Tag: bad credit

Buying a Home With Bad Credit and No Money Down

Posted on December 1, 2021 by - CREDIT BLOG

From bird-dogging to seller financing, Carter Brown kicked off the Credit and Debt Summit with six strategies for buying a home with bad credit and no money down. Even if you have a bad credit score and no down payment, Brown explains the six strategies for buying home, or investing in real estate.
Buying a Home with Bad Credit and No Money Down
Carter Brown is a real estate coach for Prosper Learning who started investing in real estate while he was in college. He now coaches other people on out-of-the-box strategies for buying homes or investing in the real estate market. These strategies don’t require any money down, and they can be used by people with bad credit scores.
As part of the Credit and Debt Summit, Brown shared these strategies with registrants:

  1. Assigning contracts
  2. Double-escrow closing
  3. Subject to financing
  4. Seller financing
  5. Lease options
  6. Bird-dogging

Two of the highlights are “subject to financing” and “bird-dogging. “
Buying a Home with Bad Credit and No Money Down Strategy: Subject to Financing

Subject to financing is a perfect strategy for buyers with bad credit and no money down and sellers who are on the brink of foreclosure. It works like this:
The buyer takes over mortgage payments on a person’s house. In exchange, the seller transfers the title to the buyer, but—and here’s the kicker—the seller keeps the loan in his or her name. The buyer, however, starts making payments on the home.
Does this sound crazy? Why in the world would a seller transfer title but keep the loan in his or her name?
It isn’t crazy, and Brown explains why it works;
1. The homeowner (seller) is going to lose the home to foreclosure otherwise. Under “subject to financing,” the seller doesn’t have to go through foreclosure and preserves his or her credit score. Perhaps more importantly, the seller’s financial stresses are over. No longer do they have to worry about coming up with thousands of dollars, negotiating with banks, attempting—and failing—to get loan modifications. The buyer can take over payments immediately, leaving the seller with peace of mind.
2. The buyer and seller can always write a clause into the contract that forces the home to return to the original owner in the event that the buyer misses a payment. And because the loan is still in the original owner’s name, the seller can track the buyer’s payments.
3. Worst-case scenario, the buyer misses a payment and the home returns to the original owner. If this happens, the original owner can start making payments if his or her financial situation has improved. If the original owner’s financial situation has not improved, he or she is no worse for the wear.
Obviously, this strategy is a bit sophisticated. Want the transcripts of Brown’s Credit and Debt Summit webinar? Register for the free summit here and get more details, including information on where you can find qualified sellers.
Buying a Home with Bad Credit and No Money Down Strategy: Bird-Dogging

If “subject to financing” makes you nervous, but you still want to get your foot in the door and start learning advanced techniques for real estate investing, Brown suggests starting with a technique he calls “bird dogging.”
Under this strategy, you don’t actually buy a home, but it allows you to shadow someone who is using outside-the-box strategies, which means you can quickly move up the ladder and start learning about buying a home with bad credit and no money down.
Simple put, bird-dogging is another way of saying that you act as a scout, and you get paid for bringing a seller and an investor together. You also get to shadow the investor so that you learn more about real estate investments.
Let’s say that you are chatting with your neighbor, and you learn that she and her husband are in financial distress. Their house has been on the market for months, but no one is biting. If something doesn’t happen—and soon—the bank is going to foreclosure.
This is where you come in. Simply introduce your neighbor to a real estate investor. Tell the investor that you want to provide a referral for a finder’s fee. If the investor purchases the property, you will receive a fee of about $500.
This isn’t where it ends. Ask the investor if you can shadow the transaction. Let the investor know that you are interested in learning more about real estate strategies. The investor, thrilled that a hot deal has dropped onto his or her lap, will agree.
Brown goes on to describe four other strategies for buying a home with bad credit and no money down.  His strategies offer something for everyone—from the seasoned investor to the newbie hoping to get his or her feet wet.

