Applied...Denied...Emotions Fried....

[financiav]

I knew it was coming but it always stings...

I told the mortgage broker I thought we needed until December to repair but it still stings...

DH and I applied for a mortgage and were denied.  The lender said "Your credit is really impaired" but then told us to drop by our discharge papers from our BK in 2005 for possible removal and pay all of our bils on time for 2 months as his recommendation.

What?  That doesnt even make sense....

We are sitting in the high 500s low 600s. This guy is a doofus.  I just feel worn out from doing the right things and seeing little benefit.  My last late on anything was a student loan in December but it was a biggie and sticking out there like a red flag it was 120 days late.  We are waiting until December to show that one year of solid history.

2 questions to lift me from this slump tonight -

1.) Is there any merit to turning in the BK discharge papers for possible removal?  Seems to me it needs to be on there until 2015 and the impact that is having on our score now is minimal

2.) Paying on time...for the next 4-6 months...this would give us 12-14 months of on time payments.  What kind of score bump can I see in the next 4-6 months of on time payments?

I appreciate your help!~

[Sunshine85]

Lates/derog credit after a BK are the kiss of death. My guess is the LO wants to try and have the BK removed not for a score bump, but so that the underwriter doesn't look at the lates and other derog credit as unfavorably. 

I don't think you'll see much of a score bump with one year of one time payments, as the 120 day lates are a killer. Have you tried writing goodwill letters to get rid of the lates? Do you have any credit cards with high utilization that can be paid down? Doing both would be beneficial for your score.

[financiav]

Hi, thanks for the reply. I did try and GW Great Lakes who services my Dept of Ed loans - first attempt failed just last month.

I only have a Walmart card and a Cap One card so not a big credit card user.  Ugh.

I have four separate student loans, two car loans in my name and the two credit cards.

[StartingOver10]

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@Sunshine85 wrote:

Lates/derog credit after a BK are the kiss of death. My guess is the LO wants to try and have the BK removed not for a score bump, but so that the underwriter doesn't look at the lates and other derog credit as unfavorably. 

I don't think you'll see much of a score bump with one year of one time payments, as the 120 day lates are a killer. Have you tried to writing goodwill letters to get rid of the lates? Do you have any credit cards with high utilization that can be paid down? Doing both would be beneficial for your score.

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^^^yep.

What kind of loan did you try for - FHA or conventional?  How much were you putting down? What I am trying to get at is there any compensating factors that the LO is holding onto because I don't understand why he would have you apply with a recent serious late. There is no way 2 months is going to help you get your credit in order.

You are going to have to go back to the rebuilding section and start the process of rebuilding again. Remember a 120 day late is not really one late at all. It is 1 - 30 day late + 1 60 day late + 1 90 day late and then another 120 day late. At a minimum it is 4 very serious lates just on that one tradeline. Can you rehab your student loans? If you are able to rehab, then you will remove all those student loan lates and that would help tremendously.

One other point: you don't need a lot of credit or large credit lines to buy a house. But you do need to show ontime payments. If I understand your post correctly you have 4 student loans and all of them reported a 120 day late payment.  That is 16 separate recent lates on installment loans. If you rehab those loans, then you get rid of all of those lates.

The next thing to address is the auto loans. What is your DTI with the auto loans? After you rehab the student loans you might consider getting rid of one of the auto loans depending upon the monthly payment or refinancing. It's not possible to give better advice without knowing the figures including your gross annual income.

You can fix this. Just come up with a plan and work your plan.

[Sunshine85]

Just read one of your previous posts. The priority is to make some serious headway with all the derog tradelines. A year of on time payments isn't going to cut it, and removing the BK won't do much, either. In addition to the student loans, there is other derog credit from 2011-2012, which would make it very tough to get through underwriting. 

I would do as SO suggests...head to the rebuilding forum and use the suggestions there to get the derogatory tradelines cleaned up. There are lots of success stories on the board of people being able to have nearly perfect reports within 6-8 months. You would be no exception- just keep focusing on getting that new house and getting those keys in hand. 

You can do this!

[PeacefulP]

He might be right about getting your score up in two months. 

On June 5, 2013 my husband's Fico was 614.  Today, it's 696 (mid score 640).  He opened two secured cards, which have given a pleasant bump every month, and we have attacked his credit report line by line. It really is possible. Go obsessively read the rebuild forum. You'll be inspired!