American Homeowner Preservation helps keep families in their homes by arranging short sales to investors, who provide affordable leases and favorable repurchase options to the selling families. Most families participating in AHP’s program have severely damaged credit and will need to wait at least two to three years before qualifying for a new mortgage. During this wait period, families can maximize their likelihood of qualifying to repurchase by reestablishing their credit and finances utilizing tools such as credit repair, secured credit cards, alternative credit and budgeting.

Credit repair services such as Lexington Law offer to “legally repair your credit and raise your credit score by removing bad credit.” This generally involves disputing negative entries on your credit report with the expectation that these items will be reported more favorably or removed altogether. Lexington’s fee is $99.95 to set up, then $49.95 – $89.95 monthly, depending on the service level chosen. There are many similar services, and one can even dispute items themselves by obtaining a free credit report and writing letters to creditors disputing the charges. The goal is to increase the credit score to at least 620 – 640, which is the minimum at which you may qualify for FHA financing.

Secured credit cards can be used effectively to increase credit scores. With a secured credit card, you deposit an amount in a bank account and then receive a Visa or Master Card with a limit equal to the deposit. For instance, you deposit $200, and then you can use the credit card for up to $200. You cannot withdraw your $200 until you close the account, or your issuer allows your credit card to become unsecured due to improvement in your qualifications.

Obtaining three secured credit cards with modest deposits is typically most effective. Use the cards frequently and pay at least the minimum payment each month but, for best results, do not pay off. Carry a balance and have new charges on each card every month. You are building a track record of responsible usage and regular payments, which reports more positively than non-use or paying off each month. These cards all report to the credit bureaus without distinction between a secured or unsecured credit card. One caution: expect fees to be high relative to unsecured credit cards, as well as typically higher rates of interest, with some even requiring a fee if you make your online payment less than two days before the due date. Nevertheless, secured credit cards can represent a pro-active and cost-effective means to improve your credit score.

Alternative credit such as positive payment histories from landlords, utility providers, cable TV and similar creditors may not show up on a credit report, but can be powerful evidence of families’ restored creditworthiness. Typically, FHA will accept alternative credit in their underwriting.

Crafting a budget and listing every dollar of income in one column and every dollar of expense in another is useful in helping families more easily identify expenses which can be reduced or eliminated. The extra funds may be needed: although down payments on FHA and similar programs are still in the 3 – 5% range, larger down payments may be required. However, the steep price declines in many markets may help offset these increases: a 5% down payment on a 2006 $150,000 Florida home equaled $7,500, which equates to a 20% down payment on the same Florida home selling in 2011 for $37,500

Families with credit damaged as a result of the housing crisis are encouraged to start the rebuilding process early and to remain disciplined in executing their plan. The modest extra effort to make the right choices each day may well be rewarded with a relatively prompt return to homeownership.

To learn more about American Homeowner Preservation, visit www.ahpfund.com or call 800-555-1055.