I am in need of information. I am taking over my fathers job which will be a substantial pay increase. I would like to purchase a home in the near future the problem is that I have late payments on my credit cards. One credit card is late by approx. 5 months another is 3 months late. How will this affect my approval for a home loan? Any information would be great!
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Credit in regards to home purchase
- Thread starter Bixx
- Start date
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The only thing that is going to make your credit better is time.
While we don't know exactly how a credit score is determined, FICO considers the following factors (the approximate weight it assigns to each factor is in parentheses):
· Payment history (35%). Your score is negatively affected if you have paid bills late, had an account sent to collection, or declared bankruptcy. The more recent the problem, the lower your score -- a 30-day late payment today hurts more than a bankruptcy five years ago.
· Outstanding debt (30%). If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score. A low balance on two cards is better than a high balance on one.
· Length of your credit history (15%). The longer your accounts have been open, the better.
· Recent inquiries on your report (10%). If you have recently applied for many new accounts, that may negatively affect your score. Promotional inquiries don't count.
· Types of credit in use (10%). Loans from finance companies generally lower your credit score. FICO says this is most important when there isn't a lot of other information upon which to base a score.
Bring the credit cards current, or paying them off, or settling them at a discount all have about the same impact on your score. It is in your history and as time passes it will become less and less of a factor.
The one thing you don't want to do is do nothing.
While we don't know exactly how a credit score is determined, FICO considers the following factors (the approximate weight it assigns to each factor is in parentheses):
· Payment history (35%). Your score is negatively affected if you have paid bills late, had an account sent to collection, or declared bankruptcy. The more recent the problem, the lower your score -- a 30-day late payment today hurts more than a bankruptcy five years ago.
· Outstanding debt (30%). If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score. A low balance on two cards is better than a high balance on one.
· Length of your credit history (15%). The longer your accounts have been open, the better.
· Recent inquiries on your report (10%). If you have recently applied for many new accounts, that may negatively affect your score. Promotional inquiries don't count.
· Types of credit in use (10%). Loans from finance companies generally lower your credit score. FICO says this is most important when there isn't a lot of other information upon which to base a score.
Bring the credit cards current, or paying them off, or settling them at a discount all have about the same impact on your score. It is in your history and as time passes it will become less and less of a factor.
The one thing you don't want to do is do nothing.
Who's Liable?
Senior Member
cmorris said:Any debt would need to be brought current. It will also increase your interest rate substantially.
And where did you get this information?
Consider this: a guy has $10K in debt to his credit card but was paying the minimum amount due every month... He would still be in good standing with the CC company...
You are saying that if he was 5 mo. without a payment, he would need to pay off the $10K AND the interest it accrued before he would even think of buying a home....
I believe what cmorris meant was the outstanding debt on the credit cards would need to be brought current, not the entire theoretical $10K. Most mortgage companies would want to see this before giving the mortgage.Who's Liable? said:And where did you get this information?
Consider this: a guy has $10K in debt to his credit card but was paying the minimum amount due every month... He would still be in good standing with the CC company...
You are saying that if he was 5 mo. without a payment, he would need to pay off the $10K AND the interest it accrued before he would even think of buying a home....
Who's Liable? said:And where did you get this information?
Consider this: a guy has $10K in debt to his credit card but was paying the minimum amount due every month... He would still be in good standing with the CC company...
You are saying that if he was 5 mo. without a payment, he would need to pay off the $10K AND the interest it accrued before he would even think of buying a home....
Thank you, Cyana. It needs to be brought CURRENT, not necessarily paid off. And if you have lates on your credit report, you better believe your interest rate will be sky high.