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Hi...I'm really looking for some truth and advice.
I'm single, no children, income of $108k, soon to be $130k.
I have been sloppy and careless with my credit rating.
I have the following:
medical collections (was told by Mortgage broker not to worry about them)
1 old car repossession (2013) with balance of $6700
And the main reason, 2 capital one cards that I let go becaues of a misunderstanding. I am currently working to get those cleaned up and they will be PIF in about 2 months. I have another 2 credit cards with low limits, but are about 50% utilization. I will also clean those up.
I am 100% sure the last 2 points regarding credit card delinquency on the first 2 Cap one card and 50% util on the second 2 (no lates on those) are what dropped my scores to their current levels.
My scores previously averaged around 560-565-570 but I looked and they dropped 50 points (because of 2 cap one cards) so now dealing with about 497-511-520 or around their.
My questions:
1 - If I a)Get my cap one cards caught up and then pay them off and b) pay off my other 2 credit cards over a 3 month time period, could that be enough to get me up at least back where I was? The myFICO simulater says yes.
2 - Are there really truly mortgage brokers that loan on 550 scores even with 10% down (which I will be able do)? I'm not sure if I'm allowed to mention the names but there is one named direct something something and a couple others that swear they can because they're direct lenders..or do I absolutely need a 620?
3 - I am looking for a home in Florida (moving from up north) around the 200k price range.
Thank you for reading!
Not sure what the scores will bounce up to, and keep in mind there is a specific set of scores that mortgage lenders use (so when reviewing the myFICO.com reports, make sure you are reviewing the correct scores). I think the simulator just works on the FICO 8 scores (could be wrong), which aren't the mortgage scores. A change with one version of the scores doesn't directly correlate to the same difference on other versions of credit scores.
There are lenders who can go down to a 500 score. Although with mid 550 scores and 10% down, you'll need to be able to qualify for FHA financing. Most likely you'd have to qualify via manual underwriting. So for that you'll need no installment loan late payments in the last 12 months, and no more than two 30-day lates in the last 24, also need no more than three 60-day late payments on revolving within the past 12 months. Odds are though you'll need clean credit for the past 12 months.
With those scores the only thing I can see helping you is if you have the creditors pay to delete, because paying them off or even settling them won't get you to where you need to be, been there done that. I had similar scores 4yrs ago, settled half of my debt to only see my score hit 580. I pretty much had to wait until they started to fall off last year before my score reached 620. Hindsight, I should have saved my money and been on this forum for tips on how to properly ask to delete the debt if paid, but hindsight is always 20/20. Good luck!
My 2 cents (and that's about what it's worth):
Take your time and give it 2 years. Pay off the baddies or settle in full. Just get them cleared up some way, even at the expense of getting to a 10% down payment. Reason being that you won't need it all in 2 years if you start now.
2 years ago I had 560's scores and 22 active collections. I went to work cleaning it all up. My income went up on a similar trajectory. And in the past 2 days I've pre qualified for zero down loans from 2 diferent banks/CU's. And the money I did save for a DP can now work for me.
It may seem hopeless now and that you have to take what you can get, but put in the time and effort and you'll have more control over the terms of engagement. Everyone's needs are different, but if you can wait and work I advise it. My current score is 715 and banks are competing for me, much like a popular commercial (except I didn't use them and instead worked the contacts I've built over the past 2 years).
I disagree about not paying collections and charge offs. I paid one collection, and the CA said that they wouldn't delete. I settled and paid, and then they deleted it! Also, charge offs should always be paid because they report every month. And they can lower utilization.