Home loans with low credit scores and 500 credit score mortgage

Since 2008 and in this Great Recession many borrowers are struggling to regain a footing in the credit world. Its a condition imposed on them by forces beyond their control. Bad credit profiles are an epidemic. They are everywhere.

I was looking at some credit reports last week and not single one of them was without credit issues. Most of these credit scores were below 620 and statistically distributed around the  500 and 550 magic marker. That is where the mean seems to be these days in 2012. The economy has finally murdered once credit worthy borrowers and butchered their credit profiles permanently for a long time to come, which will take many years to overcome.

The biggest reason for 500 credit scores was late payments and major credit problems like Foreclosures. A dose of foreclosure and the credit scores takes a major hit often down 100 or 150 points. So if you had a mortgage that went into foreclosure you would be penalized heavily. The Great recession has seen a great number of foreclosures and “near collisions “ with foreclosures. Even if the home didn’t go to a final sale a bruising effect remains on the credit report. The scores tangle up and hit 550 and sit there. The 500 to 550 credit score mortgage is the invention of and a by product of this Great Recession.

How do you overcome these 550 credit score mortgage and get home loans with low credit scores ? This is the questions that rings all the time.

Well for one reason, you need to correct all parts of the credit report. Dispute incorrect items with the Credit Bureaus or with creditors relentlessly. Don’t let them off the hook. Always communicate in writing. Send a letter and ask them to remove the item in question if it is done incorrectly. If your request’s are ignored you have other options available to you.

You can take assistance of an attorney and have them dispute the issues or you can simply sue the Credit Bureau and the original lender in a small claims court. You can get an injunction against them, and bar them in placing that derogatory information back again in the credit report.

You will be using the Fair Credit Reporting Act and State laws which mirror the Federal laws in many states. These laws have provisions for removal of incorrect information and many borrowers are simply not aware of them.

Secondly start building your new credit around your profile. Adding newer credit will take time, but over a period of one six months and a year it can accumulate. If you have removed all debts, it will be easier. This will boost your credit scores from 550 to higher levels if you paid things on time.

Thirdly the last thing is reduce your debt. Take only that debt that will produce income or shelter. If you buy a home that is fine but nothing else when you are trying to get away from the 550 marker. Reducing debt and lowering limits will also boost your credit scores higher.

It is best to take all these steps simultaneously and move forward, but you can do it one by one.