Suggestions on best way to get score 30 points higher - Quickly?

[Anonymous]

Hi all - I'm wondering from your experience on what would be the best way for me to increase my scores about 30 points relatively quickly. 

My current scores are:

Experian - 687

TU - 684

EQ - 669

My credit card limit is $2200 with 8% utilization

I have lots of student loans - all payments made on time

car loan - paid in full 2/13 with 3 lates that were 30 days - 1st late was 9/09 3rd late was 4/12

my average age of credit is 5.75 years

olderst accounts 13 years

I have 8 collections reporting to the various bureaus

Verizon bill from 9/08 paid 2/10 - reports to all 3 bureaus

Unpaid gas bill from 2/09 - $64 - reports to all 3 bureaus - refuse to do PFD

Unpaid parking ticket from 6/12 - $250 - reports to TU only - trying to negotiate PFD

Unpaid Med bill from 2/10 - $195 - reports to all 3 - trying to negotiate PFD but not getting far

Med bill from 2/09 - reporting as unpaid - agreed to PFD but hasn't updated yet - reports only to Experian

Med Bill from 2/10 - reporting as unpaid - agreed to PFD but hasn't updated yet - reports only to Experian

Med bill from 2/09 - reporting as unpaid - agreed to PFD but hasn't updated yet - reports only to Experian

Elec bill from 2/09 - reporting as unpaid - agreed to PFD but hasn't updated yet - reports to all 3

Since the agreed PFD's only report to the bureau with my high score, I'm not sure what, if anything I can do to get my score up. 

The credit simulator shows my score going up by 5 points every 3 months of making payments on time and/or reducing my student loan debt by about 30k for a 40 point increase but I don't have 30k laying around to do that!

The negative factors from myfico credit report are

1. Serious deliquency and/or collection on credit report - all 3

2. Recent collection on credit report (4 yrs 4 mo ago) - TU and Experian

3. Remaining balance on instalment loans (student loans) is too high - all 3

4. Not established long revolving credit history (1st acct 8 yr 2 mo old) - TU

5. Short credit history (oldest 16 years 1 mo, average age of credit 6 years) - Experian and EQ

6. Too many credit account with balances - (41 student loan accounts) - EQ

The agreed to PFD will really only affect Experian which is my high score and might be enough to get that 1 score up. Any suggestions for what I can do to get my lower 2 scores up, or suggestions on how to get a collector to agree to PFD when they're refusing and not cooperative?

Might lowering my CC utilization to under 5% help? or wil it not make much difference since it's already 8%

Any suggestion appreciated. I'm close to locking in interest rates for mortgage, and LO said if I can get my scores up about 30 points, will lower my rate by 0.125%

[Anonymous]

Getting PFD's would really be your only hope. Lowering UTI might get you a few points, but certainly not 30.

If your goal is to lower the interest rate another .125%, why not look into just buying down the rate?

[Anonymous]

I did, but because buying points is not common practice out here, it's not tax deductible

[Anonymous]

I'm not sure why that would be a 'deal breaker'....

IMO, the whole interest tax deductibility thing is way overstated anyway. You gotta look at the whole picture. Who cares about a few bucks from your tax bill if you're saving as much or more in total interest as well as buying equity faster?

Take a look at some amortization calculators to get a feel for: A) how much less in interest would be paid each year as well as total interest saved, B) how much more principle is paid down each year, and C) the amount saved on monthly payments each year, and compare that to the amount you potentially save on taxes. I'd be willing to bet A, B and C are all higher amounts than the taxes potentially saved.

[Anonymous]

I understand what you're saying - it's a deal breaker because the return on investment on buying a 1/8 interest reduction is about 6 years - I'm not sure I will even have the place that long, so it would actually cost more in the end to buy it, than it would to just pay the higher interest. If I were able to take a tax deduction on it, the return on investment would be better through less taxes paid and would make it more worth it. But in the maths, because of the shorter time I will likely have the property, it makes more sense to apply the money towards downpayment, than buying down interest rate, since with a larger down payment, would create more equity.

If it were a property I planned to have for the longer term 15+ years, then buying down the interest would make more sense. Thanks though.

I'll keep pestering the collections to agree to a PFD to see if I can get anywhere with them - I agree that is likely my best bet. Was hoping there might be other options I didn't know about....

[Anonymous]

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@Anonymous wrote:

I understand what you're saying - it's a deal breaker because the return on investment on buying a 1/8 interest reduction is about 6 years - I'm not sure I will even have the place that long, so it would actually cost more in the end to buy it, than it would to just pay the higher interest. If I were able to take a tax deduction on it, the return on investment would be better through less taxes paid and would make it more worth it. But in the maths, because of the shorter time I will likely have the property, it makes more sense to apply the money towards downpayment, than buying down interest rate, since with a larger down payment, would create more equity.

If it were a property I planned to have for the longer term 15+ years, then buying down the interest would make more sense. Thanks though.

I'll keep pestering the collections to agree to a PFD to see if I can get anywhere with them - I agree that is likely my best bet. Was hoping there might be other options I didn't know about....

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Well, my response to that is that you *might* be considering the wrong type of mortgage product. If I was fairly certain that I would not be owning a place more than 5-7 years, then my product of choice would be a 5/1 or 7/1 ARM, rather than a standard 30 year mortgage.

That is of course assuming there are not qualification issues (or other issues) that are forcing one to go with the conventional type loan.

[Anonymous]

But I would also add that it does appear that you have thought it through really well, so I will just leave it at that.

[Anonymous]

I don't know enough about ARM loans to know if I should consider them. With rates so low, I just though locking in a low rate with a fixed mortgage was the best idea. I don't know much about how adjustable rate products work. Would you be able to give me more info? The mortgage brokers never suggested them.

[Anonymous]

Well the ARM's got a bad rep in the last decade as being a cause of defaults leading to the mortgage meltdown. Brokers were hot to push them as a way for sub-prime borrowers to "buy more house" without having a bigger payment, under the idea that borrowers would signifigantly improve their financials or sell at a profit in 5-7 years before the interest reset. In too many cases that never occurred. But in cases where you are sure the ownership is going to be 7 years or less, an ARM gets you a lower interest rate locked in for the initial period of either 5 or 7 years (5/1 ARM or 7/1 ARM) How much lower in todays market, I couldn't say, but I would definitely inquire about it.

I think brokers today are kind of gun-shy about them.

You can go to bankrate.com and see the differences. 7/1 ARMS are about .5% lower than 30 year conventional, and 5/1 ARMS  are almost a full percentage point lower, depending on the lender.

[Anonymous]

Thanks! I just checked WF's website and its 7/1 ARM is almost 1% lower than a 30 year conventional

I couldn't find any info on down payment requirements though - do they have higher down payment requirements? I only have about 10% to put down - enough to get conventional and not need FHA - but I wouldn't be able to come up with 20% down if it was needed for a ARM. If you happen to know, the info would be appreciated.