Quote:
Originally posted by veruca
no soup-
thank-you in advance, for this wonderful thread, and i do have a question.
my husband and i just recently, paid off all of our debt, he has been steadily paying for 2 years, through debt consolidation. we had credit cards, and a repo. we havn't missed or been late on a payment, on our new car, credit cards, or anything else for that matter. we went to see about getting a car loan, for him, because all he has wanted is a newer car (he drives a '78 firebird, i think it's time). and our credit was scores were 612, and 613, and we were turned down. how long does it usually take for your score to get better? my original score was horrible, so this is way up for me, but for him, even before consolidation, he never missed a payment. i am also curious, if consolidating hurt him, more than benefited. when we went to purchase my car, we were informed , that the consolidation, was worse than bankruptcy, or even my repo. we r also wanting to buy a house soon, will the situation above effect that as well?
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This is a very tough question - I'll do my best to answer it simply...
Basically, lenders see debt consolidation companies as a "red flag" that indicates that you may potentially have issues paying back debt that you owe. Ironically, it can have lasting effects similar to a bankruptcy, however, once all the debt is paid and the credit consolidation company stops reporting that they are paying your bills, your scores should increase relatively quickly (as opposed to an actual bankruptcy) It certainly may affect your ability to purchase a home, but I would imagine that within a year or so your credit scores should rapidly increase, providing that you continue on your excellent payment history, keep you debt minimalized, and stop working with the debt consolidation company.
Congrats on being debt free, it's an excellent place to be. In the meantime, I would suggest taking your "payments" that you were making and continue making them into a savings account, starting to accumulate money for a downpayment. Your goal should be to put as much as you can down, hopefully 20%, as that way you can avoid paying PMI (private mortgage insurance) providing that the guidelines in your state are similar to the guidelines here in Wisconsin.
The money will add up quickly, and it shouldn't really have an impact on your standard of living, as you are used to making those payments already.
Another thing you may want to consider, providing that your vehicle would make it, is to wait until you purchase a house to purchase a vehicle. If you put 20% down on a 100k house, you would have 20k in equity that you may be able to get a Home Equity Line of Credit for. If you utilize these funds to purchase your new vehicle, as it is a mortgage on your home, it is generally tax deductable.
I hope this answered your questions, if not, please feel free to post again!