Get Out of Debt Guy

Our Credit is Bad. Can We Buy a House?

Posted August 22, 2013

WRAL Reader Question

Dear Steve,

Well this question is for both me and my wife. I am 32 years old and when I was 22 I went to ITT Tech and signed for student loans. While going to ITT I realized that most of the time I wasn't learning anything from the teachers, that the students were pretty much teaching themselves, so I ended up quitting, which is dumb I know.

But also my mom lost her job so I moved back in and started helping her with her bills, meanwhile I was letting my bills go, including student loans which defaulted. So I ended up getting my cars repossessed because I couldn't afford them anymore. 10 years later, the student loans finally came after me to garnish wages but I enrolled in a rehab program and I am 3 months away from becoming current.

I still have collections from credit cards and the repossessed cars among other things. My wife has collections for a repossessed, among other things.

My wife and I are looking to buy a house within the next year and our scores are 490 and 500 respectively. Is there a way outside of bankruptcy to rebuild our credit enough to buy a house in that time frame? And if so, how?


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Dear Duane,

As I'm sure you'd agree, this is a situation that did not happen overnight. It took a long time to have things fall so far down.

I understand what your goal is but it does not appear to be clear you can actually accomplish your goal within the time you've set.

Here is the problem. Your credit score is based on a number of factors. For example, how well you've been paying your bills on time, what your balance to limit ratio is, what type of credit you have, etc. Right now your credit score are in the bottom 25% of scores.

It sounds like your credit history pretty much ended on a downer with the repossessions and defaulted bills. If you wanted to bring your score up quickly the best thing to do would be to pay the balances off in full, have about three new unsecured lines of credit reported about you with consistent on time payments and get your student loans on track, fast.

If you can increase your income and devote much more than the minimum payments on a monthly basis then that approach might be possible. In that case, take a look at the free service available from

But I suspect that might not be a realistic option, otherwise you would have already done that.

I'm afraid with the limited information provided I can only make some educated guesses about what you should investigate. First I'd start off with the Get Out of Debt Calculator and look to see what your options are to tackle your drag along old debt.

When you defaulted on your private student loans the balances increased. Who knows, you might owe more now on those than you can ever repay. 

The advantage of bankruptcy in desperate situations is it gives you a legal fresh start and second chance when you find yourself in a deep pit of debt. Credit can be easily rebuilt following bankruptcy and in a couple of years after bankruptcy you'd be ready to buy a house. I'd suggest you meet with a local bankruptcy attorney and discuss your options so you can see if bankruptcy would be right for you.

In fact, lenders have been loosening their lending for people who have filed bankruptcy. The Federal Housing Administration recently cut their wait time for a mortgage after a bankruptcy to just one year.

And it might just be possible to partially discharge your private student loans in bankruptcy depending on your current situation. People generally say it is not possible to discharge student loans in bankruptcy but that's not true. Read this about discharging private student loans. 

Steve Rhode
WRAL Get Out of Debt Guy

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.