Poor Credit and buying a home
I can tell you from first hand experience that wishing and hoping for your credit to improve doesn’t work. Actually, nothing happens until you finally decide to take massive action to make it happen!
When I tell you that your credit problems can disappear, I am speaking with experience and telling you stories from a book. When I say that you can start using your credit card not fearing it will decline, or answering the phone at night, I can personally attest to it. You see in my much younger days, I was faced with my fair share of financial challenges, challenges which overtook me until I finally got the upper hand on them. Like many other things that are hard, it did take some sacrificing on my part. Now when I speak about sacrifices, I’m not talking about giving up eating; I’m talking about giving up the old ways and going in a totally new different direction.
If you already own a house, the solution is much easier. You can read more about it by clicking here. Now for all of you who don’t currently own a home, start thinking about getting one. Even with poor credit, there are options out there today! I currently have many lenders that will offer mortgages to folks with poor credit. If all else fails, you can even look at doing a lease on a home with an option to buy it, provided you can find a seller to structure this deal with. It could look something like this, after one year of lease payments made on time by you, the seller gives you the option of purchasing the home. You might be able to structure a deal whereby you can get a loan using the equity that was created, if any, during the time you were leasing as your down payment. This will make the purchase easier. You should be able to create some equity just based on the fact that the seller doesn’t have to pay a real estate commission and can give you that savings.
Why is it important to own a house? In this country, housing generally goes higher year after year based on higher building costs, limited land availability and inflation. Some areas obviously are better than others, but in the long run, they are all good. The increase in the equity in your house means your balance sheet will become more balanced. Your asset side, which includes the equity in your house, will grow to meet the liability side and help you even quicker. You can use the equity in your house at any time to start getting out of debt, and although I’m sure there are some of you out there who may think that’s foolish, hey, obviously you haven’t lived with credit problems.
I was speaking with a financial planner who was sharing this story with me: a client of his called him one day and said he couldn’t go on with his credit card nightmare ($91,000), and so he referred him to a mortgage broker who talked about a refinance, pulling cash out of the house and paying off the debt. He had the equity to do this and his credit hadn’t deteriorated at that moment. He knew it was going to, because he couldn’t make the payments any longer. At first he resisted the advice of the mortgage broker, but after about three weeks and only after exhausting every other avenue, he went forward. He was delighted and told the financial planner that he had already discounted some of the debts pending their payoff from the refinance.
Three years later he called the mortgage broker to refinance into a better loan, as his prepayment penalty was up. When the mortgage broker ran his credit, he was horrified. The client had never paid off one of the debts and they were all either written off or in collection! The mortgage broker called him and told him that he couldn’t help him. When the mortgage broker called the financial planner to relay this story, he was totally shocked!
For a long time after that incident, the financial planner felt responsible for his actions. He wasn’t, but he still felt that maybe he had done something wrong. He didn’t, and finally realized that even if he had forced him to pay the debts off with the funds from the new mortgage, the client most likely would have run them up all over again.
I thought about that story for some time and wondered what I would have done in that situation if I was the financial planner and how I would have felt about the whole incident. After a while, I came to the conclusion that some people are just like that, but should that ever stop me from helping the majority who aren’t? Of course not! I just cannot live my life with the thought that people aren’t inherently responsible.
The battle to keep your credit in tip-top shape isn’t easy, especially for young people. Advertisers are out there spending billions or maybe trillions of dollars showing you just how easy it is to live today and worry about it tomorrow. The credit card companies didn’t get as big as they are by accident. They know how to push your buttons and push them, they do!
Now back to the problem: poor credit. Poor credit affects you in so many ways, because it limits the alternatives you have when money is short and problems are long! There isn’t one simple formula that will work for everyone. There are those out there who will simply tell you that all you need to do is quit spending unless you have the cash, but they obviously haven’t been there when your child is sick and needs medicine that you can’t afford. Or it’s your child’s birthday and you don’t really have anything to give them. They weren’t there when you lost your job and your hope at the same time. They do not know what the constant phone calls can do to your psyche and your sense of self worth.
Sit down and make a real list of your bills, leaving nothing off. The list should include the amount and the monthly minimum payment. Now list all your income leaving nothing off including any financial help from your parents, friends or relatives. If you own a home, now get a real idea of what your house is worth. Now you have the entire puzzle and you can start to figure it out. Keep in mind that “Seeking help” is not a saying, it’s a major part of the solution.
For those of you who have never been in financial trouble, you have my best wishes that you never see days like these! For those of you who are currently dealing with these financial hardships, the best piece of advice I can offer you is, that you need face the truth, the whole truth of your situation, and after having done so, uncover the mess and then finally try to solve it. Not part of it, but all of it.
The missing ingredient to recovery is the need to include reserves in the formula, as it will not work without reserves. Why? Because the first problem that arises will trigger the old solution. Once you have reserves, your chances of recovery are ten times greater than without them. They must be an overall part of the plan.
This is not a pleasant subject, but with the right commitment and right actions taken by you, it can be!
