Getting Out of Debt

Credit is very important for you if you are considering obtaining a mortgage. Mortgage companies look closely at many factors to determine if you qualify for a loan, but your credit history is one of the most important among them. Your credit history will determine whether you qualify for a loan at all, and may also be a factor in the interest rate you receive if you are approved for a loan. If you have bad credit, you should be prepared for a frank conversation about your problems with a mortgage professional when applying.

If you are currently in serious debt, it may impact your credit for a long time. You should take immediate steps to attempt to correct these problems. Depending on your situation, there are several ways to get on the road out of debt and toward good credit.

If your credit doesn't in irreparable shape, you may be able to do something about it on your own. You may need to make some difficult financial choices, or changing your lifestyle to better fit your income level. You can try things like selling a second car, taking equity out of your home, asking a relative for a loan, cashing out your 401K, selling family heirlooms or jewelry, or selling your house in order to pay off your debts then renting. These solutions obviously do not apply to everyone ý they are just simple suggestions that may allow you to escape from moderate debt.

If these suggestions arenýt options for you, or you have more severe debt, you may want to talk with Consumer Credit Counseling Services (CCCS). They may be able to help you pay off your debts as if you were in a Chapter 13 bankruptcy, without actually filing for bankruptcy. If CCCS won't work with you, you may want to consider Chapter 13 bankruptcy, which gives you five years to pay off your debts. However, your credit will be bad for these years, and the bankruptcy will stay on your credit report for seven years.

Finally, if your debt is so excessive you can never repay it, you should Chapter Seven bankruptcy. From a credit standpoint, a Chapter Seven bankruptcy is probably your worst option, but you will be done with bankruptcy in six months. However, your bankruptcy will stay on your credit report for ten years. While this may not prevent you from getting a loan for that long, lenders are starting to tighten their requirements and bankruptcy may impair your ability to get a loan for quite some time.