Connecticut Couple Cleans Credit in Tough Environment

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Accord One Real Estate, Inc.

Cleaning up is something the Shakils are getting pretty good at, but before they bought their new home, the cleaning was about debt, not dirt.

Ali, an engineer, had racked up thousands on several credit cards while in school in California.

"I just couldn't get caught up and there were a lot of delinquent payments", says Shakil.

His wife, Zobia, had issues of her own rooted in her penchant for from opening several retail store credit accounts. She says she never paid a bill late, but had a low credit score because she had opened and closed so many of the "special offer" cards.

Nancy Brecher of People's United Bank says the Shakils' predicament is far from unusual. Opening too many bank and store cards can come back to haunt you because they stay on you credit history for several years. To compound matters, since the credit crunch hit, financial institutions have tightened their credit score requirements.

"Maybe a lower score was okay five years ago, but now they're being more careful", says Brecher.

In addition, Brecher warns that paying off several cards won't necessarily pave the way to that home loan or mortgage. Most lenders will not only look at your current debts, but the total amount of credit that's available to you.

She recommends that if you have several cards, you should pay the smaller balances first, then close out those accounts. If you're in a pinch, you should always pay something to principal and set up an automatic payment system with your bank if possible. A potential lender needs to see some consistency before they invest in you.

"Whoever owns that mortgage has to see on paper that 'OK this person has a history of paying their loans and debts back on time'", says Brecher.

As for the Shakils, 18 months of living lean have paid off. Their debts are gone and earlier this month, they secured a mortgage after a bit of negotiation.

"After the closing we came to the house to see if the keys really worked because this is too good to be true", says Zobia.

Now they can get down to business on fixing up their 1,200 square foot American Dream that almost didn't happen.

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