Cleaning up credit before talking to bank

[Hopeforchange]

My husband and I are over renting.  We have $5,400.  We're looking at houses in the $70,000 to $85,000 price range.  We need to save $3,400 of $5,400 for FHA down payment AND inspection.  My credit is perfect but isnt concerned with being a SAHM.  My husband score is 584 and while that's enough to qualify, I'd prefer it to be at least 600.  Sooo we have $2,000 to pay of SOME of his debt.  As follows:

Collections: $800 Sprint (anyone settle for less)

Student loan $452~$50 month 

Capital one $209/$300.. $15 a month at 16% 

Capital one $1,420/$2,500 ..$44 a month at 16%

Amazon $175/$900.. $25 zero interest

Best buy $1,800/ $2,000...$30 a month at 19.99% 

I know the collections has to be paid.  Not sure if we should offer less first or how much.  Also don't know if it's better to pay off what we pay more of a month, more interest or what's closer to the limit.  We have $200 a month to put towards debt currently out of his salary on top of minimum payments,  but it's just not fast enough!  Our house is falling apart.  We're paying $800 a month to heat it and the landlord refuses to fix anything.  We need to start the loan process like six months ago!

[StartingOver10]

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@Hopeforchange wrote:

My husband and I are over renting.  We have $5,400.  We're looking at houses in the $70,000 to $85,000 price range.  We need to save $3,400 of $5,400 for FHA down payment AND inspection.  My credit is perfect but isnt concerned with being a SAHM.  My husband score is 584 and while that's enough to qualify, I'd prefer it to be at least 600.  Sooo we have $2,000 to pay of SOME of his debt.  As follows:

Collections: $800 Sprint (anyone settle for less)

Student loan $452~$50 month 

Capital one $209/$300.. $15 a month at 16% 

Capital one $1,420/$2,500 ..$44 a month at 16%

Amazon $175/$900.. $25 zero interest

Best buy $1,800/ $2,000...$30 a month at 19.99% 

I know the collections has to be paid.  Not sure if we should offer less first or how much.  Also don't know if it's better to pay off what we pay more of a month, more interest or what's closer to the limit.  We have $200 a month to put towards debt currently out of his salary on top of minimum payments,  but it's just not fast enough!  Our house is falling apart.  We're paying $800 a month to heat it and the landlord refuses to fix anything.  We need to start the loan process like six months ago!

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I wouldn't pay the collection, especially if you are going FHA. Just leave it alone unless you can get a PFD. Check rebuilding forum to see if Sprint is open to PFD.

OPTION A:  If all you have is $2k right now, I would pay off both Cap One accounts to zero and the Amazon account to zero. Those three total $1804. Then take the rest of your $2k (which is only about $196) and apply it to the Best Buy account. That way you have 3 zero balance accounts and can start to make progress on the Best Buy account. It really needs to be brought to less than 50% of the credit line and it would be much better if you could get it paid down to 10%.  But you will start to see results with the other 3 accounts at zero. IME.

Or, OPTION B, you could pay the Best Buy account off entirely and pay off the small $209 balance with Cap One. You then have 2 zero balance accounts, one small balance left on Amazon and  a larger balance on the other Cap One that you can aggressively pay down. 

OPTION B might be better for you

Either option ought to improve his scores.

[Anonymous]

I would echo StartingOver's suggestion to check out the rebuilding forum here. Great advice to be had there.

[Hopeforchange]

Don't pay off the collections, hmmm.  See we talked to the bank a little over a year ago.  He had over $10,000 in hospital collections.  They told us we had to pay it, had letters waiting for us to sign and mail.  When I told them they we're out of their minds because at that point it had been 6.9 years since he was hospitalized, they wished us good luck and told us to come back when we we're ready financially to pay off our debt.  So I assumed you HAD to pay collection accounts

[StartingOver10]

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@Hopeforchange wrote:

Don't pay off the collections, hmmm.  See we talked to the bank a little over a year ago.  He had over $10,000 in hospital collections.  They told us we had to pay it, had letters waiting for us to sign and mail.  When I told them they we're out of their minds because at that point it had been 6.9 years since he was hospitalized, they wished us good luck and told us to come back when we we're ready financially to pay off our debt.  So I assumed you HAD to pay collection accounts

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Nope. The it is a lender overlay.

FHA guidelines allow up to $2k in collections. Here is the FHA mortgagee letter so you can read the guideline yourself: http://portal.hud.gov/hudportal/documents/huddoc?id=13-24ml.pdf

Paying off the sprint bill won't help you at all as far as getting a mortgage. I say ignore it and find another lender that doesn't have this payoff requirement.

Here are some other helpful threads for you (found in the stickies) http://ficoforums.myfico.com/t5/Mortgage-Loans/Helpful-Threads/td-p/415299

[frugalQ]

I'd chose Starting's option A. FICO dings you for having credit cards "maxed out". I believe they consider "maxed" to be something like 75%. You also are dinged for the number of cards that have balances.

[frugalQ]

Ok, so it appears that my reading skills are slacking today (worked too much!)

I just re-read what Starting wrote. ☺️☺️☺️☺️

[Hopeforchange]

I was actually a little off.  

1 CO $196

2CO $1,400

Amazon $146

BB $1,820

My mum actually owes $300 on the best buy that she pays $100 monthly.  So I'm thinking...

 Pay $1,600 on bb bring that down to what she owes

Amazon and the smaller CO ... By the time that is all said in done in three months the larger Co will be at $1,360... wouldn't be hard to bring that to 30%

What about accounts not being used?  He has a game stop card never used.  And once the smaller things are paid off should we charge say $10 a month and pay it off before the bill is issued?

[Hopeforchange]

Oh and just talked to the bank yesterday and he's actually at a 597.  Woot woot... now I want a 620 haha