Question:
Dear Steve,
Although I have made great strides in the last four years, I brought a poor credit history and score to our marriage (married for five months). My wife, whose name is on our mortgage as she owned our home prior to our marriage, is happy and proud of the work I've done to raise my score from 590 to 670 in about 18 months.
However, I'm concerned about how my still painfully mediocre credit score will affect our plans to buy a new house in the next 12-18 months. As I understand it, mortgage debt is the "holy grail" of debt on a credit report, so...
Should we put my name on our current mortgage to prepare for our eventual joint application in a year's time? Will this help/hurt my score? Will it help/hurt any aspect of my wife's immaculate credit? Any insight is greatly appreciated, thank you. -Devin
Answer:
Dear Devin,
I wouldn't say that a mortgage debt is the "Holy Grail" on a credit report. In fact a great credit history on an unsecured line of credit carries a lot of weight, maybe even more, on it's own. The expectation is that people are more likely to pay on secured items like homes and cars.
Restoring or rebuilding credit is a combination of a number of items. The first is to get a consolidated credit report and look the three bureau report over carefully to see if you can spot any inaccurate reporting. If you can, dispute those items with the credit bureau. You also want to look for any open and unresolved past items that you need to pay.
The next critical item is to make sure you have unsecured credit that is being positively reported about you to the three major credit bureaus. It would be good to have two or more cards open and reporting current and on-time payments.
Finally, the last part of the secret recipe is time. The more time that has passed since your bad credit items were delinquent and the more time that passes from a consistent on-time payment history will help to increase your score.
There are places like CreditKarma.com where you can get your credit score for free and they have an excellent online credit score simulator that will show you the things that you can do to increase your credit score further.
It would also make logical sense for you to find a local mortgage broker now, one you want to work with for your future mortgage. I would suggest setting up a meeting now to develop a plan to get yourself in the best financial shape possible based on the most likely lender for your situation.
Please post your responses and follow-up messages to me on this in the comments section below.
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