Please help, need some good, solid advice on mortgage loan issue

[Anonymous]

Hi, 

I am new to the site but am trying to learn as much as I can.  If someone out there can advise of our issue, I would greatly appreciate it.

We (myself and husband) are tyring to get a loan so we can buy a house.  We ordered the Suze Orman kit on this site so we could pull up our scores since we hadnt checked them since this time last year.  At that time last year, husbands scores looked like this: TU: 612 , EXP: 644 , EQ:  600.  We have since bought a vehicle and that has been reporting since Jan. '09 with no late payments, paid on time.  So hes good there, too.

So, we check his scores this time around (May 2nd and May 4th), they look like this: TU:  623 and EQ: 619.  EXP is a mystery since they dont let you check anymore.  The lender pulls his reports/scores and tells us that we need to have at least a 620 from one of the three agencies- so we figure we're good.  Not the case.

The lender told us that he has two collections that are a problem and that we would need to pay these before he can get the bank to ok it and give us a loan.  Here's the problem.  When we checked our scores they werent the greatest by any means but the lender says that TU is only 619.  How could it have dropped a few points in 2 days time?  I'm confused?  Was it because they pulled his report/scores?

Secondly, back to the collections.  Time Warner will be a year old in June and the lender says that since it will be a year old in June that it may boost his score.  We owe $334.  We plan on seeing if they will settle for half.  Is there any letter we can send them asking about this-- to clear up his report?

The second collection is from AT&T, its actually through AFNI and is $230 and is set to fall off his credit report on Sept/Nov '09 (between TU and EXP).  Is there a way we could do the same for them (like Time Warner) or is there some other way since its so old?  I mean this account was before we were even together.  OLD.

The other problem is though, when the lender pulled up these collections he said the AT&T one was new and said that a new collection agency bought it.  But its been through AFNI since 2007 and is still with them.  The only difference I can see when I pull the reports is that it was last updated in Jan. 2009.  The lender says it has a new update within the last couple days which I dont get because when I pulled the reports from a couple days ago it says last update as Jan.  What does all of that mean?  Does the lender somehow have inaccurate information or do we? Also, if we pay AT&T debt where its going to fall off later this year, wont it be "fresh" on the reports and affect his score in a negative way?  I figure Time Warner is so new that it would be better to pay and rid ourselves of that because it wont even fall off until 2014- which looks worse.

So, with all that being said... what should we do?  What are our options? Should we pay these off and than have the lender pull it again in another few months? 

[Anonymous]

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@Anonymous wrote:

Hi, 

I am new to the site but am trying to learn as much as I can.  If someone out there can advise of our issue, I would greatly appreciate it.

We (myself and husband) are tyring to get a loan so we can buy a house.  We ordered the Suze Orman kit on this site so we could pull up our scores since we hadnt checked them since this time last year.  At that time last year, husbands scores looked like this: TU: 612 , EXP: 644 , EQ:  600.  We have since bought a vehicle and that has been reporting since Jan. '09 with no late payments, paid on time.  So hes good there, too.

So, we check his scores this time around (May 2nd and May 4th), they look like this: TU:  623 and EQ: 619.  EXP is a mystery since they dont let you check anymore.  The lender pulls his reports/scores and tells us that we need to have at least a 620 from one of the three agencies- so we figure we're good.  Not the case.

The lender told us that he has two collections that are a problem and that we would need to pay these before he can get the bank to ok it and give us a loan. 

Not all lenders require this. Are you in a position to shop around a bit more?

If not, and you want to stay with this LO, see if you can arrange to pay the collections at the closing table (final approval/funding will be contingent on paying those collections off at closing). This is done ALL the time. Very common, in cases that collections, liens, etc, require payment by lender guidelines.

Here's the problem.  When we checked our scores they werent the greatest by any means but the lender says that TU is only 619.  How could it have dropped a few points in 2 days time?  I'm confused? 

The FICO you buy *here* may not be the same as the one the lender pulled. While there is only one "true" FICO score (meaning, FAKOs aren't FICOs), there's oodles of FICO scoring models out there. Fr'instance, about to make it's debut is FICO '08. That version is *supposed* to be kinder to those with past credit mistakes, putting more emphasis on those with *current* credit problems - like high utilization and such.

Think of it like Microsoft. There's more than one version of MS out there. You have Windows 98, ME, XP, Vista, etc. Just like there's different versions of software, there's different scoring models of FICO. No different, really.

Was it because they pulled his report/scores?

I'd not think so. FICO sees mortgage inquiries and lumps them all together for a 30-45 day period. That means that if you go crazy accumulating oodles of inquiries while shopping for a mortgage lender, FICO will only count those oodles as *one* inquiry. Essentially, FICO knows that you're gonna shop around for the best deal on the *biggest* purchase you'll ever make in your life. And FICO compensates for that.

