Trying to qualify for FHA-- questions about collection reporting

[Anonymous]

Hi there, 

My husband and I are trying to qualify for an FHA loan to purchase relatively quickly, as I'm currently 6 months pregnant with twins. 
I am wondering if I should pay off the collection accounts in an effort to look better to qualify for an FHA loan. 

My scores are 624, 633, and 625 per myFICO. 

I have 3 outstanding items on my reports from collection agencies:

Enhanced Recovery services for Sprint cell phone bill from 2010: $396

The other two CAs are for medical bills:

NAR Inc $100

Chapman Financial $208

Outside of collections accounts, I have two credit cards I obtained when my scores were REALLY low:

CapitalOne secured card that reports every 30 days with a limit of $300. I have been paying this to zero each month for the past 4 months. 

GapCard that has a limit of $200. 

Both credit cards have no balances owed. 

My husband's credit is fairly limited. He has no accounts in collections, a mid score of 640. 

My mother in law has offered to be listed as a co-borrower. Her FICO is in the 820s. 

Any and all advice is welcome! Thank you so much. 

[RobertEG]

I would present your question to your loan officer.

They may require satisfaction of any unpaid, delinquent debt as a pre-condition to final approval.

If that is the case, you will have no option, and could send out an immediate PFD offer, thus addressing both any required satisfaction of the debt, and obtain a possible credit score improvment.

[Anonymous]

Thanks, Robert! I'm wanting to improve my credit scores anyway, as it is time I grow up and manage my credit more effectively.

What does a pay for delete letter look like? I get really nervous about negotiating with debt collectors. My experiences haven't been lovely, ha. 

I have several other accounts that were in collections, but I just ended up paying them through the collection agencies in August, now showing paid in full with zero balances. 

[Anonymous]

I'm very new to the myFICO forums, just joined today after paying to obtain access to my scores a few weeks ago now. Turns out, Credit Karma isn't that reliable.  Perhaps I should reach out for advice regarding my scores in another section of the community forums? I just feel so fortunate to have found this group of incredibly knowledgable, savvy people willing to help strangers with solid advice. 

[Anonymous]

I think advice depends somewhat on how far out your potential mortgage app is going to be. Further than 6 months you may benefit from one or two additional revolving accounts.

Spends at least the next week reading the many posts in this forum in order to get a feel for the overall 'process' of managing your credit reports and scores.

[ktl72455]

Also dont let both cards report 0.00 keep a tiny balance on one for a better fico score. Also MY FICO used to show scores used for mortgages (FICO 04) they now use FICO 08 which is a higher score for credit card approvals etc,  your Fico scores for a mortgage will be approx 30-50 points lower than the scores here.

[Anonymous]

I am currently working on my credit for an fha loan as well. The lender I've spoken with will not be able to approve a loan with oustanding unpaid collectiona, nor can any collection have been added within one year prior to being aoproved. Luckily mine are older, but having them on my account is bringing my score way down. 

Not sure how your lender works, but I'm sure the collection issue would be similiar.

Also, while assuming your 04 fico is 30-50 points lower can be a good rule of thumb for aiming higher for your mortgage, it's not the case for everyone. I pulled my 04 fico from Equifax and it was only 9 points lower than my 08 fico score from here. 

[cartwrna]

FHA loans will let collections slide by, as long as they don't total more than 2k from what I learned in another section of FICO forums. I would move this to the mortgage section, they have loan officers and real estate agents in the group that constantly patrol and help people out :-)

[cartwrna]

As bandit said though, it seems it's a mixed subject and may depend on the lender I guess. I'm no mortgage expert by any means :-p

[Anonymous]

Thanks everyone for the input! I spoke with loan officer, who is asking me to get as much cleaned up as possible. She encouraged me to contact CAs directly and negotiate PFDs if possible, and then she provided me her fax number for the CAs to send correspondence to in lieu of snail mail.  I am a bit nervous to negotiate over the phone with any debt collector.  Once I get something in writing from them to uphold an agreement, I will remit payment to expedite this process.  We are on a pretty strict timeline, as I'm currently six months pregnant with twins.  Timing has never been my forte, clearly.