Credit Inquiries After Bankruptcy

Posted on November 12, 2021 by - CREDIT BLOG

If your credit score is trashed, the last thing you probably want on your credit report is a bunch of credit inquiries after bankruptcy. Won’t this tell the credit-reporting bureaus that you are planning on returning to your old habits?
To some extent, yes. Each time you apply for credit, a creditor makes an inquiry into your credit report, and this causes your score to drop. One of the bankruptcy facts is that the credit-scoring systems will be keeping an eagle-eye on your behavior, and applying for credit is a big warning sign that you are up to your old habits.
So what are your supposed to do? Live as a cash-only citizen? This might sound good in theory, but it is highly impractical. You can barely get a cell phone without a credit card, much less reserve a hotel room or a rental car.
The truth of the matter is that credit inquiries after bankruptcy are a necessary part of building credit. The key is to be strategic about how you open new lines of credit and deal with credit inquiries.
The strategy might shock you. In short, your strategy should be to get it over with. Apply for all the credit you will need, and get all the credit inquiries on your credit report at once. I have three reasons for this:
Credit Inquiries After Bankruptcy—Fact #1: You need to start to repair credit after bankruptcy as soon as possible. This means you need to open credit cards, and you need to start building a positive credit history that shows the credit-scoring bureaus that your bankruptcy allowed you to start anew.
Credit Inquiries After Bankruptcy—Fact #2: Credit inquiries stay on a person’s credit report for only two years, but they affect a person’s score for only one year. If you have declared bankruptcy, your credit score is already trashed. Get the credit inquiries over and done with now rather than waiting to tarnish your credit report later. In fact, the only way to get your score to increase is to apply for credit and use it wisely.
Credit Inquiries After Bankruptcy—Fact #3: Every time you open a new account, the average age of your credit history drops. And credit-scoring bureaus like older accounts more than they like newer accounts. If you apply for new credit today, the accounts will be a year old this time next year. If you wait to apply for new credit, the accounts cannot start growing old because they do not exist.
Let’s take a look at how this works by considering Andy and Bob. Both of them have declared bankruptcy. Both of them decide to open three new credit cards as part of their plan to rebuild credit. But they go about it differently.
Andy decides to just get it over with, so in 2010, he opens three credit cards. By 2013, the inquiries had fallen off his credit report. And the average age of his credit accounts was three years.
Bob decided to open the credit cards in stages. He knew that credit inquiries count for about 10 percent of a person’s credit score, so he wanted to space out the damage. By 2013, he had three credit cards: one that was a month old, one that was 13 months old, and one that was 25 months old. The average age of his accounts was just 13 months.  And he had a recent credit inquiry that was being factored into his score.
And guess who had the better score? Andy, who knew that credit inquiries after bankruptcy were necessary.
One thing to keep in mind about credit inquiries after bankruptcy: Your score will never be damaged if you pull your own credit report. The credit-scoring bureaus know that people need to monitor their own credit scores, and they consider this responsible behavior. If you need to pull your credit score, be sure to read this article about the credit score scale.

