FHA Preapproved.....Scores plummet 1 week later!!! HELP

[TIDE]

I made the big mistake of paying off some very old bills and they reported as being paid. Also, I took a hard inquiry hit from the mortgage company when they pulled my credit. I was told mortgage inquirys should not count as hard hits. My credit score went from 641 to 575!!!

Am I done shopping for a home?    

Will this new score kill me at before closing?

Will the scores come back up before my preapproval runs out?

The good news is, ALL my bills are paid.

Thank You,

Sick to my Stomach

[rockymtngrl]

If your already preapproved depending on the time line its very possible they won't need to pull your credit again. You can ask your LO to know for sure how they will do things.

Also wherever you heard that a mortgage pull is not a hard pull is incorrect-they are always hard.

[Anonymous]

Unfortunately if all your credit cards are paid down to low balances (under 9%) it will be hard to raise your scores up over 620 quickly.

As far as the LO, it is risky trying to go through with the process but you may be able to aqueek by.  ONe thing is I think you have to sign saying that mothing has changed/all info given is accurate to the bestof knowledge so technically it would be lying/fraud to sign saying everything is goo dwhen you know your score has dropped under the guidelines.  I would not be concerned about that, but there is a high risk that you will get all the way through the process and end up denied and out a bunch of time and money.  There is no way an LO can give you a guaranteed answer if they are going to repull credit.  It all depends upon the file.  Also, if there were a bunch of collections that they required paid, they may veru well want to re-run credit to verify they have been paid. 

So, you may very well be able to get through, but you need to do it with your eyes open.  I would not be giving notices, buying furniture, or making any other plans/purchases that I could not return/reverse until I was closed, recorded, and had the keys.  Nothing is worse than having everything ready to move and having the deal fall though 2 days before movin out and having no where to go.  And, if they were to re-pull ,it owuld likely be immediately before closing.

[Anonymous]

I don't know that not disclosing a score change would be fraud, especially when it dropped as a requirement to pay old collections. What are the chances of anyone's scores staying the same from start to close? But there is a definite risk they'll pull your scores and find out anyway, although our lender told us (in writing!) if that happened when we paid old collections, they would still honor our initial scores. Fortunately we closed fast enough (within 60 days) we didn't need another pull, although i don't think our scores changed much anyway.

[Anonymous]

Scores dropping in and of itself would not be.  Knowing that the bank has a certain minimum credit requirement and then knowingly taking out a loan with a lower credit score would at best be skirting around the edges when you answer that all of the information in the application (including all attached info such as credit reports) is accurate to the best of your knowledge. 

Again, It is a grey enough area I would not be overly concerned about it, I would be more concerned about the risk of putting so much time, energy, and money into a deal to have it fall through at the last minute.

[TIDE]

I think I will call my LO for advice tomorrow and tell him what happenned. I paid them off because they would have made me do it anyway. Hopefully they will come back next month.

About 6 months ago I paid off a couple old bills and the same thing happenned. 2 months later the scores came back higher than ever in my life. I hope the same thing happens again. As of today, all old bills are paid, all revolving credit is paid on time with no lates. I pay off my credit card every month before they report, and I feel almost debt free.

Its not fair to be penalized for paying off old bills. 

[Anonymous]

I agree, that system is rather broken although i've been under the impression they shouldn't actually re-age the accounts and it's a data entry issue. If the information is entered correctly it shouldn't re-age the collection. Of course i could be wrong and the system is just senseless lol

[Anonymous]

Fico weighs negative accounts by the date of last activity.  So when you pay a 4-5 year old bill (which at that point is having almost no affect on your credit), it updates the date of last activity to recent.  So then that 4-5 year old account now counts just as much as if a new collection hit your account.  That is the basic reasoning.  They do not technically re-age them which really means changin the date of delinquenct to affect when it would fall off your credit report/affect SOL.  They just show change the date of last activity.  Your LO should have told you not to pay anything without addressing it with him first..

Now that they are paid off, you should send out some GW letters to try to get them removed.

[llecs]

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TIDE wrote:

I think I will call my LO for advice tomorrow and tell him what happenned. I paid them off because they would have made me do it anyway. Hopefully they will come back next month.

About 6 months ago I paid off a couple old bills and the same thing happenned. 2 months later the scores came back higher than ever in my life. I hope the same thing happens again. As of today, all old bills are paid, all revolving credit is paid on time with no lates. I pay off my credit card every month before they report, and I feel almost debt free.

Its not fair to be penalized for paying off old bills. 

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Exactly what did you pay off? Were they old collections? Old credit cards, if so were they closed? Old charge-offs?

This may have been mentioned already, but you don't want all of your CCs reporting $0.

Where did you get your credit score?

[TIDE]

I paid off old collections, I had a couple of them. I also pay down my credit card every month. I was told that those old collections would have to be paid before I close so I paid them. It cost me about 66 points on my scores.

I called the LO and he said as long as I close within 120 days from my first credit pull I wont be pulled again, I dont know if he is trying to rush me or telling the truth.

.