I Want a 700 Credit Score to Purchase a Home - Any Advice?

Reader Question: "I have very late student loan payments on my credit report. I paid them all off last year in lump sums, but now I have the late payment histories (120+ days late) on my record for at least three more years. I've already increased my score from 585 to 637 in one year, and have a new credit card to create a recent payment history since I paid off my car last year (six 30+ late payments there too). I would like to raise my score to 700 to qualify for a newer car and purchase a home in the next two years. What advice can you offer me?"

My best advice is to keep doing what you're doing. Negative entries on your credit report (such as those late payments) will have less of an impact on your credit score over time. So even though they might be on your credit report for another three years, until the seven-year point, you can still improve your overall score.



Of course, how much you can improve it, or how quickly, is not something I can answer. Though the credit reporting companies won't admit it, I have my theory that there's a certain "cap" as to how far a credit score can improve while negative items remain. But even if this were true, it shouldn't deter you from following the straight path.

If you continue to make your payments on time, and you keep your credit card balances low (like below 25% of the available limit), you should see your score continue to rise.

Also, keep in mind that mortgage lenders will look at other factors beyond your FICO credit score. Sure, it's important, but it's not the only consideration. They will also review your debt-to-income ratio, as well as the general affordability of the loan (i.e., can you afford to pay it back with your income). Most lenders today are also requiring a down payment of 20% on mortgage loans. The days of "no money down" home loans are a thing of the past -- at least for now.

Hope that helps. Good luck.

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