topic Re: USDA Direct... which FICO score??? in Mortgage Loans

USDA Direct... which FICO score???

Hoss_Delgado — Mon, 19 Oct 2015 01:14:37 GMT

I can't seem to find the info anywhere I I just got frustrated enough to post and see if someone can answer.

I know you are supposed to be able to get approved with a low credit score, but let's face the truth here.... if your credit score is high enough you get express underwriting. If it's not they put you on the back burner and pick you apart with a fine tooth comb. They are supposed to look for ways you might get a waiver, but really they are picking apart everything on file then and it gets stalled out.

I've been there twice. Once with USDA Guaranteed... pretty much no lender wants to do the extra work to get someone qualified. They want express customers. Once with USDA Direct. I applied too early or too late... how ever you want to look at it. The score went up to 640 (too late) and my score didn't go over 640 until the next month. So I got picked apart.

I was planning to apply soon. My score was way over and I paid off some debt to clear the way a bit better. But that has caused my score to fall over 100 points with the one bureau that the pay offs have been reported to. SURPRISE!

It sucks. But what sucks more is I am looking at my FICO scores from that bureau (all 5 of them). They vary. They are as high as 683 and as low as 635. Of course the only one under 640 is the Fico Score 5 at 635 now. I guess because I just paid off my mortgage on my tiny house that is too small, as the USDA said that would make things better for me last time. But truth is it has hurt my score.

So which dang FICO score does the USDA use????

I don't want to start the process again just to find out the Score 5 is what they use and I'm 5 points under now. I want 3rd try to be the charm, not the 3rd failure.

Re: USDA Direct... which FICO score???

iv — Mon, 19 Oct 2015 01:56:36 GMT

On the MyFICO 3-B Score Report, the scores used for mortgages are:

Equifax FICO Score 5
Experian FICO Score 2
TransUnion FICO Score 4

Whichever is the middle score (not average) for you is the one that matters.

Re: USDA Direct... which FICO score???

Hoss_Delgado — Mon, 19 Oct 2015 02:06:06 GMT

So the USDA uses those 3?

I'd need to pay to get the other two. But with the Fico Score 5 tied to Equifax being 635 it's probably a waste of time and money. The other two will also go down I would guess as soon as the reporting date comes for those bureaus. All 3 will be low before my paperwork is finished and the 635 may be the high one.

I could get lucky and the middle one could be 640 but usually they all run pretty close no matter what fico or fako score I look at.

Thanks.

Re: USDA Direct... which FICO score???

iv — Mon, 19 Oct 2015 04:05:42 GMT

Yup, USDA (and effectively all other lenders/programs you might consider) use those three.

There can be considerable variation between the three, though - especially since EX v2 is based on an older model (and EQ5/TU4 have small differences). You might be pleasantly surprised.

Either way, once your recent changes hit all three reports, pull all three from here before starting the process again - better to know for sure, than to guess and hope.

Re: USDA Direct... which FICO score???

Hoss_Delgado — Mon, 19 Oct 2015 12:26:08 GMT

Thanks so much. That was exactly the clarification I needed and that's exactly how I want to go at it this time. I don't know if I would have ever gotten the answer to that from the USDA folks here. That's pretty much how my last attempt stalled out. My FICO was a few points under the 640, and they started to dissect my credit and pick me apart. Yet I couldn't get any advice/response on how to best handle the one thing they found (I had no prior knowledge of the issue) in order to move forward.

I'm going to do exactly that and wait for the payoffs to be reported to the other two and then I will get all 3 scores and see where I am at.

There is already enough red tape in these loans without your credit being added to the heap.

Re: USDA Direct... which FICO score???

Hoss_Delgado — Sat, 21 Nov 2015 20:56:19 GMT

OK, so anyone's help would be much appreciated.

I went ahead and paid the $60 for the 3B report. It started out bad from the get-go. Eq Score 5 dropped 5 more points. Doesn't even make sense. My old mortgage was already paid off and some way it reported already caused me to take a hit on the 1B to start with when I looked last month and it has decreased 5 more. Theres been no changes.