Secondly, back to the collections.  Time Warner will be a year old in June and the lender says that since it will be a year old in June that it may boost his score.  We owe $334.  We plan on seeing if they will settle for half.  Is there any letter we can send them asking about this-- to clear up his report?

Yup. Go to the Rebuilding Your Credit forum and search for "PFD" (that means "Pay For Deletion" letter. That's EXACTLY what you're talking about.

However, your lender is WRONG. Paying that collection off will ding his score since FICO will see the updated, paid account as being "new" --FTR, FICO scores paid AND unpaid collections equally. It being paid does *NOTHING* for your score positive-wise -- and will actually drag it down by several points.

The second collection is from AT&T, its actually through AFNI and is $230 and is set to fall off his credit report on Sept/Nov '09 (between TU and EXP).  Is there a way we could do the same for them (like Time Warner) or is there some other way since its so old?  I mean this account was before we were even together.  OLD.

You *can* offer a PFD, but really, if it's set to fall off soon, why bother?! However, it being ready to fall off might offer you leverage in forcing them to accept the PFD (not all CAs and/or creditors accept them). You're l-o-o-o-n-g past the SoL for this debt (Federal law sets the SoL for this debt at 2 years since it's communications).

The other problem is though, when the lender pulled up these collections he said the AT&T one was new and said that a new collection agency bought it. 

THAT'S more than likely why his score dipped. FICO, because these new schmucks bought this account and are now reporting on your DH's CRs, sees it as being a NEW collection.

But its been through AFNI since 2007 and is still with them.

Okay, are you saying that TWO collection agencies are reporting the same debt?! That's illegal. 

I would DV (go to Rebuilding Your Credit forum and do a search on "DV letter" for a good template to modify) *BOTH* CAs. Since the debt is so old, they probably wouldn't be able to verify. At the very least, it would get the "extra" CA off his reports.

  The only difference I can see when I pull the reports is that it was last updated in Jan. 2009.  The lender says it has a new update within the last couple days which I dont get because when I pulled the reports from a couple days ago it says last update as Jan.  What does all of that mean?

That means that the CA in question updated the account with the CRAs. That's all that means. However, doing that does make the collection seem "fresh" to FICO. Hence the score drop.

  Does the lender somehow have inaccurate information or do we?

Yes, your lender does. Specifically in that he wants you to pay off these collections believing that it will increase your score. It won't. It'll ding your scores BAD.

Best to do a PFD or, to get an increase, pay down credit cards. If you decrease your credit card utilization to less than 10% (especially if it's higher than 30%), you'll see those extra points you need.

Also, if we pay AT&T debt where its going to fall off later this year, wont it be "fresh" on the reports and affect his score in a negative way? 

If you pay it off BEFORE it falls, off, yes, it will look fresh. If after, nope. It, by Federal law, can't be reinserted after the CRTP.

I figure Time Warner is so new that it would be better to pay and rid ourselves of that because it wont even fall off until 2014- which looks worse.

So, with all that being said... what should we do?  What are our options? Should we pay these off and than have the lender pull it again in another few months? 

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DO you have any credit cards? If you *don't* that's a negative (yup ... believe it or not). FICO likes to see a "mix" of credit. Meaning, it likes to see how you use installment debt (your car note) AND revolving debt. Adding a CC to your credit reports (especially if you could piggy-back on a close relative's GOOD standing account) will give you an increase if you *don't* currently have any CCs.

Otherwise, the *only* thing you can do to increase your scores is get PFDs on those two accounts. Simply paying them will only harm your scores, not help them,.

[Anonymous]

Hi Wonderin,

Thank you for the reply.  To answer your questions.

Not all lenders require this. Are you in a position to shop around a bit more?

If not, and you want to stay with this LO, see if you can arrange to pay the collections at the closing table (final approval/funding will be contingent on paying those collections off at closing). This is done ALL the time. Very common, in cases that collections, liens, etc, require payment by lender guidelines.

We are trying for USDA's RHS loan- guaranteed since after looking around at different loans it seemed to suit our needs best.  I dont know how much we'd really be able to "shop" around because it seems like finding someone around our town that deals with RHS are slim.  This guy is actually very helpful- well at least answers our endless questions.   

That is a great question to ask him though. 

Yup. Go to the Rebuilding Your Credit forum and search for "PFD" (that means "Pay For Deletion" letter. That's EXACTLY what you're talking about.

However, your lender is WRONG. Paying that collection off will ding his score since FICO will see the updated, paid account as being "new" --FTR, FICO scores paid AND unpaid collections equally. It being paid does *NOTHING* for your score positive-wise -- and will actually drag it down by several points.

