Getting a Mortgage Score Boost

[Anonymous]

I know there have been many questions answered many vague answers about how to increase mortgage scores. But each post I go through leaves me with more questions. Right now I've got a 30-60 point difference range in my mortgage scores and FICO 8s and only five months to go before I want to apply for FHA.

Experian:673 / 612
TransUnion:645 / 610
Equifax:650 / 593

Need to get past 620 middle score in five months! 640 would be great lol

What's on my credit:
I have gathered from other posts that it is my installment loan history that is causing the lag (car loan). I have only started building my credit the last six months, and I am still five months away from being a year with no lates on the vehicle. Before that, on time payment history was basically 55% with a few 30-60 and 90 days. I have four collections, three under $110 and one is $288. I have two cards with $300 limits and no balance, one authorized revolving, and Fingerhut $400.

My questions:
1. How do I handle these collections balances? FICO tells you paying for them won't affect credit, but I've seen many people say that it improves their score. Is that true? I know I have to pay it either way, but how hard is the pay for delete to achieve? And is it worth it if it is going to affect me positively to pay it off anyway?

2. Will lenders expect the car to be paid off? There's still $9,500 left on the car. While in a few months I'll have gone a year with no lates, the track record with this loan is trash. Will it improve my score to throw a few thousand to lower it at least?

Any suggestions welcome!

[VALoanMaster]

Hi Saiyan,

I would not close the auto loan out just yet.

The collection accounts may not need to be paid off in order to qualify for an FHA mortgage BUT if you can get them to agree to a PFD, your scores will go up.

It's really not "hard" per say but it can take some real tenacity depending on the collection agency. You may have to call multiple times in order to get to a person that will go for it.

Another option would be to have your parents add you to one or 2 of their credit cards as an authorized user.

[Anonymous]

You appear to be in the same boat as I am with your scores. I can share my recent experiences and hopefully some of that will help you. I just made my last payment for a number of charge offs (all credit cards) that started about two years ago. As the accounts were being paid off and marked on the CRAs as settled but paid for lessrt than amount, the mortgage scores rose, albeit slowly. When the last one was paid the mortgage scores were 603/613/618 and, like you, with a score goal of 620 plus. Late last month, I refinanced my auto loan (which had 64% still due at the former lender, no lates) and a week later when the new account appeared on one of my CRAs my 603 credit score fell to 582 (I get a new FICO update on the 24th, so I'll see how the others fared). So it appears, at least in part, mortgage scores closely follow existing installment loan paid percentage progress (i.e. I had over 35% of my former auto loan paid but now it's at 100% after the refi). Anyway, I hope this helps at least a little. Best of luck!

[homeloanexpert]

From my personal and business experience, I would never keep a $0 balance on any credit card unless your DTI is that tight. When you completely pay your credit cards down to $0, your scores will most likely drop. I have found a 7%-10%utilization is the sweet spot. I tell all my clients, ONLY pay off a collection if you know you can negotiate a deletion. Other than that, don't touch any collections. FHA doesn't require collections or charge off's be paid anymore. If you have any collections (other than Medical) we are required to hit you with an imaginary 5% payment based on the reported balance which is effectively added to your DTI. We Loan Officers do have some tricks up our sleeves. Meaning we have used and can refer you to one of the quick reporting "credit builder companies" where you can open a new account and it be reported in 30 days. These may raise your score another 25-35 points.

NOTE: Make sure you have no open disputes. I would recommend that you "Resolve" them rather than "Remove" them as it will not drop your scores. The best is "Dispute resolved, consumer disagrees".  This is unless you are going Conventional, then all disputes MUST be removed.

Hope this helps you.

[Anonymous]

Sorry about the harsh drop! Was that your only installment loan?

[Anonymous]

Thanks for advise. Could you give an example of the credit builder companies you are talking about? And will this be an issue of the age of my accounts is fairly low already

[egaithe]

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@homeloanexpert wrote:

From my personal and business experience, I would never keep a $0 balance on any credit card unless your DTI is that tight. When you completely pay your credit cards down to $0, your scores will most likely drop. I have found a 7%-10%utilization is the sweet spot. I tell all my clients, ONLY pay off a collection if you know you can negotiate a deletion. Other than that, don't touch any collections. FHA doesn't require collections or charge off's be paid anymore. If you have any collections (other than Medical) we are required to hit you with an imaginary 5% payment based on the reported balance which is effectively added to your DTI. We Loan Officers do have some tricks up our sleeves. Meaning we have used and can refer you to one of the quick reporting "credit builder companies" where you can open a new account and it be reported in 30 days. These may raise your score another 25-35 points.

NOTE: Make sure you have no open disputes. I would recommend that you "Resolve" them rather than "Remove" them as it will not drop your scores. The best is "Dispute resolved, consumer disagrees".  This is unless you are going Conventional, then all disputes MUST be removed.

Hope this helps you.

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Zero balance goes against AZEO.....

[dizzum]

Aggressively pursue pay-for-delete on your collections.  I raised my mortgage scores by about 70 points in the last 4 months by getting all but 1 of my collections deleted, which has a pfd approved and should come off sometime soon.  Hoping that last one will put me over 680 middle score.

[Anonymous]

I thank everyone for replying with these good tips. All we did was add a bit of usage to the cards, less than 20%. Well, three months later and mortgage middle score is 624. Not too bad.

My question now is about the car loan. It seems to update to credit about a month late? If we want to apply right at the '12 months with no late' mark, will this reporting affect FHA qualifications? At that point it will still show 10 or 11 on time payments.