So here is where I stand

Eq Score 5 > 630

Tu Score 4 > 631

Ex Score 2 > 650

Ironically these are now the lowest 3 scores of all the scores from all the bureaus. Just doesn't seem right considering I'm one of the few that has actually paid off a mortgage and own my home. Hurt me for paying my mortgage off? Will the mortgage scores just continue to decline since I no longer have a mortgage?

Anyways, rant over. The above looks like gloom and doom to me. Am I correct? Isn't the score needed for USDA Direct 640?

I am thinking it was changed from 620 to 640. Anyone know for sure?

Re: USDA Direct... which FICO score???

StartingOver10 — Sat, 21 Nov 2015 21:19:12 GMT

Can I ask why you are going USDA direct with a paid off home? Can't you sell your home and use the proceeds to purchase another home? And if you are getting something larger - than use a FHA loan where the minimum mid-score for many lenders is 620 rather than 640? Or even a conventional loan if your proceeds from the sale of your current home are large enough that you can put down 20% of the new purchase. That way your current score doesn't matter for PMI because PMI doesn't apply to 80% LTV or less.

Re: USDA Direct... which FICO score???

Hoss_Delgado — Sat, 21 Nov 2015 22:14:24 GMT

Sure, I can answer that.

The cause is a suprise... another child a few years prior to paying our current place off. So the place is too small for us, but not too small to lease or rent out.

Initially I didn't think this was a big deal at all until I got farther into it. No good feasible way to expand. So I redid some stuff short term to make room for a baby. Then we started looking at selling and buying something else and realized it wasn't so simple after all. Time went by, baby no longer a baby, nothing really working out. So then I decided I would instead just buy a new place and then sell this one after. Had a couple deals fall through. Then I lost my job to downsizing.

Long story short, big mess little house.

At this point I just do not feel comfortable just selling out, moving into a rental and then trying to get another house. I've been taught better by past poor experiences of recent years. Be my luck I'd sell my paid off little house just to be stuck renting. Finding a house that will work and actually getting to closing seems to be a bit more complicated for us. Seems they are few and each time we find a house, something messes it up. So I have been looking at this route. When we first started looking this direction.

So 640 middle is the number they are looking for. I was thinking that was correct. Poo. Gone wrong again. Too bad we didn't find another house between the time I had enough time on the new job and the mortgage payoff because my score was plenty when I was still paying a mortgage. It took a nice dive after payoff and seems to keep declining while the other fico scores have been stable since the initial hit.

Re: USDA Direct... which FICO score???

iv — Sun, 22 Nov 2015 04:25:03 GMT

640 isn't the USDA minimum in the "they won't lend lower than that" sense... but it is the score that allows them to skip the detailed credit analysis, and just approve based on the 640.

See http://www.rd.usda.gov/files/3550-1chapter04.pdf for the details, including:

For applicants with no outstanding judgments obtained by the United States in a Federal court and who have more than one credit score listed on their RMCR that result in a reliable credit score of 640 or higher on their RMCR, Exhibit 4-4 need not be used to identify indicators of unacceptable credit handling. In addition, Form RD 1944-61, Credit History Worksheet, need not be completed. These applicants are automatically classified as having acceptable credit histories regardless of what is listed on the RMCR. To avoid potential disparate treatment, additional credit analysis is not appropriate. Credit scores are used to reduce the time necessary to conduct a credit analyses, but under no circumstance can they be used to make adverse decisions.

Given that you're now at 630/631/650, there are probably several things you can do to optimize up to 640. If you wanted to list the number, type, limits, and current balances of the accounts currently on your reports, we could probably give you some suggestions on that...

Re: USDA Direct... which FICO score???

