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I was divorced in 2006 from a man who had convinced me that I was awful with money. My credit was good when we married (I don't know the numbers, but had no problem getting a FHA loan in 1997).
He got transferred out of state for work in 2002, but we could not sell our manufactured home. It had been financed with Greentree, but Conseco had bought them out. We had an assumable loan on paper, and a buyer, but Conseco would not let anyone assume the loan. At this point, dumb husband gave me an ultimatum. Either let the house go and move for the job, or he would divorce me. (That should have told me something....) We had 3 little kids and I wasn't willing to break up our family, so we moved.
The house was foreclosed on in Jan. 2003. It's off my credit now.
The only thing that is showing up on my credit report is 4 small collections. One is for a credit card that ex-husband got in my name just before we separated, so in 2006. It's for $515. There are 3 other small collections (ranging from $76 to $288).
I REALLY want to quit renting!!
What do I need to do to build a credit history to get a USDA loan? What should I avoid doing? What is the general time frame for this?
I haven't gotten so far as to look at houses, but I know that staying under about 30% is generally ideal, and that wouldn't be hard to do. I firmly believe that if I don't have the cash for something, I need to save for it. Unfortunately, buying a house is probably the one exception to that rule!! My car was bought with cash (7 years ago). I have no other debts, other than the usual utilities, car insurance, etc.
I've been at the same job for almost 12 years now.
If you paid the collection off, you should see a boost in your FICO score but you need to establish new credit. If you cannot get a regular credit card, get a secured one. Those are credit cards where you send the company money and they give you a line of credit for an equal amount, so basically you are borrowing your own money. Once you get the CC, use it once a month for gas or something but pay it off in full each month.
You could also get in touch with a credit repair company that can help you fix your credit. There are many bad apples in credit repair so thoroughly check out any credit repair company before you use them. Ask friends, neighbors, co workers for a referral.
Thanks for the reply! How long after getting the credit card should I wait to apply for a loan? Just a general guess is fine... 1 month, 1 year, 2 years?
Be very, VERY careful of the "credit repair" companies. Many of them will dispute what is on your credit, it'll come off (cred bur has to take it off for the dispute) long enough to get approved for a loan, and then gets put right back on. I had a mortgage broker that I did computer work for 3yrs ago, he was ecstatic about offering 'credit repair' and explained this is how it was done in the mortgage business. Very honestly, if you have such small dollar amounts on your credit, just get it paid off. Really. Or, wait it out until they fall off the report.
I disagree with paying the credit card in full every month because that shows that yes you're willing to pay it off, but no you're not willing to 'make payments' on a debt. Let a balance sit for 2-4 months at a time and chip away at the balance, then pay it in full. As backwards as it is, banks want to see the creditor making money off you to consider you 'credit worthy' - not someone who is 'living within their means' and therefore, not profitable.
I very much sympathize with your situation, trying to build my credit after living many years as a cash only paying customer. I don't have good credit, don't have bad credit, just have no credit. It was hard enough to catch a break just to get a VERY modest car loan - last year, put 50% down on a $8300 purchase for a vehicle blue booking at $11K, had been with my job 2yrs and had more than enough income to support the loan, and they still wanted a cosigner. This year, I was able to obtain a second car loan without jumping through as many hoops (it was still a headache), and have made 2 secured credit purchases with furniture that I opted to finance for the sake of credit. I could have purchased outright, but let the financing drag out for 3-6 months to gain the benefits of credit.
The best answers you're going to get for how long it'll take to build your credit can be answered by someone who is in the mortgage industry.
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