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Yes absolutely. I currently cannot buy a house despite having a six-figure income for 4 years, money in savings, and having no debt save my student loan. All be

Yes absolutely. I currently cannot buy a house despite having a six-figure income for 4 years, money in savings, and having no debt save my student loan. All because of bad decisions I made in years past.

dangrossman 13y ago
Actual bad decisions you made in the past are a valid reason not to risk underwriting a large loan to you. There are valid criticisms of the credit agencies, but that doesn't seem like one of them. If you want a mortgage and you feel you have a convincing reason a bank should risk entrusting you with their money despite a bad credit history, try an in-person appointment with a lender at a local credit union. Be prepared to show your bank statements, several years of tax returns, and if you're self-employed, a signed letter from your business's accountant about the health of your cash flow. You'll definitely need enough cash on hand for a downpayment of at least 30% the house's value; good strategy even if it weren't required. If you really want to look credit-worthy, use that six figure income to pay off those student loans before you take on an even larger debt obligation.
- callmeed 13y ago
  I don't disagree with you–but it can be frustrating to know you've improved both your responsibility and your earning power yet only be judged by the past. For example, I've paid cash for the last 5 cars our family has purchased over the last 6 years. Why doesn't my ability to do that apply to my credit-worthiness? Small things like that annoy me about the agencies/system. Also, the median home price where we live is $500-600K (depending on the city/neighborhood). 30% of that is quite a down-payment.
  - dangrossman 13y ago
    > Also, the median home price where we live is $500-600K (depending on the city/neighborhood). 30% of that is quite a down-payment. You're talking about being entrusted with half a million dollars of someone else's money. That's a huge bet to make on you; it goes both ways. If you can't afford the down payment, then you can't afford to live in that neighborhood. 30% isn't an unusual downpayment, especially if you don't have perfect credit. With a smaller downpayment, the bank is in a position where you could default on the mortgage, they repossess the house, and because it's depreciated in value at all, get less money when they sell it than they paid the person who sold the house to "you" (to the bank, really) after foreclosure and closing costs.
    - johnchristopher 13y ago
      Why is the house "depreciated in value at all" ? I don't understand that part.
      - dangrossman 13y ago
        You just lived through a recession in which tens of millions of homes depreciated in value during the terms of their loans. Depreciated means it lost value; the house is worth less than before. That, combined with a small downpayment, can result in a bank holding a foreclosed home which is worth less than the value of the mortgage on it.
        johnchristopher 13y ago
        Ah, I see. I thought your explanation was more general, not specific to the current economic situation. And since I learned as a kid that a house normally only get more value over time (I live in western europe) that was confusing me. Thanks for the clarification.
        jdbernard 13y ago
        > I learned as a kid that a house normally only get more value over time I think this is one of the reasons we got into this mess. People bought more house than they could afford thinking they would be able to sell it if they needed to and at least break even. Nobody was prepared for underwater mortgages because we all assumed houses only appreciate.
      - useful 13y ago
        all structures depreciate, eventually it will fall down. It requires maintenance to keep the same value. This is one reason most people will tell you to never buy a condo. Land is finite and does not depreciate.
        bstpierre 13y ago
        > Land is finite and does not depreciate. The value of land can definitely depreciate. Perhaps not in [sub]urban areas so much, but in rural areas the value of land can be tied to things like timber, water, or mining. If I buy some acreage and extract timber/sand/gravel/etc, that land is going to have a lower resale value. Or maybe I buy prime farmland and then crop the soil until it is dead. Or instead of extracting stuff, I leave bad stuff behind (persistent pollution -- lead, mercury, etc). For something more [sub]urban, consider the case where a new highway is built to route traffic around a city instead of through it, and a previously viable commercial location becomes worthless because the traffic count drops to near-zero.
  - ams6110 13y ago
    20% - 30% used to be the standard down payment for a mortgage. I'm not sure exactly when the %5%, 2%, and even no-money-down mortgages started, but they are a big part of why housing has been in such a mess the past decade. They sort of set the general expectation that you could buy a house with no personal sacrifice or investment, and thus made it easy for people to rationalize walking away when the payments became difficult to manage.
  - bullseye 13y ago
