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Year 6 of Charge Off Purgatory / Trying to Buy House

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divorcesucks
New Member

Year 6 of Charge Off Purgatory / Trying to Buy House

2024 June 5:

I am in Year 6 of charge-off purgatory to which I blame no one but myself and divorce.

 

2015 February - credit score 824

2018 November - credit score 531

 

2024 May - credit score 618 (Equifax)

With the help of my 20 year old son who added me to his AmEx card last month (God Bless Him) and a $300 secured loan that I opened three months ago,  I've rebuilt my credit one measely point at a time (537 to 618) in three months.  

 

I have two charge offs /  last payment date of April 2018

Discover Card $22,668 (credit limit $20,000)

Wells Fargo $776 (credit limit $650)

 

The Discover Card is with National Enterprise Systems (last letter dated 2023 February).

 

 

I'm trying to buy a house. 

Three Year Income History ($75,000 each yr) 

FICO 5,4,2 Score (663 / 642 / 619)

Total Utilization 112%

 

HOW DO I PROCEED WITH ONE YEAR LEFT !!!???!!!

 

10 REPLIES 10
VAMortgageGuy
Regular Contributor

Re: Year 6 of Charge Off Purgatory / Trying to Buy House


@divorcesucks wrote:
2024 June 5:

I am in Year 6 of charge-off purgatory to which I blame no one but myself and divorce.

 

2015 February - credit score 824

2018 November - credit score 531

 

2024 May - credit score 618 Equifaxx)

With the help of my 20 year old son who added me to hisAmExx card last month (God Bless Him) and a $300 secured loan that I opened three months ago,  I've rebuilt my credit onemeaselyy point at a time (537 to 618) in three months.  

 

I have two charge offs /  last payment date of April 2018

Discover Card $22,668 (credit limit $20,000)

Wells Fargo $776 (credit limit $650)

 

The Discover Card is with National Enterprise Systems (last letter dated 2023 February).

 

 

I'm trying to buy a house. 

Three Year Income History ($75,000 each yr) 

FICO 5,4,2 Score (663 / 642 / 619)

Total Utilization 112%

 

HOW DO I PROCEED WITH ONE YEAR LEFT !!!???!!!

 


Easy, you apply for a mortgage with a lender. Your mid score is 642 which is fine for FHA or VA & the charge offs are not an issue.

Message 2 of 11
pizzadude
Credit Mentor

Re: Year 6 of Charge Off Purgatory / Trying to Buy House

Putting aside the charge offs -- your revolving utilization is over 100% ?  

 

This is a huge factor in depressing your FICO mortgage scores.   It sounds like the COs are being included in your utilization or do you have other open accounts ?

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Message 3 of 11
ShanetheMortgageMan
Super Contributor

Re: Year 6 of Charge Off Purgatory / Trying to Buy House

Nice score increase over the past few months.  Is the AMEX you were added as an AU on the only revolving account reporting to credit (other than the two charge-offs)?   If so, then are there 2 more credit cards your son can add you to as an AU as well?  Mortgage credit scores love revolving accounts and I've read that at least 3 revolving accounts is the minimum to increase your mortgage scores at a healthy clip.  

 

Do you have any other debt payments, such as car loans, student loans or personal loans?

 

What state are you looking to buy in and how much of a sales price are you trying to get pre-approved for?

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 4 of 11
divorcesucks
New Member

Re: Year 6 of Charge Off Purgatory / Trying to Buy House

Thank You so much for the reply!!!   I forgot to turn-on notifications.

 

 

Message 5 of 11
divorcesucks
New Member

Re: Year 6 of Charge Off Purgatory / Trying to Buy House

Correct, the CO's are included.

 

I have been on a cash basis for the last 5 years.  No loans OR credit cards.

Message 6 of 11
divorcesucks
New Member

Re: Year 6 of Charge Off Purgatory / Trying to Buy House

Total cash basis for the past 5-6 years .... no loans or credit cards.