Rebuilding Credit After Bankruptcy

Posted on November 12, 2021 by - Bankruptcy, CREDIT BLOG, Credit Score

Like a lot of folks who start trying to rebuild credit after bankruptcy, you might be thinking of wiping your hands clean of credit. And it might make sense that the fastest way to move past the bankruptcy is to stop relying on the loans and credit cards that precipitated the bankruptcy.
But contrary to popular belief, using credit appropriately in the wake of a bankruptcy is the best way to rebuild credit after bankruptcy. Of all the bankruptcy facts, this one might be the most important. Indeed, you might be able to build your score to 720 within a couple of years of declaring bankruptcy if you follow a smart plan to re-establish credit.
This twofold plan to learn how to fix credit starts by opening new lines of credit and concludes with paying your bills on time and in full.
Rebuilding Credit After Bankruptcy Rule #1: Open new lines of credit!
You might hear claims that you can have a bankruptcy wiped from your record. Beware of these claims! There is no legal way to wipe a bankruptcy from your credit report. That said, time does heal. The credit-scoring bureaus—Equifax, TransUnion, and Experian—are more concerned with your recent behavior than they are with your past behavior. The trick, then, is to persuade the bureaus to pay more attention to your recent good behavior than to your past behavior. By establishing new credit and using it responsibly, you can prove to the bureaus that you are a new person—that the bankruptcy forced you to change your habits and establish smarter financial strategies.
After you have declared bankruptcy, open three new credit cards (Visa, MasterCard, or American Express) and one installment loan as part of your plan to rebuild credit after bankruptcy. Taking out a car loan is not advisable, in part because of the high interest rates you would assume, but also because of the debt you would add to your credit report. Instead, buy a new appliance, piece of furniture, or electronic using an installment loan. Then pay the loan off within six months.
Keep the credit cards active by using them at least every other month. Make only small charges (preferably less than 10 percent of the limit), and pay the balances in full.
Of course, with both the credit cards and installment loan, be aware of high interest rates. Because of your bankruptcy, you will likely not qualify for the best interest rates, which is why I stress the importance of paying the balances in full as quickly as possible.
Another note about opening new accounts: Insomuch as it is possible, open these accounts all at once and as soon as possible after the bankruptcy. The credit-scoring bureaus respond best to accounts that have been open for long periods of time. Your future credit score will benefit best if you open the accounts now.
By opening these new lines of credit, you can begin to rebuild your credit after bankruptcy by giving the credit bureaus new information on which they can judge your creditworthiness. Show them you have changed your patterns of behavior.
In this way, you can immediately begin proving to the credit bureaus that the bankruptcy allowed you to turn over a new leaf and change your payment behavior.
Rebuilding Credit After Bankruptcy Rule #2: Never, never make a late payment!
After a bankruptcy, the credit-scoring bureaus will have an eye on you, even as your score begins to climb. If you make a payment that is even one day late, the bureaus will assume you are back to your old ways, and your progress will be for naught.
To best rebuild your credit after bankruptcy, you must pay your bills immediately every single month. This means that you must live within your means. Be sure to read our article about how to create a budget, find money, and establish habits that best afford you to bounce back after a bankruptcy.

Keys to Avoid Bankruptcy

Posted on November 12, 2021 by - CREDIT BLOG

If you have lost a job or have experienced a financial catastrophe, you might be worried about your ability to pay your bills, wondering how to avoid bankruptcy. One of the unfortunate bankruptcy facts is that bankruptcy will leave a black mark on your credit report and will severely limit your options until you are able to repair credit after bankruptcy. Though sometimes it is the best choice to handle your financial situation, bankruptcy should be considered only after a thorough analysis of all of your other options that allow you to avoid bankruptcy entirely.
The most common trademark of those faced with an overwhelming amount of debt is the tendency to ignore the situation. By keeping your head buried in the sand, you are only causing the problem to worsen rather than seizing the opportunity to change your fate. Embarrassment is the reason many people give for the failure to address their financial problems. Unfortunately, some people may attach a stigma to bankruptcy, seeing as a sign of moral failing.
However, is you want to avoid bankruptcy, avoiding the problem is the worst thing you can do! And keep in mind that several prominent Americans, including Mark Twain and Walt Disney, have claimed bankruptcy. Sometimes bankruptcy may be precipitated by an unforeseen job loss, divorce, or medical crisis. Other times it may be due to poor business decisions or financial negligence. Whatever the reason, avoiding the problem will only make matters worse. The most important thing you can do is to decide to fight back because you do have options, even in the darkest of hours
To avoid bankruptcy, start by calling the hardship department for your bank. The incredible economic turmoil of recent months has lead to new priorities for the financial industry and newly available opportunities for you. Many banks are looking to work out alternative solutions instead of taking a huge loss. In the event of a bankruptcy, creditors will be left with nothing. Though lenders are not obligated to change the terms of your loans, by being proactive and asking, you might be able to work out an alternative payment plan or a loan modification to stave off bankruptcy.
In order to gain financial relief you might also consider consolidating your debts. Debt consolidation the combination of all your debts into one loan so that you make only one payment at a time. Depending on your circumstances, this can be a good way to regain stability and gradually repair your credit. You might also consider hiring a debt consolidation company, but be very careful or your money worries will be compounded by dodgy outfits that will rip you off.
Despite your best intentions, it may be impossible to avoid bankruptcy in some cases, and in others, considering all your bankruptcy options may be your best course of action. If you are trying to keep your head above water with a plan that is not working, bankruptcy might be preferable to more financial stress, harassing calls from collectors, and a burgeoning debt caused by an increasing load of interest and late fees. In this case, it’s easier to wipe the slate clean and start over. Additionally, depending on the type of bankruptcy you file for, you may be able to hold on to property.

