topic Re: Question about increasing a FICO score in Understanding FICO® Scoring

Question about increasing a FICO score

Anonymous — Thu, 10 Apr 2008 18:38:31 GMT

I have been asked by a relative to co-sign for a loan. Here is what I know;

- This person has an extremely low credit score in the low 400's

- They have an ARM which is set to adjust Sep 08

- They are 3 months behind on their car payments now, 5 months behind on a HELOC (the car loan and the HELOC total 21K)

The loan officer's bright idea is to refinance the 21K pay off the car and HELOC. So my question to them is what happens with the ARM adjusts, they will then need me to co-sign for the mortgage and I am definitely not doing that. The loan officer then claims that rates don't generally go up during an election year and the mortgage will more than likely decrease when it adjusts and not increase until Jan/Feb 09, and by that time my relative's credit score will have increased and she will not need a co-signer. I believe the score may increase but not nearly enough to refinance their mortgage without me co-signing. Any thoughts on what a realistic credit score increase may be?

Thanks in advance for any help!

Re: Question about increasing a FICO score

MidnightVoice — Thu, 10 Apr 2008 19:06:54 GMT

Cincybound wrote:
I have been asked by a relative to co-sign for a loan. Here is what I know;
- This person has an extremely low credit score in the low 400's
- They have an ARM which is set to adjust Sep 08
- They are 3 months behind on their car payments now, 5 months behind on a HELOC (the car loan and the HELOC total 21K)

The loan officer's bright idea is to refinance the 21K pay off the car and HELOC. So my question to them is what happens with the ARM adjusts, they will then need me to co-sign for the mortgage and I am definitely not doing that. The loan officer then claims that rates don't generally go up during an election year and the mortgage will more than likely decrease when it adjusts and not increase until Jan/Feb 09, and by that time my relative's credit score will have increased and she will not need a co-signer. I believe the score may increase but not nearly enough to refinance their mortgage without me co-signing. Any thoughts on what a realistic credit score increase may be?

Thanks in advance for any help!

Even if they refinance they will have a 90 day and a 120 day late on their report, and that will hammer their scores, along with the new credit and the inqs. My personal guess is that their score will be in the 500s at most.

Others may disagree

Re: Question about increasing a FICO score

marty56 — Fri, 11 Apr 2008 01:31:11 GMT

Don't co-sign,

Family or no-family.

Unlike a loan, you can't pay back FICO points. The forums here are full of stories that start of I co-signed a loan. but then....

Re: Question about increasing a FICO score

Anonymous — Sat, 12 Apr 2008 16:25:18 GMT

It is veeeeeeery unrealistic to assume their scores will go up - I seriously doubt it. Me? I would neeeeeeeeeever co-sign.

The most I have ever done (or would ever do) is add a realtive (my sister) as an AU to a couple of my CC's.

Re: Question about increasing a FICO score

Anonymous — Sat, 12 Apr 2008 19:24:18 GMT

Your relative is a serious credit risk - you should be very careful. Trying to family with financial problems almost always comes back to bit you in the butt...

Re: Question about increasing a FICO score

llecs — Sat, 12 Apr 2008 20:22:22 GMT

Cincybound wrote:
I have been asked by a relative to co-sign for a loan. Here is what I know;
- This person has an extremely low credit score in the low 400's
- They have an ARM which is set to adjust Sep 08
- They are 3 months behind on their car payments now, 5 months behind on a HELOC (the car loan and the HELOC total 21K)

The loan officer's bright idea is to refinance the 21K pay off the car and HELOC. So my question to them is what happens with the ARM adjusts, they will then need me to co-sign for the mortgage and I am definitely not doing that. The loan officer then claims that rates don't generally go up during an election year and the mortgage will more than likely decrease when it adjusts and not increase until Jan/Feb 09, and by that time my relative's credit score will have increased and she will not need a co-signer. I believe the score may increase but not nearly enough to refinance their mortgage without me co-signing. Any thoughts on what a realistic credit score increase may be?

Thanks in advance for any help!

Not to sound trite, but don't co-sign, no matter how bad off your relatives may be.

They could always sell the house and the car and that would give them time to settle their finances. They are bleeding money and co-signing will cost you dearly. Without dramtically changing their habits, a forclosure would be on the horizon for them (and you).

With hard work, between now and then, their scores can rise. I'd even venture to say they could get into the 600 range. But it would mean making several lifestyle changes to stop the current lates/defaults/soon-to-be repo. Then they would have to work hard to negotiate PFDs on the most recent debts to eliminate that. Not to mention the uphill battles with the GWs.

Re: Question about increasing a FICO score

haulingthescoreup — Sat, 12 Apr 2008 21:16:08 GMT

@Anonymous wrote:

I have been asked by a relative to co-sign for a loan...

The loan officer then claims that rates don't generally go up during an election year and the mortgage will more than likely decrease when it adjusts and not increase until Jan/Feb 09, and by that time my relative's credit score will have increased and she will not need a co-signer...

My reaction to the loan officer's predictions: when pigs fly.

Sad to say, your relative will probably not make a real, meaningful, and permanent change in her credit behavior if you help her out, i.e., rescue her. I agree with the others: as tough as it sounds, she needs to sell the house, start over, and learn from her past. And by learning, I mean heart learning, as opposed to head learning.

I hope that you will keep yourself out of this mess, no matter how angry or bitter family members might become. I doubt very seriously that she will make any meaningful changes in her life if you help, and I worry that you'll just be dragged down with her.

Re: Question about increasing a FICO score

smallfry — Sun, 13 Apr 2008 14:23:14 GMT

Do you know what the definition of a co-signer is? A sc---ck with a pen. Fill in the blanks. Never co sign.

Re: Question about increasing a FICO score

llecs — Sun, 13 Apr 2008 14:44:38 GMT

smallfry wrote:
Do you know what the definition of a co-signer is? A sc---ck with a pen. Fill in the blanks. Never co sign.

SC- - -CK?

Well, let's see....According to Llecs' Comprehensive Dictionary, I have found three words that fit into this word play:

1) Scabick - A word to describe the icky gel that lies just inside a scab after an injury.

2) Schorck - Someone who is a cross between a Schum and a Dorck.

3) Scumuck - The stuff that boils out with the swamp gas and is similar to scum and muck.

I hope nobody thinks I'm a schmuck for writing this.

Re: Question about increasing a FICO score

smallfry — Sun, 13 Apr 2008 15:29:02 GMT

You got it. No censor police on that one I see.

Re: Question about increasing a FICO score

Anonymous — Sun, 13 Apr 2008 15:33:13 GMT

You would be INSANE to co-sign with this person and regret it for a long time time.

No no no. Run away.

Re: Question about increasing a FICO score

llecs — Sun, 13 Apr 2008 20:55:18 GMT

Sorry for kidding earlier, but treat these words of advice seriously.

Based on what you said, foreclosure is on the horizon for them and you if you cosign. It would be cheaper for you and you'd save money by giving them the money so their mortgage payment gets lowered. If you gave them $40-$50k, or whatever it takes to bring them to a level they can afford, you would save on the amount of money you would have to pay if your were to get a mortgage in the future. If a forclosure happens, it'll cost you way more than $50k in extra interest and charges due to the forclosure on your report. They are better off selling and renting for a year or so until they can stop bleeding money.