01-29-2013 08:35 AM
In trying to rebuild my wife's credit score after a Ch. 7, one of the things that has helped is that i've added her as an authorized user on several of my older credit cards. We find ourselves about 2 months away from applying for a mortgage...though we have been pre-approved after the lender reviewed our W-2's, pay stubs, tax returns, her bankruptcy paperwork, etc. One of the requirements is that she have a 640 credit score. Her mid-score is about 630 (down from 636 at the end of December) after we entered into a new car lease to replace a previous lease in November (it was either do it then, or do it literally the same month we were going to apply for a mortgage. We did it as early as VW would allow.)
On her credit report, both VW leases are reporting as active at the moment (I was warned about that). The old lease is PIF, and we have a PIF letter, but the account shows as active with a balance just under $1000. In addition, there is a 30 day late payment listed on that lease from October 2010 that we are positive is incorrect.
1 -- Is it worth the effort to try and get the 30 day late payment from over 2 years ago removed? Would there be a significant score jump if VW removed the payment?
2 -- What would be a reasonable score impact be, if any, once the old car lease reports as paid in full? Her score dropped 9 points as soon as the new lease wound up on the credit report, but we also paid off a credit card with a $1700 balance in the same reporting period so the impact of the new lease may have been blunted to some extent by that.
3 -- We are going to pay down her credit card utilization from roughly 86% to about 54% within the next month. We would love to pay it down further but that would have to happen over a longer period of time.
4 -- Would there be a risk or an advantage to adding her as an authorized user to a credit card i have that was opened 3 years ago ($7500 credit limit, with a zero balance)? Would this show up as a new account and drop her score, or would it help age her AAoA and decrease her credit card utilization? If the credit limit was added to her utilization, after we paid down the balances as referred to in step #3, her utilization would drop to about 32%.
5 -- How soon would she recover any lost points from the new car lease? Again, it was leased in November, and her score dropped 9 points, though i'm not sure of the total impact as we made regular monthly payments on 2 of her 3 cards, and paid off the third.
We obviously don't need a huge jump. We are looking to build a new home, so assuming we can get to the 640 and get an approval, we will have plenty of time after that to pay down debt and ensure that something weird doesn't drop her back under the 640 by the time we are looking to close.
01-29-2013 09:59 AM - edited 01-29-2013 10:04 AM
To put it simply, if you're just trying to get to a 640 score, pay down the revolving utilization and you're going to get more than 10 points easily. Ideally pay it down more than what you suggest, but as you state it may take some time. I'd talk to your LO as well, if you have extra cash it may be worth it here if you don't get qualified otherwise.
To some of the other points:
It's always worthwhile trying to get derogatory information removed. Always. One 30 day late from 2+ years ago isn't major; however, it could be worth a few points and is worth chasing when your mid-score is on the bubble.
The current lease being paid in full will have little to no bearing on your FICO score. May see a slight difference in either direction, but the balances aren't calculated like revolving utilization.
I'd add the AU absolutely; she'll inherit your old history and that's a huge change to her utilization. That again might be the entire ballgame right there; it may not help with underwriting but it can certainly help the score in this situation assuming there's no negative marks on the account. AU's are rather free scorewise to add in most cases (Amex is an exception), aged tradeline and no inquiry penalty. AAoA it may help if the tradeline is older than her current average, but that's near irrelevant compared to the additional CL in her situation.
Scores from a single new tradeline often recover in about six months; however, that's a YMMV type thing and there's really no predicting it because of a few factors, but it's a reasonable estimate anecdotally.
01-29-2013 11:39 AM - edited 01-29-2013 11:40 AM
Thank you for the information.
There are actually several accounts i could add her as an authorized user on, but that one account in particular is the largest. The account was opened in May 2009, had a balance of around $4,000 or so, and was paid in full by September 2011 with no lates. I think that combined with paying down debt, on time payments for everything, etc, we should be able to squeeze out enough points to qualify.
Obviously, the overall goal is to get her score over 700 where my scores are lurking, and ultimately get us both as high as we can go. Hopefully this is just the start of the climb.
02-02-2013 08:59 AM