The Forms of Bankruptcy Options

Posted on November 12, 2021 by - CREDIT BLOG

Question: What are the bankruptcy options for those who have been through a taxing financial crisis?
Answer: If your financial life is spiraling out of control, with late payment fees and interest multiplying faster than you can them, considering the bankruptcy facts might be the best option that allows you the room to piece your life back together and make a fresh start. Take a look at some of your bankruptcy options to see if this is a good choice for you and your situation.
Six types of bankruptcy exist: Chapters 7, 9, 11, 12, 13, and 15. However, only two of these are legitimate bankruptcy options for individuals, Chapters 9, 11, 12, and 15 are specialized bankruptcies for municipalities, business corporations, family farmers and fishermen, and international ancillaries, respectively.
Individuals usually file for one of two bankruptcy options: either Chapter 7 or Chapter 13, depending on your level of debt and the assets you are trying to keep. Both bankruptcy options remain on your credit report for 10 years.
Individuals, corporations, or partnerships may file for Chapter 7 bankruptcy, which is also known as liquation or straight bankruptcy. In a Chapter 7 bankruptcy, all your assets are liquidated, and the proceeds from these sales go to your creditors.
Chapter 13 bankruptcy is intended for individuals with debts that do not exceed $1,230,650. Chapter 13 is considered less toxic to your credit score. A Chapter 13 bankruptcy involves working out a payment plan with creditors, resulting in creditors ceasing collection attempts. After you make the payments to the creditors, you can receive a discharge. The benefit of this option is that you can retain a leased car or a mortgaged house, but you need to repay all your remaining debts over a three- to five-year period or else creditors will confiscate your assets.
Because bankruptcy is such a complex process, it is highly recommended that you hire an attorney to discuss your bankruptcy options. Bankruptcy has important implications for your finances and for your legal status, so having an experienced bankruptcy lawyer can prevent you from making serious mistakes. For example, an attorney might be able to advise you about property that is exempt from asset collection in bankruptcy. As well, an experienced attorney can help you answer the important question: “Should I file for bankruptcy?”
If you so choose, you may be able to file on your own, or pro se. Be prepared to do a lot of work to research the bankruptcy code and any special laws unique to your state or county. Generally, filing pro se is only recommended when you are attempting a relatively simple bankruptcy and don’t have any major assets at risk.
If you are filing for Chapter 7 bankruptcy, you might want to ask your attorney about reaffirming part of your debt, a process that will allow you to preserve a debt through bankruptcy so that you can pay it off. It might sound strange to consider keeping a debt.
What? you might be thinking. Reaffirm a debt? Isn’t bankruptcy an opportunity to wipe the slate clean?
It is, but reaffirming a debt might have some benefits. Some proponents of this strategy argue that if you continue to pay on one or two of your existing accounts, you will help your credit score by showing credit-scoring bureaus that you did not shirk all your debt. Reaffirming a debt that is in good standing may help you in some circumstances, such as when you have a small amount on a credit card you have had for several years. By keeping the debt, you will keep the account active and thereby take advantage of the age of the account. (Credit-scoring bureaus assign 15 percent of your credit score to the length of time of your credit accounts.)
However, if you reaffirm too many debts, you will miss the best opportunity offered by bankruptcy: a chance to start over without bearing the weight of your previous debts. Reaffirming debt is a complicated decision and among the bankruptcy options you should discuss with a qualified attorney.
If you are considering your bankruptcy options, be sure to do your homework and make the best decision for your situation. If you are unable to avoid bankruptcy, being strategic as you work through the process will help you gain some control in your life and start working for a brighter future. And, of course, don’t forget to start the process to repair credit after bankruptcy!

Should I File for Bankruptcy?

