Boosting credit?

[red6905]

My husband and I are looking to purchase our first home. We've talked to Homestar, and they need a minimum 620 score. My husband will be the only one on the mortgage because I am an independent contracter and my income doesn't count. Right now my husband's score is a 596. He has no credit cards himself, but is an authorized user on my Discover and Capital One cards, that we are currently paying off (just payed off one today, actually). My question is, do we need to try to make him a joint account holder or will being an authorized user suffice in boosting his credit when we pay off these debts? I'm not sure they'll even let him, though. Also, he has an installment loan with around $1100 left. Will paying that off help? Any other tips you have to try to get to 620 as quickly as possible would be great.

Thanks!

[guiness56]

If the accounts he is AU on have high balances he may be better off without them.  What is his overall utilization on these?  Are there any late payments?

It is suggested not to apply for any credit 6 months before applying for a mortgage.  The inquiries and the new TL could cause a score drop.

As for the installment, they have little impact on your score.

Does he have any collections or charge offs, any late payments?

[llecs]

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@red6905 wrote:

My husband and I are looking to purchase our first home. We've talked to Homestar, and they need a minimum 620 score. My husband will be the only one on the mortgage because I am an independent contracter and my income doesn't count. Right now my husband's score is a 596. He has no credit cards himself, but is an authorized user on my Discover and Capital One cards, that we are currently paying off (just payed off one today, actually). My question is, do we need to try to make him a joint account holder or will being an authorized user suffice in boosting his credit when we pay off these debts? I'm not sure they'll even let him, though. Also, he has an installment loan with around $1100 left. Will paying that off help? Any other tips you have to try to get to 620 as quickly as possible would be great.

Thanks!

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Was the 596 a score pulled from the lender? If not, are you sure it is a FICO and would that be the mid-score?

He cannot be joined in as a joint card holder after the account has been opened. AU is the only option or to open a new CC (I don't recommend that leading up to a mortgage app). Some lenders have issues with AUs. Some do not. If denied with one, then he can always go to another.

How many months are left on the loan? If 6 or less, I wouldn't pay anything at all (aside from the monthly pmt). Paying it off won't result in a significant boost.

Keep paying down CC balances. Get all CCs to report $0 except for one and get one to report less than 9% of the reported CL.

You can be on the mortgage as an IC. I was. Just make sure your balance sheet and P&L look good. Also you may have to have it factored in if you file jointly on your taxes. You had to have filled out Schedule C on your tax form and that lists your income. If a net income then that can be added to your benefit. If it shows a loss, then that'll cut into your husband's qualifying income. BTW, if ever doing this in the future, you can get around this by paying yourself a salary. You don't have to volunteer that you own the company if they do not ask.

ETA...slow typing disease inflicts 6 out of 10 people everyday.

[red6905]

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@guiness56 wrote:

If the accounts he is AU on have high balances he may be better off without them.  What is his overall utilization on these?  Are there any late payments?

It is suggested not to apply for any credit 6 months before applying for a mortgage.  The inquiries and the new TL could cause a score drop.

As for the installment, they have little impact on your score.

Does he have any collections or charge offs, any late payments?

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Thanks...We just payed off most of the Discover card...it currently has $28 on it with a $500 credit limit. The Capital One is almost maxed out with almost $500 on it, but we plan to pay that off in the near future. I think there were a couple of late payments but not recently. A couple of years ago he had issues with collections, etc, but we took care of those. Mortage lenders have told us the credit to debt ratio we have is really what's effecting our scores. Should we pay off both cards and NOT use them at all again? Or would it be better to put gas expenses on them and then pay them off each month?

[guiness56]

Don't pay them both to 0 balances.  FICO will ding you for that.  Let one report a 0 balance and the other at 9% or below.  Then to avoid interest charges pay it before the due date,

If the collections are still reporting, they are hurting his score.  Start sending out GW letters asking if they will remove the accounts.  Paid and unpaid collections are scored the same by FICO.

[red6905]

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@llecs wrote:

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@red6905 wrote:

My husband and I are looking to purchase our first home. We've talked to Homestar, and they need a minimum 620 score. My husband will be the only one on the mortgage because I am an independent contracter and my income doesn't count. Right now my husband's score is a 596. He has no credit cards himself, but is an authorized user on my Discover and Capital One cards, that we are currently paying off (just payed off one today, actually). My question is, do we need to try to make him a joint account holder or will being an authorized user suffice in boosting his credit when we pay off these debts? I'm not sure they'll even let him, though. Also, he has an installment loan with around $1100 left. Will paying that off help? Any other tips you have to try to get to 620 as quickly as possible would be great.

Thanks!

---

Was the 596 a score pulled from the lender? If not, are you sure it is a FICO and would that be the mid-score?

He cannot be joined in as a joint card holder after the account has been opened. AU is the only option or to open a new CC (I don't recommend that leading up to a mortgage app). Some lenders have issues with AUs. Some do not. If denied with one, then he can always go to another.

How many months are left on the loan? If 6 or less, I wouldn't pay anything at all (aside from the monthly pmt). Paying it off won't result in a significant boost.

Keep paying down CC balances. Get all CCs to report $0 except for one and get one to report less than 9% of the reported CL.

You can be on the mortgage as an IC. I was. Just make sure your balance sheet and P&L look good. Also you may have to have it factored in if you file jointly on your taxes. You had to have filled out Schedule C on your tax form and that lists your income. If a net income then that can be added to your benefit. If it shows a loss, then that'll cut into your husband's qualifying income. BTW, if ever doing this in the future, you can get around this by paying yourself a salary. You don't have to volunteer that you own the company if they do not ask.

ETA...slow typing disease inflicts 6 out of 10 people everyday.

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The 596 we got from a lender. I'm not sure I want to risk him getting denied a CC (he has never been approved in the past). Maybe a secured credit card though? I think there are more than 6 months left on the loan. I guess we will wait on paying that off until after we take care of the CC's. That's interesting about the IC thing...I will have to look more into that. Thanks for your help.

[llecs]

I'm recommending no new credit leading up to the mortgage. Guiness recommended nothing prior to 6 months. IMO, I say a year.

[red6905]

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@guiness56 wrote:

Don't pay them both to 0 balances.  FICO will ding you for that.  Let one report a 0 balance and the other at 9% or below.  Then to avoid interest charges pay it before the due date,

If the collections are still reporting, they are hurting his score.  Start sending out GW letters asking if they will remove the accounts.  Paid and unpaid collections are scored the same by FICO.

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Ok...that's good to know. And I will make sure that the collections are still not reporting. I don't think they are though.