@Xtracho wrote:Hi Folks!
New to the site and enjoying the resources available. I hope I do not come off as too ignorant and lacking in knowledge with my questions. If so, a gentle reprimand would be appreciated. And I would assume, as voluminous as this forum is, that some of my questions have already been asked and answered. I apologize for the repetition in advance if that is the case. [NEVER! Some have no idea, some have some ideas, some have the wrong ideas. Just look around, ask, form an opinion based on responses and others' situations that have already been posted. This isn't something that happens overnight or in a week. This is a process - and unfortunately, a process that requires 100% patience & time!]
Viewing my FICO from the 3 CRA's I noticed that there was no "FICO Score Siimulator" for Experian. So, I used the simulator for the other 2. By paying down my CC debt, the simulator spit out a rather significant FICO score increase for that act alone. Does anyone have any comment or experience on how accurate the "FICO Score Simulator" is? If it is rather accurate then a substantial hike in my FICO would be realized by paying down the CC's. And that is what we plan to do. [The simulator is just that; a simulator. Depending on what your currently using, which is referred to as your "Utilization", expressed in a %, is the 2nd highly scored factor in the FICO algorithm. I think it's the 2nd one but I could be wrong - all I know is it's right up there with Payment History. Look for the page that gives a complete summary of your accounts (if you got these through myfico, it will be in your "Understanding your Score" and "Credit at a glance" sections. You'll have to look over these sections well - I've found in mine, under the "Understanding your Score" section, that it shows my current UT% based on what is helping my FICO score (VERBATIM: RATIO OF YOUR REVOLVING BALANCES TO YOUR CREDIT LIMITS: 4%. FOR FICO HIGH ACHIEVERS, THIS RATIO IS 7% ON AVERAGE. YOUR RATIO IS BETTER THAN 72% OF ALL CONSUMERS IN THIS SCORE...." Just as you already stated, the "recommendation" it gave you is correct if your UT% is >20-30%. While the "optimum" consensus number is 10-20%, if that is not possible just yet, doing what you can to lower that number is a high priority. Even going from 30% to 20% utilization can result in a higher score as the more you use, the more risk increases. If you have balances on ALL accounts, that is not helping either as you're using available credit on all accounts, not just some. FICO is tricky no matter what you do - what is good for one could be bad for another and what is bad for another may be good for another. With all the variables, there is NEVER a "clear-cut" answer. However, I found that when I look at my utilization as a whole and my utilization on each account, you can get a better picture of where you stand UT% wise. Let's say Visa#1 has a credit limit of $2K and you're using $1K. That's 50% on just that card alone. Obviously there may be reasons for that - but FICO doesn't know that (such as a balance transfer from other cards or a 0% promotional period). All FICO sees, on VISA #1, is you're using 50% of it. Now let's look at Visa #2, which has a credit limit of $5K and you're not using it. That is 0%. Overall, based on these two cards only, you're using 14% of your combined credit limits to combined current balances. Based on both, that utilization is LOW overall, but you have one card that is eating up the "bulk". That will be somehow factored in the 100's of variables. See what they are all at individually and see what they are all at overall. The key here, regardless, is to NEVER "max out" just one and definitely to never exceed 30%. Some say 15%, some say 20%, but the "rule of thumb" is 20%-30% as the lower that number is, while also ensuring prompt payments, demonstrates good use of your credit. Hopefully this isn't "too much" at once]
I am in the process of submitting IRS form 12277, Withdrawal of NFTL. My wife and I have a direct debit installment agreement and our tax debt, at this time, is only around 15K. My tax refund will impact that balance due significantly as well. Can I expect to see a significant rise in FICO should the IRS approve the forms 12277 and report the Lien Withdrawals to the CRA's? Does anyone have any experience on how lengthy the process is from submitting the Form 12277 to Withdrawal to realizing a positive change in our FICO scores? [I personally have not had experiences with this paticular situation. If this means removing negative info and converting to positive, the fact there is still a presence of a tax lien is going to impact the score. How bad, how much, etc. is all dependent upon the amount owed and so forth, but bear in mind that just having the lien on your reports is going to pull your score down as it's considered negative, whether paid/unpaid, and the corresponding score "damage" depends on all that & then some. Im sure someone with more tax-related experience will come along on this one.]
My wife just paid off a federal student loan in full and, according to her, they agreed to have this item removed from her credit report. [Nothing BUT good will come out of negative info being removed. If they're removing the TL altogether, any GOOD history with this account is going to go along with it. If they are only removing the bads and keeping the TL on your CRs, then you will now have a POSITIVE TL reporting for however long the TL has reported. Now that it is paid as well, if the TL remains with all NEG removed, that is a great TL to help your AAoA (Average Age of Accounts) as well as experience with Installment Credit.]