    > For example, I've paid cash for the last 5 cars our family has purchased over the last 6 years. Why doesn't my ability to do that apply to my credit-worthiness? Because paying cash once for something is the opposite of proving credit-worthiness. You haven't proven an ability to uphold your end of a long-term agreement. If you want to improve your credit, finance those cars. Make payments for about 6 months and then pay them off. You pay a little extra in interest, but you get another credit entry which is in good standing. On an unrelated note, you can almost always negotiate a better price on your car (in the US) if you finance and then pay the loan off.
    - morrad 13y ago
      There are better (less expensive) ways to build credit than car loans. While I don't remember the name, my wife and I built credit getting some sort of secured loan from our local credit union. The process was something along the lines of making an account with them, putting $X into the account, and then getting a 6 or 12 month loan from them for the same $X dollars at a really low interest rate. Overall I think we paid $30 to $50 dollars over that period in interest.
    - unclebucknasty 13y ago
      >Because paying cash once for something is the opposite of proving credit-worthiness. You haven't proven an ability to uphold your end of a long-term agreement. This is absolutely true under the current system. But, I think the parent is actually questioning the rationale behind the current system. I agree to some extent. Accruing, then using significant cash-on-hand to make multiple large purchases should speak more than it currently does to the customer's financial responsibility and/or wherewithal. It's also potentially evidence of his/her earning ability. All of these should contribute more to the determination of a person's "credit-worthiness". The current system is punitive for those who generally don't like debt, but recognize its necessity for large purchases (i.e. especially for homes). Debt elimination/avoidance is a sound and oft-recommended personal financial practice, which should show sound financial judgement. Why is there a penalty for subscribing to it? Of course the credit-reporting bureaus profit tremendously by upholding the current system as it is. Their biggest customers as well as their source of information/power are the creditors themselves.
  - hackula1 13y ago
    If a 20-30% downpayment seems completely unrealistic, then you are probably not in area that you can afford. A home is like a car, in that nobody forces you to buy the Porsche, and you can always buy something in a cheaper area. A location with a median home value of 600k is definitely in the "Porsche" category of locations. Go find yourself a Camry.
    - callmeed 13y ago
      Never said it was unrealistic–just meant it wouldn't happen immediately. By the time I have it available (2-3 years), my credit score will be improved too. Also, our rent is very low here ($2K for a 4bd home on 1/3 acre in a great neighborhood). We just happen to be in an area where buying vs. renting is out of balance. And your car analogy breaks down real fast. There are many more factors which can/do prevent people from moving to other cities.
  - kevinpet 13y ago
    So you pay cash for everything, and somehow that demonstrates your ability to responsibly use credit? Do you also assume that Mormons are experts on responsible social drinking?
malandrew 13y ago
I thought credit rating things only lasted 7 years. Are your credit transgressions more recent than that?
- marincounty 13y ago
  I'm pretty sure it's 7 years. After that they're suspose to remove the information. They don't really care though. You need to call and have it removed. Sometimes you need to really hassel them. If you have old debt, some buyers of that old debt are fraudlently trying to make it look like new debt by filing it with credit agencies--fight it. It's all about statue of limitations. Oh, I've noticed some of you are very protective of our credit system. I've always felt most credit cards are very unfair. No real control over your rate of interest has alwalys bothered me. While, I'm on a rant. The Credit Agencies need some competition? It would be a great start up? A credit agency that actually looks at an individuals ability to pay back a loan. It shouldn't be a crime to pay off your bills without using a credit card. Oh yes, they claim to look at utility bills, etc, but in order to get the really good credit terms they want to see you used high interest credit cards through out your life. I'll never forget the look on my fathers face when he was refused a credit card, because he never saw the need to use credit until he was in his 60's. This was after paying off a morgage.
  - pionar 13y ago
    > A credit agency that actually looks at an individuals ability to pay back a loan. The problem with that is that just because someone is able to pay back a loan doesn't mean they will. I had a roommate in college that financially was able to pay off a credit card, but was just so irresponsible that he ignored it.
- callmeed 13y ago
  Most are, but (from what I understand) there are ways items can stay on for longer. For example, if your account is sold or resold to a collection agency, I believe the clock resets under the new creditor.
  - 13y ago

