“We’re trying to buy a home, but my credit score is 579”

If your credit score was 579 could you get a mortgage? That would depend a lot on why you had such a low score. Let’s suppose you had several old accounts from back in 2007 or 2008. Would paying them off help raise your credit score?

Paying off old debts won’t help

Unfortunately, if you have old debts you had defaulted on then settling them wouldn’t help your credit score. As the old saying goes, that ship has sailed. The information is in your credit report and won’t go away. Debts you didn’t pay off in 2007 will appear on your credit report until at least 2014 and maybe not until 2017.

To get a mortgage

If you want to get a mortgage, the first thing you could (and should) do is contact those creditors where you had defaulted and try to settle with them. In fact, most mortgage companies will insist you do this before they will approve your mortgage. When you contact those lenders, you might offer to settle your debts for less than 50% in a lump sum. If they do agree, make sure you get this in writing.

To improve your score

One good way to improve your credit score is to get a secured card. This is where you deposit money to “secure “ it. You could get a secured card by depositing $300 or $500 and then use it anywhere merchants accept Visa or Mastercard. You would have a limit as to how much you could charge, which would probably be whatever amount you deposited to secure the card. In other words, if you deposited $500, you could probably charge up to $500. However, with some secured cards, you could be limited to 90% of your deposit. So with a $500 deposit you might have a credit limit of $450.

Why a secured card would help your credit score

The reason why it’s a good idea to get a secured card is because the bank that issued it will report your usage to the three credit reporting bureaus. If you pay off your balance on time and use the card prudently, this will be reported to the three bureaus and will have a positive impact on your credit score – but only after time. Having and using a secured card for a few months won’t have much of an impact on your score. But if you use it carefully for a year, you will see your credit score improve and will probably be offered an unsecured card. This will expand your credit history as you will be able to use both cards but, again, must promptly pay off your balances each month.

About that mortgage

If there is some reason why you would need to get a mortgage in the next two to three months, you may be out of luck. If you shop around long enough, you may be able to find one but it will come with a higher-than-normal interest rate.

What you need to shoot for

As a general rule, you would need a FICO score in the 640 range to get a mortgage with a decent interest rate. If you did pay off those old debts, got a secured card and used it sensibly, it would take probably 12 months for your score to get into the 640 range and two years for it to get to a good score (660 to 749).