05 2010 : 8:02:13 PM
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Thanks for the information, Alee. :) I appreciate it. I can't believe its all such a technical mess!
--* FarmMilkMama *--
Farmgirl Sister #1086
Be yourself.
Everyone else is already taken.
-Oscar Wilde
www.farmfoodmama.blogspot.com |
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Alee
True Blue Farmgirl
22941 Posts
Alee
Worland
Wy
USA
22941 Posts |
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Across the Fence: Anyone in the process of rebuilding credit? |
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Anyone in the process of rebuilding credit?
