When might we qualify?

[Anonymous]

Hey everyone. We were hoping to buy a new house this year to get our soon-to-be-kindergartener in a great school district, but after reviewing my husband’s credit report/scores, I’m sure we’ll have to wait until next year. I read ABCD’s 11 rules and we’re going to start implementing it immediately. I also read a post about GW saturation and will be sending out the first round Monday.

Here's our current situation. We’ve had two major medical emergencies in the last four years that we’ve recovered from financially, but our credit still has a long way to go.

Credit scores are currently mid 500s.

Credit negatives:
1 Collection for $154 that’s from Sprint (but we haven’t had Sprint in over a decade so I assume I can dispute this)
1 Collection from AT&T for $231 (husband hasn’t used ATT since college, so 15 years ago, also plan to dispute)
1 medical collection for $3000
All are unpaid

2 90 days lates from 2016 and 2017 for Comentiy (Overstock store account)
1 60 days late from Conn’s (furniture store) from 2017.

We also have an auto loan $16k/$23k, no lates ever. $406/month

Current card utilization is 99% for two cards, Cap1 $3000 and Barclays $2000. We’re going to pay these down to <10% in the next month.

Income is $77k, FTE for 10+ years at the same company

Cash reserves: About $7k currently, but we’ll be using some to pay down the CCs. We also have around $100k equity in our house, when we sell we should get around $80-85k after realtor commission and misc fees. Intending to put 20% down, pay off our car, and keep $10k in savings. Also have a 401k but we aren’t touching this.

We’ll be looking around $220-250k for the next house. With the incredibly low taxes in this area, this would put our payment around $1200-1300, depending on the rate. And if we pay off our car right after we get the new house, this will be our only monthly payment aside from utilities.

This is all my husband’s. I don’t even have a credit score because I have one card I haven’t used in two years that was recently closed and my income is unverifiable. So the mortgage would likely be in only his name.

Our last issue is that our mortgage doesn’t report to any CB. We’ve never been late on it, so I think it would actually help both of our scores, but from what I understand its up to them whether or not they report. Would this hurt us when trying to get a mortgage or would we just have to provide the payment history to the lender?

I know that if the GW campaign works, we’ll be in much better shape, but if I can’t get them to remove them, do we have to wait a year or two to qualify for a mortgage because of the recent lates? And will the medical collection need to be paid for approval or is it better to just leave it alone for now and focus on the CCs? Any advice about when we could possibly qualify and what else we should be doing to get there would be greatly appreciated.

[NC_Mtg_Loaner]

Is the medical collection legitimate? 

If so, i recommend obtaining or creating a payment plan back to them---once 4 regular monthly payments are made and can be verified the creditor legally can't report it as a derogatory account.  

It seems to me that your household budget is just stressed from your "event" that caused you to fall behind a year or so ago.   Only time (making all monthly payments on time) will heal these credit wounds, but it sounds like it's already in progress.   In addition to working on paying a legitimate medical claim I'd work on paying down those credit card balances ASAP so that you can strengthen that credit profile history to boost your score.   You might even consider paying them down to < 50% and using that additional $2500 you were planning to use this month to get that utilization ration <10% to negotiate settlements for the medical collection and the Utilities.  (Sprint & ATT if valid)

If the older collections' (Sprint and ATT) dates of last activity are > 7 years, they technically should be removed if you are to inquire about them, but if they're valid and have recent activity enough to hamper your profile, you surely ought to be able to satisfy them with an offer of half the collection amount.   

In 30 -45 days you'll have a much more attractive credit profile in the eyes of the algorithms unless i am mistaken.  

[Anonymous]

Thank you so much for your reply.

The medical collection is probably legitimate. We thought we'd arranged payment plans with everything, but there were so many charges from different doctors/hospitals/departments, I guess we just missed that one until it went to collections. I didn't know about the payment plan and the four months, thanks for the suggestion. We didn't have an emergency fund and spent three months last year getting 1/3 normal income through sick pay. It was a rough time, but it was our own irresponsiblity for not saving like we should have.  

The AT&T and Sprint charges have to be way past the SOL. Or possiby the Sprint  one isn't really my husband's, the addresses is wrong and his name is super common, so it may be a mix-up. We've had Verizon for 12 years now, easy to remember because we switched from AT&T just before we first moved in together. If disputing doesn't work for whatever reason, I'd definitely try to PFD or just settle.

At this point i think we're okay with waiting longer anyway. It'll give us more time to deal with all of this, continue saving, and we'll probably get a little more equity too (our neighborhood is gaining fast) so we can put 30% down and be even more secure in the next mortgage.