Hoss_Delgado — Sun, 22 Nov 2015 07:22:53 GMT

That's what I was reading. It's not so much the minimum score but that number helps bypass a bunch of fine tooth comb scrutiny, which is much needed because there is plenty of other red tape as it is. What I mean is we have already walked on several houses due to other red tape you wouldn't think would be in a rural housing program. One with a few too many square feet. One with a barn. One with a man cave that could have been argued as rentable. One on a gravel drive. One that had one deed but 2 parcels (lots). One that had a few acres that was not really sub-divide able due to land features, drive location, etc but still... none of which makes any sense for a rural program. It's not like you could just divide and sell off a lot when it's all in a deed of trust either?

Anyways, yeah I'd like to have the 640 to avoid whatever I can with it.

Right now I have a closed mortgage account, an auto loan I only have 6k left on. Then I have cards. A gas card with 1k limit, and 2 credit cards with 6k limit and a Lowes card with 10k limit that never has and never will report anywhere but Experian. I give up on that.

Anyways, I use them all, but I pay them all off month to month. But I have started waiting until they post a utilization balance before paying off because I have found showing some utilization under 9% yields a better score than 0% utilization. That's all I have active 100% on time payments always.

I don't really know what I can do. Everthing was going fine until I paid off my mortgage. I'd like to buy a car or take a loan. But I'm wanting to buy a house next and pay off the remaining 6k on my current auto loan before diving farther it. Obviously if I can qualify for USDA I don't have the income to be carrying 2 car payments and a mortgage in the first place. I'm sure the score models want me to have more trade lines, but gosh... I don't make a 6 figure income and don't try to live beyond my means.

Re: USDA Direct... which FICO score???

iv — Wed, 25 Nov 2015 23:44:27 GMT

It sounds like you've got a good handle on the basics.

A few things you may want to consider:

Don't completely pay off the car loan before applying for the mortgage (or for the next car loan). Just like you saw with the now-closed mortgage, having the account open is boosting your scores. (Open, but almost completely paid off would be ideal.)

Make sure that the cards aren't all reporting with balances at once. You've noticed the negative effect from all cards reporting 0... but 100% of your cards reporting a balance (even $1) is also a negative. Pick one card to report a small balance on each month, pay the others off before the statements close.

If you have any negative closed accounts on your reports, investigate your options to improve or remove them. (A closed mortgage, open car loan, and a few open cards, all with 100% positive history should score better than the low 600s.)

See if you can find a real estate agent that does a lot of USDA transactions - they should be able to help both with the property requirements, and perhaps with finding a lender experienced in doing USDA Guaranteed loans (or with guiding you through the USDA Direct process).

Also consider going the FHA route, with downpayment coming from the sale of your current house. (Getting the timing right on closing both your sale and purchase contracts at once can be a pain... but it is done every day.)

Good luck!

Re: USDA Direct... which FICO score???

Hoss_Delgado — Sat, 28 Nov 2015 01:43:25 GMT

I was not aware of that on the cards. All of them report balances at a different time before a bill cuts so I usually just use them a little between 0-9% a month, let them report, then pay them back to zero balance. I will try just letting my gas card report a fill up and pay the rest off before reporting and see how that works.

I agree with you on what I have vs what my score is. I will tell you what I think it is. It's almost as if it is "the way" my closed accounts are reported. When I look at them and my paid off mortagage, some of them just appear CLOSED rather than reported paid in full and closed out in a positive way. This certainly seems to be the case with my mortgage too. What has happened to my credit history age or average account age seems to reflect that as well.

It shows up like 2 years... so it's the equivelant of being 20 years old again as far as credit is concerned. I think thats the big factor and I don't know how to fix that.

The other thing I am thinking is my account mix and the actual age of those other things besides my mortgage. I know it was an issue a few years back when I had went over 7 years after paying off everything but my mortgage. When I went to get new credit, I only had the mortgage reporting and they said that was an issue then.

Anyways, problem is my next stratigic move is to buy another house. So I can't go getting other credit at this point. I don't have the income for it. If I open new credit lines now I won't be able to buy a house with enough bedrooms. Kinda stuck there.