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Applying for construction loan soon. Evaluate my scores?

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New Member

Applying for construction loan soon. Evaluate my scores?

My husband and I are planning to build soon. He has better credit than I do (790), so I'll talk about my scores as my median will be the one they consider. I would like to be at 750 before I apply.
TU 718: utilization 0%
on time payments 98%
Credit age: 9y 4m
Derogatory marks: 2
Accounts: 12
Hard inquiries: 0

EF 720 utilization 0%
on time payments 98%
Credit age: 9y
Derogatory marks: 2
Accounts: 9
Hard inquiries: 1 (Verizon when I switched to their plan)

98%payment history won't raise. I called my auto lender and they don't adjust for any reason.
One mark will fall off soon. The credit company said they would remove it from my CR. That was about a week ago.
The second one is pretty bad. I forgot about a loan for my (now closed) business. It was applied for online and I paid online but when the business closed so did my email. It was sent to collections and then to court without them serving me. I had no idea until about a month ago and it went to court a year ago. This has since been paid in full but not reflecting in my score yet. This will likely hang on unless I take them to court...I think? Any feedback on this is greatly appreciated.
We have a mortgage for the past 12 years with 100% ontime payments.
Any thoughts on raising my score is much appreciated!
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Super Contributor

Re: Applying for construction loan soon. Evaluate my scores?

A few quick thoughts:

 

(1)  You use the abbreviation EF which threw me at first.  I think you are using it to mean EquiFax.  You'll be better understood here on the forum if you use the abbreviation EQ for Equifax.  Minor issue, but I am sure you want to be understood.

 

(2)  You only mention two credit bureaus, TU and EQ -- and not Experian (EX).  Furthermore you refer to your scores as "scores" and "credit scores" but not FICO scores.  Those two things together makes me suspect that you are getting your scores from Credit Karma (which supplies EQ and TU scores).  Karma uses a model called VantageScore.  This model is often different from FICO.

 

A much better approach would be to find out what model a typical lender would use for the loans you want.  I am guessing that this would be your FICO mortgage scores (though I can't be sure).  Once you know the model, you and your husband would benefit from pulling those particular scores.

 

Another problem with Karma is that its summary software will tell you incorrect things about your profile age.

 

Karma is great, however, as a tool for pulling your reports as often as once a week.  Just ignore what its summary software says about age and ignore its scores.  (Unless of course, your lender is using Vantage.)

 

(3)  You write that your "utilization" is 0%.  If you mean credit card utilization, that's a problem.  0% means all of your credit cards are reporting with a $0 balance.  You do not want that. If that is happening, your score is being penalized. You want exactly one card to report with a small positive balance, like $20 say.

 

Message 2 of 10
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New Member

Re: Applying for construction loan soon. Evaluate my scores?

Thank you! Yes I'm new. And then realized I should have posted this in a whole other thread as well. But thank you for your tips anyway!
I'll ask the lender and then go from there! Yes I used KC but after reading here, I may need to be looking elsewhere. Where are the best places to get my FICO scores? From the bureaus directly? Are the advantage scores far off from the fico score?
I'll put a small balance on my credit card definitely! Do you know, from experience, what others have reported in a FICO score change based on this small change?
Thanks so much!
Message 3 of 10
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Super Contributor

Re: Applying for construction loan soon. Evaluate my scores?

Great to hear that you will be making some changes to your CC balances.  Right now they are at all cards showing $0, right?  And the far better place (in fact the ideal place) is for most of your cards showing $0, but with one card showing a smallish positive balance (like $10 or so).  You want the card that shows a positive balance to be:

 

*  A true credit card (not a "charge" card)

*  A card in your name (not an AU card from somebody else)

*  A card reporting at least $5. 

 

The balance can be a lot more than $5 and still give you ideal scoring points (depends on your credit limits) but when preparing for a loan it's often best to keep it simple and make it small ($10, $20, whatever).

 

The scoring difference between these two places (all zero and most zero) varies.  If anybody else reading this wants to chime in with the more definite answer that would be great, but I think it is 15-20 points.  That's true using the FICO 8 model or the FICO mortgage models.

 

The best place to get all your FICO scores (it's like 20 different scores total) is here at myFICO.  You can click on the button at the top of this screen that says COMPARE OUR PRODUCTS.  When you do get ready to buy your scores, my advice is to choose the 3B Ultimate package for $30.  Print out all your reports and scores.  Then cancel the membership a few days later.  I say that only because I can see you are on a budget and trying to save money.

 

But because it DOES indeed cost money to get your scores at myFICO, I would (if I were you) wait on that.  Here is the plan I would recomend for you:

 

(1)  Choose a major credit card that fits the criteria I give you above.  Moreover, choose one where the next statement will print shortly after Dec 28.  Early Jan or even mid-Jan are also ok.  The reason late Dec is ideal is that the new balance will get reported more quickly to the three credit bureaus. 

 

(2) Once you have chosen this card, make a small purchase on it ASAP and allow it to generate a statement with a positive balance.  A week later, pay it off in full.  Do this every month for at least the next several months -- until your loan is absolutely finalized at least.

 

(3)  Begin talking to several lenders to ask them what kind of credit scores they use.  The model will almost certainly be made by FICO, and it might well be the "mortgage" flavor of the FICO scores.  It also could be a more recent model, like FICO 8.  You need to find out what this is. 