dangrossman 13y ago

Actual bad decisions you made in the past are a valid reason not to risk underwriting a large loan to you. There are valid criticisms of the credit agencies, but that doesn't seem like one of them. If you want a mortgage and you feel you have a convincing reason a bank should risk entrusting you with their money despite a bad credit history, try an in-person appointment with a lender at a local credit union. Be prepared to show your bank statements, several years of tax returns, and if you're self-employed, a signed letter from your business's accountant about the health of your cash flow. You'll definitely need enough cash on hand for a downpayment of at least 30% the house's value; good strategy even if it weren't required. If you really want to look credit-worthy, use that six figure income to pay off those student loans before you take on an even larger debt obligation.

callmeed 13y ago
I don't disagree with you–but it can be frustrating to know you've improved both your responsibility and your earning power yet only be judged by the past. For example, I've paid cash for the last 5 cars our family has purchased over the last 6 years. Why doesn't my ability to do that apply to my credit-worthiness? Small things like that annoy me about the agencies/system. Also, the median home price where we live is $500-600K (depending on the city/neighborhood). 30% of that is quite a down-payment.
- dangrossman 13y ago
  > Also, the median home price where we live is $500-600K (depending on the city/neighborhood). 30% of that is quite a down-payment. You're talking about being entrusted with half a million dollars of someone else's money. That's a huge bet to make on you; it goes both ways. If you can't afford the down payment, then you can't afford to live in that neighborhood. 30% isn't an unusual downpayment, especially if you don't have perfect credit. With a smaller downpayment, the bank is in a position where you could default on the mortgage, they repossess the house, and because it's depreciated in value at all, get less money when they sell it than they paid the person who sold the house to "you" (to the bank, really) after foreclosure and closing costs.
  - johnchristopher 13y ago
    Why is the house "depreciated in value at all" ? I don't understand that part.
    - dangrossman 13y ago
      You just lived through a recession in which tens of millions of homes depreciated in value during the terms of their loans. Depreciated means it lost value; the house is worth less than before. That, combined with a small downpayment, can result in a bank holding a foreclosed home which is worth less than the value of the mortgage on it.
      - johnchristopher 13y ago
        Ah, I see. I thought your explanation was more general, not specific to the current economic situation. And since I learned as a kid that a house normally only get more value over time (I live in western europe) that was confusing me. Thanks for the clarification.
        jdbernard 13y ago
        > I learned as a kid that a house normally only get more value over time I think this is one of the reasons we got into this mess. People bought more house than they could afford thinking they would be able to sell it if they needed to and at least break even. Nobody was prepared for underwater mortgages because we all assumed houses only appreciate.
    - useful 13y ago
      all structures depreciate, eventually it will fall down. It requires maintenance to keep the same value. This is one reason most people will tell you to never buy a condo. Land is finite and does not depreciate.
      - bstpierre 13y ago
        > Land is finite and does not depreciate. The value of land can definitely depreciate. Perhaps not in [sub]urban areas so much, but in rural areas the value of land can be tied to things like timber, water, or mining. If I buy some acreage and extract timber/sand/gravel/etc, that land is going to have a lower resale value. Or maybe I buy prime farmland and then crop the soil until it is dead. Or instead of extracting stuff, I leave bad stuff behind (persistent pollution -- lead, mercury, etc). For something more [sub]urban, consider the case where a new highway is built to route traffic around a city instead of through it, and a previously viable commercial location becomes worthless because the traffic count drops to near-zero.
- ams6110 13y ago
  20% - 30% used to be the standard down payment for a mortgage. I'm not sure exactly when the %5%, 2%, and even no-money-down mortgages started, but they are a big part of why housing has been in such a mess the past decade. They sort of set the general expectation that you could buy a house with no personal sacrifice or investment, and thus made it easy for people to rationalize walking away when the payments became difficult to manage.
- bullseye 13y ago
  > For example, I've paid cash for the last 5 cars our family has purchased over the last 6 years. Why doesn't my ability to do that apply to my credit-worthiness? Because paying cash once for something is the opposite of proving credit-worthiness. You haven't proven an ability to uphold your end of a long-term agreement. If you want to improve your credit, finance those cars. Make payments for about 6 months and then pay them off. You pay a little extra in interest, but you get another credit entry which is in good standing. On an unrelated note, you can almost always negotiate a better price on your car (in the US) if you finance and then pay the loan off.
  - morrad 13y ago
    There are better (less expensive) ways to build credit than car loans. While I don't remember the name, my wife and I built credit getting some sort of secured loan from our local credit union. The process was something along the lines of making an account with them, putting $X into the account, and then getting a 6 or 12 month loan from them for the same $X dollars at a really low interest rate. Overall I think we paid $30 to $50 dollars over that period in interest.
  - unclebucknasty 13y ago
    >Because paying cash once for something is the opposite of proving credit-worthiness. You haven't proven an ability to uphold your end of a long-term agreement. This is absolutely true under the current system. But, I think the parent is actually questioning the rationale behind the current system. I agree to some extent. Accruing, then using significant cash-on-hand to make multiple large purchases should speak more than it currently does to the customer's financial responsibility and/or wherewithal. It's also potentially evidence of his/her earning ability. All of these should contribute more to the determination of a person's "credit-worthiness". The current system is punitive for those who generally don't like debt, but recognize its necessity for large purchases (i.e. especially for homes). Debt elimination/avoidance is a sound and oft-recommended personal financial practice, which should show sound financial judgement. Why is there a penalty for subscribing to it? Of course the credit-reporting bureaus profit tremendously by upholding the current system as it is. Their biggest customers as well as their source of information/power are the creditors themselves.
- hackula1 13y ago
  If a 20-30% downpayment seems completely unrealistic, then you are probably not in area that you can afford. A home is like a car, in that nobody forces you to buy the Porsche, and you can always buy something in a cheaper area. A location with a median home value of 600k is definitely in the "Porsche" category of locations. Go find yourself a Camry.
  - callmeed 13y ago
    Never said it was unrealistic–just meant it wouldn't happen immediately. By the time I have it available (2-3 years), my credit score will be improved too. Also, our rent is very low here ($2K for a 4bd home on 1/3 acre in a great neighborhood). We just happen to be in an area where buying vs. renting is out of balance. And your car analogy breaks down real fast. There are many more factors which can/do prevent people from moving to other cities.
- kevinpet 13y ago
  So you pay cash for everything, and somehow that demonstrates your ability to responsibly use credit? Do you also assume that Mormons are experts on responsible social drinking?