Posted on November 8, 2021 by - CREDIT BLOG

Should I file for bankruptcy? If you have creditors that are calling at all hours and bills that are piling up faster than you can pay them, you have definitely asked yourself this question. While you should always pay back your bills—it’s the right thing to do—you might have no choice but make a clean break. One of the harder bankruptcy facts to accept is that sometimes bankruptcy is the best option.
If you are wondering, should I file for bankruptcy?, spend some time thinking about your various options:

  • You might think about debt consolidation, which can combine all your debts into one loan so that you can make one payment at a time.
  • Hiring a reputable debt consolidation company is also an option, but like debt settlement companies, some unscrupulous companies might end up costing you time and money.
  • Loan modification programs and reductions in payments are another option for distressed homeowners. Perhaps you can contact the hardship departments for your creditors and ask them to consider a change in terms that will allow you to float above water. Especially during a financial crisis, banks want to help their clients make their payments. They know that many people are teetering on the verge of bankruptcy. In fact, you might want to call your mortgage lender and ask: “Should I file for bankruptcy, or can I qualify for a loan modification program?” Rather than having all your debt discharged during a bankruptcy, many creditors will simply lower your payments. After all, something is better than nothing.

“Should I file for bankruptcy if none of these options are available?”
That said, if you have exhausted all options, you might want to consider filing bankruptcy, especially if you face the possibility of losing property. (Bankruptcy enables many people to hold on to their property despite their financial woes.) The first determination that you need to make as you consider bankruptcy is based on your finances. If you are in a situation where you can’t dig yourself out from a mountain of debt, then bankruptcy can stop creditors from charging late fees and interest on your bills. If you are at this point, considering one of the various forms of bankruptcy options may be the best option so you can make a fresh start. Plus, you won’t have to worry about being harassed by creditors every day and losing sleep as a result of worrying about your debts.
That said, a bankruptcy will definitely harm your credit, but if you are already too deeply in debt to repay your debts, your credit will probably be severely tarnished after several more years of collection notices and repossessions.
Once you declare bankruptcy, the next step in regaining your credit is to embark on a robust credit repair campaign. If you can improve your credit score by changing your habits and paying your bills on time, you can slowly begin regain financial stability. In fact, if you are diligent about repairing your credit and establishing good financial habits, you might even qualify for a home loan within two years of declaring bankruptcy!
Ultimately, your question—”Should I file for bankruptcy?”—is a personal one. You must learn how to create a budget, consider all of your bankruptcy options, and then make a strategic choice. If you cannot find a light at the end of the tunnel and know that bankruptcy is eventually inevitable, you should begin the process today so you can start rebuilding your future and your credit score.

Collections Account on Credit Report: Option #4

Posted on November 8, 2021 by - CREDIT BLOG

Here is the riskiest option for dealing with collections account on credit report. In fact, before you read about this option, I should tell you that I think paying your debt is your responsibility. It is always the right thing to do.
Collections Account on Credit Report: Option #4
But some folks do not suffer from a crisis of conscious, so they want to employ this option for dealing with a collections account on credit report. They simply refuse to pay the collection item, arguing these pros:
Your credit will be only nominally affected four years from the last payment you made on the account, and it will being to improve significantly in as little as two years. And of course, if you do not pay the collections account on credit report, you have lots of room to try to negotiate for a letter of deletion down the road.
But before you employ this option, be sure you know about the cons:

  1. You could get sued.
  2. Creditors will continue to contact you.
  3. Your will never satisfy your agreement with the creditor.

Collections Account on Credit Report: Option #3

Posted on November 8, 2021 by - CREDIT BLOG

The best way to handle a collections account on credit report is to negotiate for a letter of deletion. But the truth of the matter is this: Sometimes you will be unsuccessful. Here is your third option for dealing with those pesky collection accounts.
Collections Account on Credit Report: Option #3
You could always make payments on the collection item. This is one of my least favorite options. Most of the time, I think you are far better off saving the money and making one payment. However, if you have a problem saving money, and you feel obliged to satisfy your agreement with the creditor, this might be the best option for you. Keep in mind that your score will drop each time you make a payment.
The pros of this option follow:

  • Eventually, you will satisfy your agreement with the lender.
  • If you are able to negotiate a payment plan, the collector will stop calling you and probably will not sue you, so long as you pay on time.
  • You can always call back and try to negotiate for a letter of deletion while you are making payments.
  • You might be able to negotiate for cents on the dollar.
  • If the debt is more than two years old, you might be able to convince the creditor to stop reporting payments to the credit bureaus so that your credit score can be preserved.