We are trying very hard to position ourselves to purchase a home in June or July 2014. Our rental history for the last 4 years is unblemished. And our monthly car payment has never been late in 59 months. We do have some bills in collection, mostly medical as a result of heart surgery in 2011. I have disputed many of these items with the CRA's as a matter of practice. The vehicle will be paid off with our next installment in April. [Honestly, it all depends on the lender. Some require certain things, some do not, some factor in rental, some do not, and some disregard medical collections especially or collections >X # of years. MOST do require collections to be paid but some will allow your Mortgage to pay them off (if there is wiggle room) although this is mostly common on refinance situations. For a purchase, the "general" rule is they want to see all collections paid and/or at least aged around 4-5 years. Like I said at the beginning, EACH lender is going to be different and the chances of finding consistency amongst lenders is rare. Medical ones, in particular, are usually "easier" to get diregarded when there is good reason such as what you presented. You've taken the right steps by disputing them as some may be wrong, paid, insurance finally paid, the list goes on. Alot more can be said on this subject alone but that is a conversation in and of itself. Once you know the CA's that ARE legitimate, if you have the means, ALWAYS try to get a "Will pay this, once verified, if you delete it". Depending on the CA, they may delete it once you pay it and ENSURE it is in writing like the Student Loan TL. It NEVER hurts to try & I got rid of several this route. All they care about is getting their money and if you're showing willingness to pay it right then & there, they'll want that commission & money and may just delete it for you resolving the account. Some WILL be stubborn - some will not. Also, pay attention to SOL (Statute of Limitations). You don't want to wake up a sleeping giant that is months from the SOL unless you're ready to pay it. I wish I could write more on this alone but I'm getting pretty lengthy already]
Would a potential mortgage lender take into consideration our rental history when making a decision for approval or not? [This is part of an overall "background" on your histories as it relates to your housing. Whenever you apply, you're going to declare you've rented & then they will get a letter of recommendation (unless you already get/have one) about how you paid and so forth. It isn't something that will not help you - as it WILL help you - but how much, that is up to the lender. Given you have 4 years of perfect payment history for your housing, and as a matter of practice/common sense, this DOES demonstrate good payment history.]
My gross income for 2013 was 145,000 and 2012 was 119,000. Tax returns, payroll stubs, etc. can verify this with no problem.
I have little doubt that we can find a mortgage with sub-prime lenders. But would like to avoid that if at all possible. Our anticipated down payment on the home will be in the 10-15% range.
I suppose in the end I am looking for some sage advice from the good members of this forum that have "been there, done that." I am completely open to suggestions, advice, and guidance from all of you and I thank you in advance for that. [I touched on alot in just this response and I don't want to inundate. I understand about the sub-prime aspect too. However, this all depends, once again, on the "Big Picture" that the lender is using. One can bear more weight with your rental history to qualify you for a better weight while the other may give little weight to that and worry more about getting CA's paid first. With all the variables, it truly is VERY difficult to say what lender-to-lender will do. The higher the DP, the less you will be mortgaging, which means more LTV%, which means a better overall Mortgage AND overall credit "mix". Having a higher LTV, such as a $280K mortgage on a $300K home, is a 93% LTV and getting that as far below 80% as possible is the #1 objective. I've had several mortgages in the past (had rental properties) and when acquiring properties/refinancing, the main objective is to mortgage the absolute necessity even if that included having 3 out of 5 houses paid for and only holding a note on 2 of the 5. This shows that I have 100% equity available on 3 of the 5 while 2 of the 5 have a 60% LTV. In the BIG picture, a mortgage lender will see I have 3 F&C (Free & Clear) properties, they will see I'm responsible with the other 2, and even if I had to go sub-prime beforehand, in 2 years or so that refinance process will get you out of the sub-prime lending. This, too, is another huge topic in and of itself & I don't want to go too much more in-depth for reading sake. All I can recommend here is to borrow only what you need and if that means waiting another year to be lower than 80% LTV, the better off you will be OVERALL. Remember, that means a higher payment and higher loan amount which will be factored into the countless FICO variables.
First & foremost, WELCOME! 
You're going to find nothing less than the best help you can find through all of our experiences. We're all here for one reason or another - and many people have alot of expertise in these areas. Just bear one thing in mind: READ, READ, & READ some more when you think you have read enough . Make sure you look at the "Stickys" and so forth to get a general idea of what to do or "Where do I begin?" within the topics you are looking for. Believe me - people here WILL help all they can.
As for my input into your situation, I replied within your post to keep my responses in-line. Hope this helps a bit - I tried my best to give an "overview" with some examples in my own histories. There will be others here that have far more knowledge than I do as well. However, the above, particularly with the mortgages, is real-life and how I'm handling/handled mortgages in the past.
Hope this offers a start & feel free to ask away at anything. If I don't know, again, someone else will
Take care