In Need of Help

[Anonymous]

Good evening!  I am new to trying to understand the FICO system and how to effectively raise my score.  I have a balloon payment on my mortage due in February and I need to refinance this.  My current FICO score is 595 and I need to reach 640 by roughly November 1 of this year.  I don't quite understand why my FICO score is so low.  I have a mortage that I have never been late on.  I had a second mortage that I was also never late on.  I just paid this off a couple of weeks ago (one year early).  How much rise in my score can I expect from this payoff once it's reported?  I have no credit cards.  I have a vehicle payment.  Balance is $6000.00 - no late payments.  The only derogatory things on my report are two judgements for medical bills (resulting from an automobile accident) that were turned over and reported prior to settlement which just occurred this week.  I'll be paying the two judements in full and will still have $20,000.00 to work with to hopefully improve my credit score.  Would it help to pay the auto loan in full?

I am baffled by the fact that I've made mortgage/2nd mortgage payments faithfully and timely and cannot obtain refinancing due to a low FICO score and am facing losing my home.  Did the two judgements decimate my score to this degree?  Also, I applied to Sallie Mae last week for a student loan and was turned down over this FICO score.  How much did this inquiry lower my score?

In a nut shell,  how much will the payoff on the second mortage and paying off the auto loan and the two judgments raise my score in 4 months time?  What else can I do to gain the 45 needed points by November 1?  Is it possible? 

I'd greatly appreciate any help or advice you could offer and I apologize for my "green" questions.

[jeffriesde]

It sounds like you do not have a good mix of credit.  FICO likes to see different types of credit.  Mortgage, Auto, Revolving, and Installment.  Also low utilization Revolving seem to make the most difference.

Others will be behind shortly...

[bettercreditguy1]

Your baddies are what is hurting. They can easily cost you 100 points. Credit speaking, even though paid, they will remain on your report for up to seven years. Your mileage may very.

[bettercreditguy1]

Also imho (in my humble opinion) I would pay the judgements, any outstanding bills, and save the cash. Paying off the car loan will not improve your score that much. If you go to the mortage table  with 20% cash or more down, the lender will be more receptive although your interest rate may be higher because of your derogatories.

[Anonymous]

Out of curiosity, is it possible to negotiate a PFD on a judgement?  Would it help to pay the car loan down to 65%?  Would getting a couple of credit cards help?  I just have no concept of what it would take to gain 45 points in 4 months.

[bettercreditguy1]

 By obtaining new credit cards, your average age of accounts will drop and your new credit will be a drag/decrease on your scores up to one year. These are estimates only as you have not given us a full history of your entire credit history and the alogrithim you are being compared against.. Time is your best friend. Your negatives/derogatories are holding your score down. Late payments (score wise) seem to weigh more negative and longer if they occurred on your mortage. Generally speaking although your cc, loans, and mortage history are tracked 7 yrs, one or two thirty day late payments have minimal effect on your score after 48 months. Remember the Three P's, Pay on time, Pay in Full, and Patience. As always, ymmv.

[jamie123]

First off you need to pull your credit reports and make sure those 2 judgments are the only things pulling your score down.

Then you need to PFD(Pay For Delete) those 2 judgments. This is REALLY important! Those judgments are really dragging your score down. If you just pay the judgments your score WILL NOT change.

You might want to also get 2 secured credit cards and fund them to at least 1K each. In 4 months time they should start to have a positive effect on your score.

Paying off any of your existing debt will have MINIMAL effect on your score. Some people on these forums have actually report score declines after paying off auto loans.

Time is of the essence. You really need to get hopping! 4 months is a very short time to improve your score.

If you follow this plan you will be changing your score 2 ways. Removing the baddies will increase your score, and adding good credit will increase your score. With only 4 months left you need to do both now.

[tooleman694]

Do you have 20 percent equity in your home?

If so you could get a conventional with a 620 score. and that would be easy to get to with a secured card reporting for a couple months.

[RobertEG]

I see definite things you can do, but unfortunately, they are more of a longer-term rebuilding than an immediate fix.

First, the judgements.  They are major derogs that are impacting your most important scoring category... payment history.

I suppose that a PFD would be possible, but who do you offer it to?  Judgments are public records.  Payment is due to the judgement creditor, but they may not necessarily be the party who reported the judgment, and thus not the party authorized to delete the reporting.  In your settlement negotiations, did they inform you that are the party who reported the judgment?  Did you request their reporting of a deletion?

Once paid, some courts will entertain a motion to vacate the judgment, but that varies by court, and is not assured.  It will take time to follow that route if you cant get the furnisher to simply report deletion of their prior reporting.

Next, mix of credit.  Revolving credit is a major factor in FICO scoring, and the absence of revolving credit should be addressed for long-term score improvement.

But as has been stated, in the short term, it may have no postive, or even a negative, effect.  Deletion of the judgments would vastly increase chances of approval for new credit, so you may have to address those first.  Maybe getting a secured card would be the best step until the derogs are removed.

Then, hard inquires will most likely be needed to secure revolving credit.  And once approved, they will lower your average age of accounts.  In summary, not a short-term fix.

[Anonymous]

I have something odd going on with the judgements.  Maybe you could shed some light.  I received a letter from the CA who originally had the accounts that  "went down" as judgements.  It reads as follows:

Dear:

We have been reviewing our records and are notifying individuals who have outstanding judgments.  This letter is to advise you that our client has obtained a judgment for an unpaid debt plus any court costs, attorney's fees,and interest.  Please contact our ofice to resolve this matter.

There is a $30.00 service charge on all returned checks.

For your convenience we offer check by phone and accept all major credit cards for payment on your accoun.  For details please contact ______________ at ____________ or visit us at ___________.

This communication is from a debt collector.  Yadda, yadda, yadda.........

That having been said, however, the court is listed as the creditor on my credit report and instructions say to pay by mail only and the court's address is provided. So, I don't know what I can and cannot do.  Also, of note, the CA, I'm sure, did not follow the legal protocol as I never rec'd a summons to appear on either of these judgements.  I believe I was entitled to act on my behalf before these became judgements.

Again, any help would be appreciated.