Help! First time home buyer with credit in rebuilding stage.

[Anonymous]

Please Help! I'm 24; I graduated from college last year and recently (a month ago), I moved back with my parents to save for a house until the end of the year. For the past 6 months I have been working to rebuild my credit in preparation for purchasing my first home. When I first contacted a lender 6 months ago he gave me a few tips to improve my credit (back then scores were in the low 600s). These tips including paying down 2 of my credit cards, opening a third credit card and signing up with a credit repair company that he personally recommend. Well, I now have 4 CCs: BOA (oldest card-2013, 500 cl, 200 balance), Capital One Quicksilver (1500cl, 600 balance), Capital One Secured (200cl, 0 balance), and Victoris Secret (500cl, 0 balance). Other things on my cr: about $50,000 in students loans, 1 charged off cc (paid in full) from 2010, 1 30-day late payment on my BOA cc from a year and a half ago, and one installment loan that is a collections account ($990 balance).I also have about 10-12 inquires on each cr from the past 2 years which I know is bad. I have $5000 saved for a downpayment so far, I plan to have $10,000 by the time I start the pre-approval process in December. My salary is $38,500 and my DTI ratio is extremely low (about 6%). My current credit scores are Tu 613, EQ 670, EX 697

My questions:

I have tried with no luck to get the negative items removed from my credit report. Which items (if any), will be a deal breaker for the lender? Should I request a PFD for the collection account?

I plan on paying all my CCs off. Should I do this before pre-approval or before closing? Does it matter?

Are there any other ways to increase my credit score without applying for new credit?

My aaoa is quite low. Will this hurt my chances of being approved?

Any other advise for my situtaion?

[Anonymous]

1st things 1st, never, I repeat, never use a credit repair company if you can avoid it. They cannot do anything for you that you cannot do for yourself with a little bit of effort.  Coming to these forums is a great place to get the information/knowledge to help your situation.  It is good to have at least 3 open revolving (credit card)tradelines reporting in good standing on your credit report, and to keep 2 of the 3 at a $0 balance with the 3rd one reporting below 10% of your total utilization. If your lender recommended it personally, he is probably receiving some kind of kickback I would assume lol. You can try a PFD on the collections, and a GW letter for BOA but BOA is a pain in the rear. I have been a customer for over 10 years and recently wrote 4 GW letters and an email to the executive office of the CEO and got nothing accomplished as they fed me the same "we have to report everything accurate" garbage each time. The inquiries will fall off after 2 years and only affect your score for the first 12 months. At worst, you can keep bothering BOA with GW letters to the EO and they may come around eventually. As for your DTI, make sure you are factoring your new mortgage into that ratio. 6% seems to be an unbelievable low number for DTI. All in all, if you're going FHA, none of these items will be a deal breaker although you would probably have to write a letter explaning the recent inquiries and derogatory items.  Pay down that utilization ASAP and see the scores rise quickly.  If you're going for preapproval in December and want to present the best credit profile, you don't have much time left. A lot of your efforts need to be completed by early November as it can take up to 30 days for a CC company to update your utilization with the bureaus, depending on when they report and when you make a payment. Also, PFDs and GWs through the postal service can be slow and take weeks on end to get a response back so there's that also. Hope this helps.

[Anonymous]

Thanks! I've only sent one GW letter to BOA so perhaps I'll try again. As far as my DTI goes, maybe I've been calculating it incorrectly. I only include my CCs & student loans as those are the only current debts I have (no car payments, etc). The min payment for each of my cards is $25 (*4) & the min payment for my student loans is $10. So that's about $110. In reality, at the moment I put about $200 towards my CCs each month & $100-200 towards my student loans. What else should I include? Am I missing something?

[Anonymous]

Your DTI ratio is low simply because you live rent and utility free with your parents. This will go up considerably once you purchase a home, between mortgage, insurance etc. Different lenders will look at different things so be prepared to explain every line on your report. Be prepared to explain why you have such a low DTI also. When I bought my first home, I even had to explain how and where I came up with my down payment. Enjoy this while you can! I am trying to get in a position to buy a home next year, and all this is making me a little crazy. Good luck to you.

[Anonymous]

First, Welcome to the myFico forums!

Great that you are starting to look at your credit at 24.

Your scores are not that bad right now, maybe hope that the EX comes up closer to the others.  Of course, higher scores mean lower APR for mortgage loans.

The credit repair company is going to take your money to do what your are already doing, except not as good.  They tend to try to over power a debt holder to get them to drop the TL.  If the debts are valid, not much they can do.  Their GW letters (if any) on your behalf will be form letters where they just substitute your name and account number and try to flood them with paper, hoping they will just drop out.  Very often, when they get a CA to drop, the debt comes back in a couple months after they sell it to another CA.  Personally, I would use the money that a 'repair' company charges to add to paying off that collection account for 990 sooner.

Mortgage lenders have their own overlays that go above what a method like FHA or USDA would have.  Is the debt for the 990 an actual installment loan, or is it a payment plan with a CA?  Most lenders will accept a payment plan that has at least 3 months successful history.  Otherwise, try to get all collections either paid or in an agreed plan with the one that owns the debt.

Not sure how they calculate student loans with DTI, it could be different than the way you are calculating it.

You could get more information from the Mortgage forum and reading some posts over there.

The 30 and 60 day lates are less harmful after 1 year,  and even less after 2 years.  90 day and above are pretty bad until they drop off completely.  INQs also count less after 12 months, and dont count at all after 24 months.

A couple more cautions about the credit repair companies:  They submit disputes on your behalf.  Those disputes could be worded in such a way as to be antagonistic to a debt holder, the opposite of GW.  Also, they may submit a dispute that will affect your mortgage app.  Most mortgage lenders will not allow an app to go forward with disputes on your CRs.  They could be working against you in those ways

If you dont have any true installment loans, one of the best and least expensive ways to get one is with SDFCU, State Department Federal CU.  You can join if you arent affiliated by using the 'who can join link'.  You can deposit 500 with them, get a 500 secured loan for 36 months at 14 a month at 3.9%, and also use the 500 loan proceeds to get a secured CC with them.  Having an installment loan would improve your credit mix, which is 10% of your Fico score.

You may also want to consider pulling your Fico Mortgage scores from here.  They would be different from regular Fico 8 scores.

GL, hope that helps, and remember to get things in order and settled down at least 30 to 45 days before making a mortgage app.

.

[diveforfun97]

Congrats on taking the steps towards repairing your credit and buying a home!  First thing I will echo is the advice of not using a credit repair company.  I used a well known one and to be honest it worked a little, but at a cost.  Once I found this site I realized that the company was only doing what I could do for free.  I poured over these forums for hours, hey I have no life, and I had great success.  Next, what state do you live in?  The reason I ask is if you live in NY that charged off CC could get deleted as it was paid in full and is over 5 years old.  If you do not live in NY, dont move here, and ask around on these board for tips in your state.  Good luck!