Like I said, making payments on a collections account on credit report is one of my least favorite options. Here are the cons:

  • If you are unable to negotiate for a payment plan, you might be sued, and the collectors will definitely keep calling you.
  • If you do not negotiate to have the creditor stop reporting to the bureaus, your credit will keep being dinged, and you will not be able to make significant improvements to your credit score until you have paid the debt in full.

If you choose this option, be sure you know how to fix credit! And be sure to read about the other options for dealing with collections account on credit report.

Collections Account on Credit Report: Option #2

Posted on November 8, 2021 by - CREDIT BLOG

In my last post, we talked about the first option for dealing with a collections account on credit report. This week, let’s talk about the second option.
Collections Account on Credit Report: Option #2
You could always wait for the right time to pay the collections account on credit report. If you are planning on making a purchase in the near future, paying a collections account might not be wise as it could hurt your credit score. In this case, just wait until you have made the purchase, then pay the account. The pros of this option:

  • First, you will eventually satisfy your agreement with the creditor. There is a certain amount of peace of mind in fulfilling an obligation. The phone calls will end, the worries will end.
  • You might be able to negotiate for a letter of deletion when you do make the payment.
  • This will allow you to delay the damage to your credit score until after you have made your purchase and secured decent interest rates. This is particularly true if you have not made a payment on the account in more than two years. If this is the case, your score probably isn’t suffering much from the past mistake, so paying it could cause an okay score to turn into a bad credit score.

The cons: You will prolong the suffering. if you wait to pay the debt, your credit score will likely drop in the future. And in the meantime, creditors and collection companies will continue to hound you about the payment. And let’s not forget that you can always be sued for failing to pay a debt.
Still, this might be the smartest strategy if you are unable to secure a letter of deletion now, and you plan on making a large purchase in the future. Keep in mind that some banks will insist you pay a collections account on credit report before giving you a home loan. As you know, paying your collection could damage your credit score, so this is risky business. The last thing you want to do is hurt your credit and have the lender pull your credit report again! To avoid this sort of repercussion, pay your collection at the close of escrow. This way, you will preserve your credit score until the last possible minute.

Collections Account on Credit Report: Option #1

Posted on November 8, 2021 by - CREDIT BLOG

If you have a collections account on credit report, the first thing you should do is read our article about addressing credit collections head on and attempting to negotiate for a letter of deletion.
The truth of the matter, though, is that sometimes you will be unable to negotiate for a letter of deletion. If this is the case, you have four options:
Collections Account on Credit Report: Option #1
You could immediately pay the collections account. The pros of this are pretty straightforward:

  • As long as you take all the necessary steps and learn how to fix credit, your credit score will be only minimally affected after just two years.
  • If the collections account appeared on your credit report in the past few months, your credit score is suffering regardless, so this option will not significantly lengthen the amount of time your score suffers from the slip-up.
  • You won’t be sued for failing to pay the debt.
  • Your agreement with the creditor will be satisfied in full, so those harassing phone calls will stop!

Now let’s take a look at the cons:

  • Your credit score will probably take a hit. Remember that paying a bill in collections often causes a person’s score to drop.
  • The item will remain on your credit report for seven years. You will have no leverage to negotiate for a letter of deletion.

If the collections account on credit report is relatively new, and you don’t plan on making a large purchase in the next two years, this might be your best option. Be sure to pay the debt instead of making payments. Remember that each time you make a payment on a collections account, your score will take a hit.
If you choose this option, try to negotiate a smaller payment. A lot of creditors will settle for cents on the dollar, especially if you have a bad credit score and they think you might enter bankruptcy. After all, they would rather receive something than nothing!
Here’s another tip you might want to consider: In some cases, you might be better served by asking the creditor not to report the payment to the credit bureaus. I know this seems counter-intuitive, so be sure to read Chapter 6 of 7 Steps to a 720 Credit Score before taking action. If the collections account on credit report is old and you have not made payments for the past two years, the payment might hurt your score. Asking the creditor not to report the payment could preserve your existing score.