Ok, so to make sure I understand this correctly.  If we do a PFD for both AT&T and Time Warner, it will pay them a settled amount and they will remove it from all 3 reporting agencies, correct?  Does that mean his score will lower though or no?

Or does his score only lower if we make payments?  I just want to be clear because I sure dont want his score dropping anymore.

Okay, are you saying that TWO collection agencies are reporting the same debt?! That's illegal. 

I would DV (go to Rebuilding Your Credit forum and do a search on "DV letter" for a good template to modify) *BOTH* CAs. Since the debt is so old, they probably wouldn't be able to verify. At the very least, it would get the "extra" CA off his reports.

Ok, this is where it gets a bit confusing and I think LO is wrong.  On all all credit reports it says that AFNI has been the account holder of AT&T since 2007 and shows they (AFNI) last updated 01/2009- which lender agrees with BUT at the same time lender says AFNI is showing up as new with an update as a few days prior to pulling our scores/reports.  When I match everything up with him- its totally the same.  So, I dont know if they are adding a 2nd collection for it or not.  I'm pretty sure that they arent and that LO is wrong.  After all, we just received a collections notice from AFNI for payment a month ago.  I will need to clarify it with LO though.

If you pay it off BEFORE it falls, off, yes, it will look fresh. If after, nope. It, by Federal law, can't be reinserted after the CRTP. 

Does this mean that even if we do a PFD, it will look fresh and affect the scores or no?  

DO you have any credit cards? If you *don't* that's a negative (yup ... believe it or not). FICO likes to see a "mix" of credit. Meaning, it likes to see how you use installment debt (your car note) AND revolving debt. Adding a CC to your credit reports (especially if you could piggy-back on a close relative's GOOD standing account) will give you an increase if you *don't* currently have any CCs.

Otherwise, the *only* thing you can do to increase your scores is get PFDs on those two accounts. Simply paying them will only harm your scores, not help them,.

We have no credit cards, they have all been closed for several years.  The only thing he has on his report is a credit card that was paid off and is reporting paid.  Actually, I think he settled with them on that one.  It was before we were together. 

We do have a car payment that is current, paid/never late but that only just started showing.  The car was bought at the end of Jan.  The only other thing he has is his student loans through Sallie Mae- which will be in repayment in June.    I dont think theres anyone we could piggyback with, everyone in our family that would help us has bad credit and the ones with good dont want to take the risk, lol.  

[DallasLoanGuy]

You should get a second opinion from another loan officer before paying off collections.

usually, those need to go untouched until after you get the keys to your new home.

[Anonymous]

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@Anonymous wrote:

Hi Wonderin,

Thank you for the reply.  To answer your questions.

Not all lenders require this. Are you in a position to shop around a bit more?

If not, and you want to stay with this LO, see if you can arrange to pay the collections at the closing table (final approval/funding will be contingent on paying those collections off at closing). This is done ALL the time. Very common, in cases that collections, liens, etc, require payment by lender guidelines.

We are trying for USDA's RHS loan- guaranteed since after looking around at different loans it seemed to suit our needs best.  I dont know how much we'd really be able to "shop" around because it seems like finding someone around our town that deals with RHS are slim.  This guy is actually very helpful- well at least answers our endless questions.   

That is a great question to ask him though. 

I don't know how that works (we went FHA), but can you not find another lender online? Or stay with this guy, but bear in mind that its the rare LO/lender that requires collections to be paid.

Yup. Go to the Rebuilding Your Credit forum and search for "PFD" (that means "Pay For Deletion" letter. That's EXACTLY what you're talking about.

However, your lender is WRONG. Paying that collection off will ding his score since FICO will see the updated, paid account as being "new" --FTR, FICO scores paid AND unpaid collections equally. It being paid does *NOTHING* for your score positive-wise -- and will actually drag it down by several points.

Ok, so to make sure I understand this correctly.  If we do a PFD for both AT&T and Time Warner, it will pay them a settled amount and they will remove it from all 3 reporting agencies, correct?  Does that mean his score will lower though or no?

Depending on how old they are, they might only agree to a PFD if you pay them in full. But if they DO agree to a PFD (regardless of how much you actually end up paying them), they WILL remove the entire entry from all reports. However, make a gazillion percent sure that you get this agreement in WRITING. CAs do not uphold their verbal promises. I don't care how "nice" they were on the phone -- they're trying to get paid, for Heaven's sake, yannow? -- they're not nice people.

If you get a PFD his score will go UP.

Or does his score only lower if we make payments?  I just want to be clear because I sure dont want his score dropping anymore.

Only a few things will lower his scores: 1) making a payment (which, in many states, resets the SoL on the debt), 2) paying it in full or settling or 3) when the CA updates the account with the CRAs.

Paying it with a PFD (or even leaving it alone completely) will only make his score go up.