malandrew 13y ago

I thought credit rating things only lasted 7 years. Are your credit transgressions more recent than that?

marincounty 13y ago
I'm pretty sure it's 7 years. After that they're suspose to remove the information. They don't really care though. You need to call and have it removed. Sometimes you need to really hassel them. If you have old debt, some buyers of that old debt are fraudlently trying to make it look like new debt by filing it with credit agencies--fight it. It's all about statue of limitations. Oh, I've noticed some of you are very protective of our credit system. I've always felt most credit cards are very unfair. No real control over your rate of interest has alwalys bothered me. While, I'm on a rant. The Credit Agencies need some competition? It would be a great start up? A credit agency that actually looks at an individuals ability to pay back a loan. It shouldn't be a crime to pay off your bills without using a credit card. Oh yes, they claim to look at utility bills, etc, but in order to get the really good credit terms they want to see you used high interest credit cards through out your life. I'll never forget the look on my fathers face when he was refused a credit card, because he never saw the need to use credit until he was in his 60's. This was after paying off a morgage.
- pionar 13y ago
  > A credit agency that actually looks at an individuals ability to pay back a loan. The problem with that is that just because someone is able to pay back a loan doesn't mean they will. I had a roommate in college that financially was able to pay off a credit card, but was just so irresponsible that he ignored it.
callmeed 13y ago
Most are, but (from what I understand) there are ways items can stay on for longer. For example, if your account is sold or resold to a collection agency, I believe the clock resets under the new creditor.
- 13y ago