Need to repair wife's credit for a mortgage?

[baziko]

Hello,

So my wife and I are selling our current home, looking to upgrade.  The home we live in now is in my name as I purchased it before we married.  In order to afford the house we need, I feel we will need to use both my income and my wife's income, however from what I'm hearing, the lenders will take the lowest score between both of us.  This is a problem.

My myFICO score is currently 717, and my wife's is 588. (for some reason myFICO appears to have higher scores than the separate credit bureaus)

My wife has a lot of collection accounts - some small - as low as $60 - some larger - as much as 1-2000.  Most are from a few years ago, and the majority are medical.  I've been trying to figure out what we need to do to improve her scores.  I was planning on just paying some of the collection accounts - but I read somewhere that is the wrong thing to do if you are planning to get a loan soon as it will bring the bad debt back into recent history.  I'm not sure how true that is - but that's why I'm writing here

Other than that, she's on a couple of my credit cards, but no other real history.  So a couple credit cards always paid on time and a lot of debt collectors.  What would be the best way to increase her score?  I understand we will have to eventually pay her bad debt - and i'm fine with that - I'm just confused as to whether now is the right time to do it or not.  

As for a new house, we were considering going with DR Horton, who seems to have a credit improvement program.  Would it be best to go through them to figure out what we need to do to qualify for one of their loans?

Finally, there is some weird collection agency - Midland Credit Management - on my wife's report.  It says the account was opened in September of 2012, and is exactly $500.  It doesn't show up as a collection agency on myFICO, but rather an active account that she is 120+ days late on.  We have no idea what this is.  It could have been a medical bill - but being an even $500 seems unlikely.  Should we try to dispute this?

Thanks for your help and sorry for the long-winded questions!

[tooleman694]

How much is the house you are trying to buy, and what is your income not including your Wife.

I just did a home loan with a non purchasing spouse. My credit is ok, hers sucks..

[baziko]

House - probably 260-270,000

My income: Currently I work 2 jobs and gross about $95,000/year.  I may be starting a new (single) job soon grossing $96,500/year.  I wasn't planning on having DR Horton look at my application until after I start the new job.

[tooleman694]

Your income is fine alone for that amount. what state do you live in and what is your credit score.

[baziko]

Really? We have a lot in car payments and credit cards, so the online calculation tools I was using seems to indicate the most I'd be able to afford is $209,000.

myFICO says my score is 717.  I pulled all 3 from equifax about a week or two ago and it was: EQ: 688, EX: ~658, TR: ~655

I don't understand why myFIC says 717.  We figured we would pay off some of the credit cards real quick to improve the scores and lessen the debt/income ratio - but I want to make sure I put that money to good use.  Is it better to repair her credit, or pay off cards?

The myFICO simulation seems to think we can improve her scores by paying off a couple credit cards that we both have - so maybe i can knock out two birds with one stone?  

[baziko]

Oh and we're in North Carolina

[tooleman694]

You dont live in a Community Property state so you are in luck.

Are any of your debts in your Wifes name only? If so they wont be counted against you.

As long as you dont have a ton a debt, I think you are in good shape.

[baziko]

I wouldn't say i have a ton of debt. But everything says I should pay down my credit cards to increase my score (payment history on everything i've ever owned is perfect)

None of my wife's debts are in my name.  So do you think I should wait until after I start the new job & get first check to get pre-approved? Or will it matter?  (I'm waiting for the background check to come back in - thats the only thing holding it back at this point).

[tooleman694]

Yeah id wait for the new job.

But your scores are perfect for FHA, and with your myfico score if you have another score that high then conventional might work.

I think you could do it alone without your Wife on the loan.

[baziko]

Gotchya - Cool - Thanks for your help!