i have two tenants who want to buy the rental units they are renting from me, but they have no credit. what can they do to establish credit and how will this take ?
It'll take 6 months from the time they get credit of any type for them to even have a score. But even after that, they'll have a "short credit history" that will make it tough to finance them through mortgage lenders.
One consideration is to do a contract for deed sale. Say two years intrest only, at 10%. Refi to a monthly arm and keep any tax rebate as a finance charge. You no longer have any tax burden or M&R to deal with. I suggest that you have a presigned Quit claim in escrow, in the event of default. After two years you will have the option to extend if need be.
Some credit bureau's (not necessarily the MAJOR credit reporting agencies equifax, experian, transunion... but bureau's that report) will let them use alternative credit. You submit alternative credit tradelines to them (i.e. car insurance, cell phone bills, etc.) and they use this information to populate a score... not sure who exactly is doing it though... but this is what I have heard from another colleague of mine.
If you're a youngster, dealing with "NO CREDIT" situation, then run to your parents, friends, or a spouse, and have them put you as a user on one of their existing lines of credit with long established history. You will get a warning on your credit "for fraud-prevention reasons" that your credit seems to have been established before you were 18, but it will work! Naturally you won't actually use these cards or lines of credit, but the banks will see any prior use of them as something you were a part of.
As Devlon stated, there are programs that will allow a borrower to use alternative tradelines, if they don't have a score. I'm a loan officer in TN, and know that there are several programs where you can use tradelines such as utility bills, car insurance, daycare payments, rental payments, cell phone bills, cable bills, personal loans that you've paid back, etc. You just have to prove that these payments were made on time for the past 12 months and they will count in getting you approved up to 100%!
There are literally dozens of SECURED credit card companies out there that are ready and willing to help you establish your credit. Many of them do not even pull a report when you sign up, they just report you activity to the repositories.
If you have been rejected as many times as you claim if would just sit tight and spend the next 90 days researching the various secured card companies and go with the best 3 out there that fit your needs. Do not continue to have your report pulled because it WILL continue t drop further and further ans you will just be pissing in the wind.
By the way alot of people would kill to have a 640 score with Experian, so you are not in as bad of shape as you are thinking. Even at this point you should be able to get a mortgage loan for the purpose of further establishing your credit score and investment purposes.
You may also want to try becoming an authorized user on someone else's account. Just make sure that they have been on time with making their payments! What this does is create instant credit for you, b/c whatever history is on the account will appear on you credit report. With some companies, it may have to specifically requested that they report the activity to all 3 bureaus for your credit. You don't even have to use the account yourself, just make sure its a trustworthy person who makes all their payments on time.
You should try getting a loan from a bank using a secured cd as colateral. I purchased my first car this way. I didn't have much credit then and this really helped my score.
It'll take 6 months from the time they get credit of any type for them to even have a score. But even after that, they'll have a "short credit history" that will make it tough to finance them through mortgage lenders.
Figure 1-2 years, at least.
Jerre19 -
One consideration is to do a contract for deed sale. Say two years intrest only, at 10%. Refi to a monthly arm and keep any tax rebate as a finance charge. You no longer have any tax burden or M&R to deal with. I suggest that you have a presigned Quit claim in escrow, in the event of default. After two years you will have the option to extend if need be.
Some credit bureau's (not necessarily the MAJOR credit reporting agencies equifax, experian, transunion... but bureau's that report) will let them use alternative credit. You submit alternative credit tradelines to them (i.e. car insurance, cell phone bills, etc.) and they use this information to populate a score... not sure who exactly is doing it though... but this is what I have heard from another colleague of mine.
FICO itself is working on new scoring systems to make "thin file" consumers creditable for mortgages.
http://moneycentral.msn.com/content/Banking/Yourcreditrating/P86174.asp
If you're a youngster, dealing with "NO CREDIT" situation, then run to your parents, friends, or a spouse, and have them put you as a user on one of their existing lines of credit with long established history. You will get a warning on your credit "for fraud-prevention reasons" that your credit seems to have been established before you were 18, but it will work! Naturally you won't actually use these cards or lines of credit, but the banks will see any prior use of them as something you were a part of.
As Devlon stated, there are programs that will allow a borrower to use alternative tradelines, if they don't have a score. I'm a loan officer in TN, and know that there are several programs where you can use tradelines such as utility bills, car insurance, daycare payments, rental payments, cell phone bills, cable bills, personal loans that you've paid back, etc. You just have to prove that these payments were made on time for the past 12 months and they will count in getting you approved up to 100%!
~Kesha
(901)831-5308
**Please See My Profile**
There are literally dozens of SECURED credit card companies out there that are ready and willing to help you establish your credit. Many of them do not even pull a report when you sign up, they just report you activity to the repositories.
If you have been rejected as many times as you claim if would just sit tight and spend the next 90 days researching the various secured card companies and go with the best 3 out there that fit your needs. Do not continue to have your report pulled because it WILL continue t drop further and further ans you will just be pissing in the wind.
By the way alot of people would kill to have a 640 score with Experian, so you are not in as bad of shape as you are thinking. Even at this point you should be able to get a mortgage loan for the purpose of further establishing your credit score and investment purposes.
dl will
"Short Sale Master"
You may also want to try becoming an authorized user on someone else's account. Just make sure that they have been on time with making their payments! What this does is create instant credit for you, b/c whatever history is on the account will appear on you credit report. With some companies, it may have to specifically requested that they report the activity to all 3 bureaus for your credit. You don't even have to use the account yourself, just make sure its a trustworthy person who makes all their payments on time.
Hope this helps!
~Kesha
You should try getting a loan from a bank using a secured cd as colateral. I purchased my first car this way. I didn't have much credit then and this really helped my score.