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Read on, good info here
http://ficoforums.myfico.com/fico/board/message?board.id=rebuildingcredit&thread.id=28996
Medical collections won't prevent a mortgage loan from going through (though it does depend a bit on how old the collections are, since they do represent a willingness and capacity to pay your bills).
You mention that your FICOs are low? How low are they? Right now, it seems that for most lenders, a 580 mid-score is the minimum, but that'll change soon to a 620 minimum. Do you have any credit cards? Getting a credit card can help with your mix of credit (since it shows lenders that you can use it wisely). If you do have one (or more), paying down the balances to less than 10% utilization can boost your scores quite nicely.
Do NOT just pay them outright, though. Doing so will tank your score, since the CA will then update your tradeline to read as "paid" (updating is BAD ... VERY bad, when it comes to collection accounts). Go the HIPAA route. Follow the instructions to the VERY letter. Every step. It will work.
Lastly, get your butt over to the CRAs' websites and "opt out" ASAP. That will prevent the CRAs from tipping off CAs that you're fixing your credit. If the CAs find out that you're fixing your credit, they'll assume that you have a reason (such as, trying for a mortgage or other type of credit) and will KNOW that they have some leverage in getting you to pay them (as in "If you don't pay us NOW, we'll report this on your CRs ASAP" ). That's something you don't want!!!
Best of luck!! Keep us posted!!
@Anonymous wrote:
My realtor is telling me to pay them to take down how much debt I owe.
Your realtor is a realtor. Not a lender or mortgage broker.
While that IS good advice, paying those medical bills (and not HIPAAing them) will tank your score. Especially if you only have two on your CRs.
Plus, medical collections aren't figured into DtI, which is what lenders use to decide if you can afford the mortgage.
My husband is in the high 500s and I am in the low 500s. We want to get to over 600 by August. We are both working on paying down our current credit cards, we have gone from 80% util. to about 45% and by next month our goal is for 25% or lower.
Lowering your utilization ('specially if you can take it down to, say, 5%) will REALLY boost your scores.
We have paid everything on time in the last few yrs.
Lenders LOVE to see that!!
We both have about two collection accounts each and I have written letters for all asking for a letter to delete once paid (well see) but my realtor is telling me that we have to have anything like that outstanding paid,
Again, your realtor isn't a lender.
ALL the LOs I've talked to have said to NOT touch old collections unless told to by Underwriting (the people that take the last, long look at your CRs and file before you get final approval -- and funding).
If you listen to your realtor you'll more than likely end up NOT getting the house. I'd suggest that you respectfully thank him/her and let them know that you'll be talking to an actual LO before you do a durn thing.
but Im scared if I pay them ( balances are all less than $100 each) that they will report like new and mess up my score more.
Yup. Which is why you DON'T touch them unless your LO tells you to.
But since they are very old and disputing hasnt worked I am hoping they will send me a letter saying they will delete once paid. And then we have the medical bills which are alot (close to $3000) total. I opted out of the first thing but once I went to the second got confused. Do I need to send an opt out letter to each credit card???