whats the quickest way to get 16 points inmprovement of mortgage score.

[ozzie1973]

Hi,  I am in the process of getting a second FHA mortgage. My median score is 604, It seems the FhA might not go through, so i want to do conventional.

I have several credit cards , such as discover  Whats the best strategy to get 16 points improvement. Also the disputes on my report  have to be removed for FHA, 

there are 6 existings disputes on my report

Thanks in advance

Sean

[Kevin86475391]

Unfortunately most aspects of your credit score are not things that can be quickly fixed or improved, most take time. One of the biggest exceptions, however, is utilization, which doesn't have a historical aspect to it and is also weighted heavily in your credit score: about 30%. So if you're carrying any debt one of the fastest ways to improve your score is to pay it down as much as possible and wait for the new, lower balance to report.

Everything's going to depend on your exact credit profile. So an action that might raise another given person's score 20 points could raise yours 24 points, or 12 points, or any amount. It's not a black and white, do X thing to get Y results. But utilization is one of the biggest factors and one of the few that can be quickly changed, assuming of course that you're somehow able to get the funds to pay off/down your debt without offsetting your gains by incurring new debt.

[RobertEG]

I agree with Kevin, with the proviso that you are paying down revolving debt (credit cards, LOCs, etc.).

Revolving % utilization is a heavily weighted factor in scoring, and refers to the percentge of your discretionary credit limit on your revolving accounts that you are currently using.

Installment debt is not included in your % util, and paying it down will not result in a significant score improvement.

[StartingOver10]

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@ozzie1973 wrote:

Hi,  I am in the process of getting a second FHA mortgage. My median score is 604, It seems the FhA might not go through, so i want to do conventional.

I have several credit cards , such as discover  Whats the best strategy to get 16 points improvement. Also the disputes on my report  have to be removed for FHA, 

there are 6 existings disputes on my report

Thanks in advance

Sean

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FHA loans are much easier to get than conventional loans - and are much less expensive when your scores are in the lower 600's.  [ Edit: for comparison the MIP rate on FHA is 85 basis points and for conventional at 3% down it ranges from 1.45% to 2.25% at a 620 score. That is a huge difference]   Are you looking to put down 20% or more with the conventional loan? That would help because the PMI on a 5% conventional loan down payment is very high if your scores are in the lower 600's. Here is a PMI rate sheet so you can compare the rate against the LTV and your score.  There are only a few PMI companies, this is one of them below:  (check the monthly PMI rate cards below)

https://www.mgic.com/rates/rate-cards.html

PS If you are looking at the 3% down payment conventional loan  - it is very expensive in both closing costs and PMI costs. Have your LO give you the figures to compare. 

What is best for you depends on your specific situation regarding your LTV and score.

 You are much better off getting your score to 620 and going with a FHA loan by paying down/off your credit card debt as stated in the previous posts. The break even point is somewhere around 680-700 score range with 5% down where the conventional loan pmi rates beat FHA. If you are putting down 20% or more, then it is better to get conventional. Look at the matrix in the link I posted to get a firm idea of your breakpoints for each LTV in your projected score range.

[CreditDunce]

Util is the big one.  One related factor is reducing the number of revolving accounts with balances.  Ideally, you want 1 with a small balance (for utilization).  The rest should be zero. 

One the potentially negative side, accounts being disputed do not count towards your score.  Once the dispute ends it could hurt or help your score.  If it is just dispute notes, it will not make a difference.

Note: If you have lots of cards, you can probably have more than one reporting a balance without taking a score hit.  However, unless you have tested the break point, it is best to assume it is one card.  I have noticed my EQ-04 score is more sensitive to number of cards with a balance than my FICO 08 scores.  I don't have an easy way to monitor my other mortgage FICO scores.

[RonM21]

All of the above are definitely right. In my experience, paying down CC debt to lower utilization is a very quick way to get a boost in score.

[takeshi74]

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@ozzie1973 wrote:

whats the quickest way to get 16 points inmprovement of mortgage score.

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Depends on what issues there are on your credit profile.  Review your reports and consider typical weighting for FICO:

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

Derogs tend to have the biggest impact given that they tend to kill Payment History.  Howver, getting rid of them is not a quick process if even possible.  However, you want perfect Payment History in the long run so even if you can't get them quickly removed you still want to work on getting as many removed as possible.  Hit the Rebuilding subforum.

Amounts Owed is the next biggest slice and Revolving Utilization plays a signficant role in that factor.  If you have high Revolving Utilization then get it down.  Since  Revolving Utilization is determined based on your currently reported balances and limits this can be quickly changed.  However, whether or not you can benefit all depends on your Revolving Utilization and how much you can drop it.  If it's already low then there's probably not much gain to be had in this area.

Everything else requires time and responsible management.  Generally speaking, there are no quick fixes in the credit world and building/rebuilding is a long, slow process.  If you're thinking of getting a mortgage then make sure you review your reports well ahead of time -- a year or more if possible -- so you can uncover potential issues and have the time to work on them.

Additioally, mortgage lenders will use one of the older FICO models used for mortgages so don't rely on FICO 8's or models not used for mortgages.

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@ozzie1973 wrote:

Also the disputes on my report  have to be removed for FHA, 

there are 6 existings disputes on my report 

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They're also potentially affecting your scores one way or another but we can't tell you scoring impact just based on being a dispute.  You'll want those sorted out ASAP so you're aware of their scoring impacts.

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@Kevin86475391 wrote:

One of the biggest exceptions, however, is utilization, which doesn't have a historical aspect to it and is also weighted heavily in your credit score: about 30%.

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Amounts Owed is 30%.  Revolving Utilization is part of it but not the only thing considered in Amounts Owed.  However, Revolving Utilization does have a significant impact.