 

My son is only 20 y/o and in college,  so the AmEx card is his only card (he added me as an AU, three months ago) and at the same time I opened a $300 secured loan inwhich I "borrow" $10 and immediately pay off. 

 

I guess I'm unsure how to proceed:

(1)   should I, myself apply for a credit card ???

 

(2)  should I call/write Discover (or National Enterprise System, last letter dated February 2023 from them) to ask for mercy / prayer for judgement for that unfortunant large chunk (112% utilization) that is set to fall off next October (last payment April 2018, so fall off is 6y-6m / so October 2025) .... or just ride out the storm and keep my mouth shut???   Actually I'd probably still be married if I'd have learned that small little lesson in self control!   But I digress.  

 

Thanks Everyone.  I really do appreciate any directives. 

 

North Carolina / $285k max

Message 7 of 11
ShanetheMortgageMan
Super Contributor

Re: Year 6 of Charge Off Purgatory / Trying to Buy House

Got it on your son, that was still nice of him to add you.  

 

With your score and credit history, FHA financing would probably offer you the easiest chance of getting approved along with the lowest monthly payment.  Your income & debt-to-income ratio looks like it should qualify for a $285k sales price.  FHA doesn't require charge-offs to be paid off either.

 

You can apply for an FHA pre-approval now, worst case if you can't get pre-approved then you can open a couple more credit cards (secured or unsecured, they both will help your scores) and then 3-4 months after getting them, when your score has increased further, you can re-apply for the pre-approval.

 

As far as dealing with the charge-offs, the only benefit is if they would delete them or $0 out the balance on the account.  I don't think it's realistic for them to $0 them out and I'm not sure how willing they'd be to delete the trade line either.  You will probably get better advice regarding the charge-offs in the Rebuilding Your Credit section here on the FICO forums.

Free Mortgage Advice & Pre-Approvals (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Southern California and lending in all 50 states
Message 8 of 11
VAMortgageGuy
Regular Contributor

Re: Year 6 of Charge Off Purgatory / Trying to Buy House


@divorcesucks wrote:

Total cash basis for the past 5-6 years .... no loans or credit cards.

 

My son is only 20 y/o and in college,  so the AmEx card is his only card (he added me as an AU, three months ago) and at the same time I opened a $300 secured loan inwhich I "borrow" $10 and immediately pay off. 

 

I guess I'm unsure how to proceed:

(1)   should I, myself apply for a credit card ???

 

(2)  should I call/write Discover (or National Enterprise System, last letter dated February 2023 from them) to ask for mercy / prayer for judgement for that unfortunant large chunk (112% utilization) that is set to fall off next October (last payment April 2018, so fall off is 6y-6m / so October 2025) .... or just ride out the storm and keep my mouth shut???   Actually I'd probably still be married if I'd have learned that small little lesson in self control!   But I digress.  

 

Thanks Everyone.  I really do appreciate any directives. 

 

North Carolina / $285k max


The bad thing about COs is the debt can still be sold to a CA. If that happens, you're going to end up with another hit to your scores/credit when the new collection hits your credit report.

The good thing about COs is you can negotiate with the original creditor to settle the debt for less than owed. This will do 2 things, it settles the debt so you don't have to worry about it being sold to a CA and it can help boost your scores. The score increase comes from reducing that 112% utilization (because the account will report as paid/zero balance) and you're changing the status of the account from CO to paid.

As a lender, I would run a what if simulator and change the CO accounts to zero balance to see how much impact it will have on the scores. That way you have some idea of whether or not it's worth it.

 

 

Message 9 of 11
divorcesucks
New Member

Re: Year 6 of Charge Off Purgatory / Trying to Buy House

@ShanetheMortgageMan  .... you're amazing!    Thank you for the ensight, great advice and strategy, I absolutely truly appreciate your time.     If I can return the favor and you need help with an appraisal, let me know!  LOL

 

 

Message 10 of 11
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