Okay, are you saying that TWO collection agencies are reporting the same debt?! That's illegal. 

I would DV (go to Rebuilding Your Credit forum and do a search on "DV letter" for a good template to modify) *BOTH* CAs. Since the debt is so old, they probably wouldn't be able to verify. At the very least, it would get the "extra" CA off his reports.

Ok, this is where it gets a bit confusing and I think LO is wrong.  On all all credit reports it says that AFNI has been the account holder of AT&T since 2007 and shows they (AFNI) last updated 01/2009

Right. Updating this account dings your score since FICO "sees" it as a "new" collection.

- which lender agrees with BUT at the same time lender says AFNI is showing up as new with an update as a few days prior to pulling our scores/reports. 

It really just sounds like they updated, nothing more. Is what *he's* saying sound like what *I'm* saying? Perhaps he *does* know a bit about FICO (though the part about paying the collections to increase your score is wrong, wrong, wrong) and knows that because the CA updated the account, FICO sees it as a new collection.

Could that be it?

When I match everything up with him- its totally the same.  So, I dont know if they are adding a 2nd collection for it or not. 

No, you would know. What he's seeing is supposed to be the *EXACT* same as what *YOU'RE* seeing. Unless you have split reports.

Split reports is when the CRAs make a boo-boo with your CRs and let you only see a fraction of the reports but provide the lender with the complete report. To figure out if this is happening to YOU, ask the lender for a copy of the CRs in question and compare them side-by-side. EVERYTHING should be the same (although his copy might be a bit harder to read).

I'm pretty sure that they arent and that LO is wrong.  After all, we just received a collections notice from AFNI for payment a month ago.  I will need to clarify it with LO though.

If you pay it off BEFORE it falls, off, yes, it will look fresh. If after, nope. It, by Federal law, can't be reinserted after the CRTP. 

Does this mean that even if we do a PFD, it will look fresh and affect the scores or no?  

DO you have any credit cards? If you *don't* that's a negative (yup ... believe it or not). FICO likes to see a "mix" of credit. Meaning, it likes to see how you use installment debt (your car note) AND revolving debt. Adding a CC to your credit reports (especially if you could piggy-back on a close relative's GOOD standing account) will give you an increase if you *don't* currently have any CCs.

Otherwise, the *only* thing you can do to increase your scores is get PFDs on those two accounts. Simply paying them will only harm your scores, not help them,.

We have no credit cards, they have all been closed for several years.  The only thing he has on his report is a credit card that was paid off and is reporting paid.  Actually, I think he settled with them on that one.  It was before we were together. 

For the BEST FICO score jump, you need a revolving credit card account. FICO likes to see a good mix of credit (like I already said). Can you get one? Or would that affect your DTI?

Get a CC, then (that's what I would do). Cap One is great for getting started ... they gave DH $1500 credit line with scores like yours. Then, use it to pay something small every month, pay it within 1-2% of the utilization, and let it report. Adding that new mix of credit should net you somewhere around 10-20 points - it did my DH.

We do have a car payment that is current, paid/never late but that only just started showing.  The car was bought at the end of Jan.  The only other thing he has is his student loans through Sallie Mae- which will be in repayment in June.    I dont think theres anyone we could piggyback with, everyone in our family that would help us has bad credit and the ones with good dont want to take the risk, lol.  

Most people *don't* have someone they can piggy-back with. But if you *could* that'd be AWESOME, since you'd inherit their perfect history. But you can create your own history like I outlined above. Just make sure to keep the card in good standing, with a low, low, low balance.

That should really get you above the minimum for the loan.

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[Anonymous]

I don't know how that works (we went FHA), but can you not find another lender online? Or stay with this guy, but bear in mind that its the rare LO/lender that requires collections to be paid. 

I will do some searching tonight for other lenders and see what I'm able to come up with.  Since you said before it wont affect his score to apply for different lenders since they know its for a home.

Depending on how old they are, they might only agree to a PFD if you pay them in full. But if they DO agree to a PFD (regardless of how much you actually end up paying them), they WILL remove the entire entry from all reports. However, make a gazillion percent sure that you get this agreement in WRITING. CAs do not uphold their verbal promises. I don't care how "nice" they were on the phone -- they're trying to get paid, for Heaven's sake, yannow? -- they're not nice people.

If you get a PFD his score will go UP.

Exactly.  I saw the PFD letter on here and was using that- if we go that route.  I'd like to (best case scenerio) have them settle for a less amount since its so old but have it completely gone.  We shall see.  I know AFNI wanted to settle the account up for $57 from $230. So, I wonder if I could get them to take that and delete it off as paid in full.  Hmmm. 

I'll try to check into the CCs with Cap One as well... thats where our car loan is.