Would I be eligible for a homequity loan with just a 600 point credit score?

[Anonymous]

Hello. I'm trying to get a 34,000 dollar loan to pay off a tax lien on my property. I own the home in full but my credit score is on the low side(600) according to most lenders i've spoken with. The only thing so far I've been eligble for is an FHA cash out refiance but that entails borrowing much more money then i'd like to.  This type of loan also requires having my taxes paid in escrow monthly which I'd prefer not doing and just paying them on my own. My short term goal is to aquire a loan for 34k, 30 years with a low monthly payment. In the next few years I'd be able to pay off the loan completley. 

Any advice would be appreciaed. 

[Anonymous]

Most tax agencies want payment a will work out a payment arrangement. Try that first. I wouldn't go into debt to pay a lien. All my tax debts were paid off with time through programs offered.

[Anonymous]

Thanks for the response ABCD2199. I should have clarified that this was a property tax lien. The company that bought the lien was not willing to work out payment arrangements with me and want the money in full. Unfortunatly a home equity loan or something similar seems to be my only option right now to prevent a foreclosure down the the road.

[Anonymous]

Oh yeah whoever bought the lien may just want the property. Why are your scores low other than the lien? Can you do anything to raise your scores to 700s? I have an unpaid lien on TU which is my lowest score at 701 -- maybe your credit card utilization is too high?

If you can get your scores up 40 points it might help securing an equity loan.

[Anonymous]

Unfortuantly for me that's there goal. Funny thing is the tax lien doesnt even show up on any of the three credit reports. What's hurting me is 5-7 outstanding debts I have in collections. I say 5-7 because from what i've read not every report shows the same debts. The fresh start consultant at quickenloands suggested I try to offer the verizon 3rd party debtor to ask for a pay for delete but I wasn't able to get anywhere with that. Just told me they didn't offer it.  Yea I think if I had a 620 right now i'd qualify for a lot more,640 even better. Only credit card I have is a wells fargo secured card for 300 dollars.  I have a truck payment too which for the most part payemnts have been on time. My last payment for that is the end of this month.

[Anonymous]

Considering that your taxes were sold at auction, it may not be a bad idea to have an escrow account for your taxes.  Having something like that in place might help prevent you from getting into that situation in the future again.

[Anonymous]

UncleCorky -- when your loan is paid off your score will drop as much as 30 points more. Do the Alliant SSL Technique in my 11 rules signature link today asap.

You want a minimum of 3 cards for rebuilding score purposes so check out 2 more cards maybe discover secured or a capital one card.

Also note the AZEO method in my link. It can have a drastic effect in your score.

As for Verizon many of us have had that collection deleted by having the original creditor claw it back and then pay them.

[Anonymous]

Oh boy! I wasn't expecting such a drastic drop from having my auto loan paid off. I was thinking the credit I built from the auto loan would remain on my report for awhile. Reading up on Alliant SSL technique now.  Now from what i've read opening up more credit cards lowers your credit score for the short term? Would this not pertain to me since I only have one only credit card at the moment? I want to build my credit long term as well but right now being as I'm only 20 points under to qualitfy for home equity loan options I'm looking for something that could give me a quick bump to 620 so I can move forward with this. Once that loan is secured I can start building my credit for the long term so I'm not put in this kind of position again. By Claw it back do you mean Verizon reclaming the orignal debt? When I inquired to verzion they didn't have much to say to me other then the acount is closed and to contact jefferson/capital about paying the outstanding debt. Thanks again for the help

[Anonymous]

I really need to make a post about it because I do answer it a lot!

For FICO scoring purposes, a new account can hurt your score while it ages, but for FICO scoring, the first three credit cards tend to raise your score because FICO prefers to see a minimum of 3 cards.  So cards #1-3 all boost your score a little bit (5-10 points each) without the aging penalty.  This is true for most people but if your oldest single credit card is 20 years old I haven't seen data points on what happens.

3 credit cards + an installment loan with less than 8.9% left to pay = best way to quickly boost scores.  That auto loan probably has less than 8.9% left to pay so it's giving you maximum FICO boost for a loan, but once it is paid to $0, you lose all those points.  The Alliant SSL is highly recommended to get 2-3 months BEFORE your last loan is paid off so you carry all that beautiful FICO boost from having a loan report with less than 8.9%.

Note: if you get a NEW car loan soon after the Alliant SSL, you lose that boost because the new loan will report 100% balance left to pay, and that removes the free FICO boost.  One thing I suggest to people is if they get a new auto loan, at the very least try to pay down 10-15% balance as fast as possible to get under the 89%-100% balance penalty phase.  So if you get a $25,000 auto loan, try to pay balance down to $22,000 super fast so you're not dinged for a new loan balance.

I asked around about home equity loans on Facebook and got no answers from anyone. Some folks were curious if you could even get an home equity loan with a property tax lien   I'm not sure if that might prevent it or not, but if it isn't on your credit reports that's a benefit.

[Anonymous]

Ok so at the very least it sounds like having 2 more cards will help offset the impending drop i'm going to see when my auto loan is paid off? Also I wanted to mention I had a kohls charge card years ago which has been closed awhile. How long will it take to see the credit score drop from my auto loan being paid in full? Should I at the very least stave off paying my last monthly payment for a few weeks to buy myself some time to potenitally benefit from my current score. If I was able to do that and find a way to get a collection deleted from my report I'd probably be close to a 620. 

Yea I looked into that awhile ago and i've heard of people being approved for home equity loans with tax liens luckily! Esp since i'd be using the loan to pay off the debt which would put the lender in 1st place. I've already been accepted for a few cash out refiancnes but  a lot more then I wanted to borrow resulting in much higher montly payments. If I could just get my score up a few points quick I'd be at a number to be considered for a home equity. A few of the lenders told me they could do a lot more for me if I had a 620.  Seems like right now the only thing that could help me get to the 620 before i'm effected by the auto loan drop is getting some of these collection debts deleted.