 

(4)  Go the Rebuilding sub-forum here at myFICO and start a new thread there that focuses solely on your new derog, the one that has not yet appeared on your reports.  See if you can get help there understanding your options.  Also send a private message to a guy named Brutal Body Shots and see if he can help or can hook you up with people who can help.  One thing you will need to know is exactly when the old derog is supposed to fall off.  You say that will happen "soon."  You need a better timeframe than that.  That could mean next month, or four months from now, or 12 months from now. 

 

#1 - #4 can all be done at the same time.  Your husband should also be doing #1 and #2 as well to improve his score.  If he has any derogs he should also do #4.

 

Continue to use Credit Karma.  It is an awesome tool for seeing what your credit reports look like.  Karma will allow you to pull reports with fresh data as often as once a week.  Just ignore what Karma says about your account age and ignore its scores.  Also ignore it if it says your CC utilization is 0%.  The approach I suggested (all zero except one with a small balance) might read as 0% in Karma's summary software, because  the actual number will be so small (e.g. 0.2%).  FICO rounds all percentages like that UP, however, so it will in fact be considered by FICO as 1%.

 

You should also sign up for Experian's free credit report (one free report every month).  You can do that here:

http://www.experian.com/consumer-products/free-credit-report.html

 

I would do that today, and then pull your EX report again a month from now, but wait till a few days after all your CC balances are reporting better on Karma.  You should be looking at your EX report now to make sure it doesn't say anything different from your EQ and TU reports.

Message 4 of 10
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New Member

Re: Applying for construction loan soon. Evaluate my scores?

Thank you thank you for all the excellent info. In fact the one cc I have, I am an AU for my husband with my own card. If I apply for a card of my own, that will look bad, right?
The old derog was supposed to fall off last week (another line item from the same credit co fell off last week).
Thank you for the resources for the court issue. I will contact him!
Message 5 of 10
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New Member

Re: Applying for construction loan soon. Evaluate my scores?

Will it not show credit utilization even if the Chase CC that I am an AU on is on my report?
Message 6 of 10
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Super Contributor

Re: Applying for construction loan soon. Evaluate my scores?

You have got an interesting problem: the only CC you have is one you are an AU for.

 

Therefore the traditional advice (make sure that the one card you reporting is not an AU card) can't work for you.  But even stronger is the advice against opening credit cards just before a major home loan.

 

Let's assume that the scoring model that the lender will use is the FICO mortgage score.  You are going to investigating that, right?  So you will know.

 

If it is, then I believe that the mortgage scores DO include AU cards in their utilization calculations.  If my memory is correct, then you'll be fine.  But I can't be sure.  If no one else chimes in, send a PM to Revelate or Thomas Thumb, both of whom likely know.

Message 7 of 10
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Re: Applying for construction loan soon. Evaluate my scores?

Ah! Yes I spoke with the lender today. They use FICO. Additionally if my score is above 650, we qualify for a flat rate (5.5% during construction). My bigger issue now is raising my FICO for the 2nd close post-construction. I can easily make a $10 charge to the card and see what happens. Thanks so much!
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Re: Applying for construction loan soon. Evaluate my scores?


@CreditGuyInDixie wrote:

You have got an interesting problem: the only CC you have is one you are an AU for.

 

Therefore the traditional advice (make sure that the one card you reporting is not an AU card) can't work for you.  But even stronger is the advice against opening credit cards just before a major home loan.

 

Let's assume that the scoring model that the lender will use is the FICO mortgage score.  You are going to investigating that, right?  So you will know.

 

If it is, then I believe that the mortgage scores DO include AU cards in their utilization calculations.  If my memory is correct, then you'll be fine.  But I can't be sure.  If no one else chimes in, send a PM to Revelate or Thomas Thumb, both of whom likely know.


You recall correctly; the anti-abuse algorithms for AU weren't implemented until FICO 8 whereas the standard mortgage trifecta is a mix of FICO 04 and FICO 98, and on both of those AU's count absolutely.

 

Most construction loans UW on the mortgage trifecta.

 

@OP, court judgements can sometimes get vacated if paid, I don't know the full details about that but I'd ask for specific advice over in Rebuilding as if you can get it off you have a decent file heading into a mortgage.

 

Later you'll want to add some CC's of your own, but I'd clean up as much as I could (negatives off if possible, small balance on the card currently), then pull here to see where I stood before I went and talked to the lender though realistically I'd estimate you'd be 98% fine just going and having the lender pull... just for me peace of mind going into a mortgage is worth way way more than $60.




        
Message 9 of 10
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Re: Applying for construction loan soon. Evaluate my scores?


@Brighthome wrote:
Ah! Yes I spoke with the lender today. They use FICO. Additionally if my score is above 650, we qualify for a flat rate (5.5% during construction). My bigger issue now is raising my FICO for the 2nd close post-construction. I can easily make a $10 charge to the card and see what happens. Thanks so much!

That's nice, but FICO makes several different models, which will give you different scores.  For example the widely used FICO 8 classic is very different from the FICO mortgage scores.

 

As I mentioned earlier, you need to ask the lender not only whether it is FICO but specifically what kind of FICO scores they are.  Are they the FICO mortgage scores?  I have been saying for a while that I think it is likely that they are the mortgage models, but even Revelate doesn't know for sure.  Circle back and find out.  It matters.

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