04 Mar How can my friends clean up their credit?

Q. I have a friend whose husband has ALS. They have limited income and need to get into a new place and they’re looking at HUD loans, but their credit is not good. Who can help them clean up their credit?
— Trying to help

A. It’s kind of you to try to help.

HUD is the U.S. Department of Housing and Urban Development, and the Federal Housing Administration is part of the agency. It offers loans that are insured by the federal government, which gets better deals for homeowners. The loans have lower down payments and lower closing costs, and they’re easier when it comes to qualifying credit than other loans.

There are many options when it comes to improving your credit.

First, they can consider debt consolidation, said Jody D’Agostini, a certified financial planner with The Falcon Financial Group in Morristown.

She said the goal would be to combine all existing debts into one at an interest rate and payment that makes sense for their situation.

First, she said, they should create a budget of their monthly expenses to see what, if any, capacity they have to pay. Then they can contact a credit consolidation company to see if they can consolidate into a monthly payment.

“Banks generally are not willing to do this, but there are online lenders as well as credit unions that are often more willing to help with these situations,” she said. “Make sure to try and create options by getting multiple quotes for comparison and check the lender out well before committing. Read the fine print in any agreement.”

Check out the National Foundation for Credit Counseling for more.

If it is just credit card debt, they might be able to call the credit card company directly and negotiate a fixed monthly payment that can be debited from their checking account to satisfy the loan, D’Agostinis said. Just make sure that it is an amount they can stick with until the loan is paid off, she said.

They should also try to improve their credit score.

They should start by checking their scores. The big three credit bureaus are Experian, Equifax and TransUnion. They may also be able to review their credit score online through their bank or credit card company.

They should check their credit reports for free at annualcreditreport.com.

“They can explore what is causing the low score and provide any supporting documentation to boost it,” D’Agostini said. “Make sure that all the information is correct, and then move to change any negative information such as a late payment.”

Along the way, they should do everything they can to make on-time payments, which will have a big impact on their scores, and try to lower the amount of outstanding credit they have.

If all else fails, they might want to speak with a bankruptcy attorney to see what their options might be, D’Agostini said.

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This story was originally published in March 2024.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.