Investment Property Mortgage

[Jane1908]

Hi- I am trying to get a mortgage for a home I inherited. The home needed a lot of work, I was advised to take a home equity loan on my personal residence by a contractor and max out my credit cards. That was bad advice. Now that I am trying to get a mortgage, my credit score is horrible. I have paid down the credit cards to just under 50% over the past two months and have movd money around to other credit cards that had $0 balance. The first month, my credit score increased, but I was 2 points short of achieving the 680 score that I need to qualify for the loan. Then I paid the cards down to just under 50% and my credit score for Transunion dropped in February. In March I paid down $5k, and the credit score did not move. I had a negative report from Nordic trak back in 2020 for a product I never received, and they charged me late fees, again for a product I never received. I disputed the negative report, and they updated it last month and added more negative reports, saying I was 120 days late, again, for a product I never received. I am disputing this with the federal agency, but in the meanwhile, I really need my score to get to 680. 

Right now I have 8 credit cards, 2 of which I paid off today. 

The 6 cards that I have left, I plan to have under 29% this month. How do I know which card to attack to have the most impact this month? My total debt credit card debt is 19k. 

Is there anything else I can do to help my score jump to the middle score of 680?  FICO score 5,4 &2 as of 4/4/2024.

Equifax: 634

Transunion: 663

Experian: 684

Thanks! 

[ShanetheMortgageMan]

I've never spoken with NordicTrack before, but I'd ask if you are responsible for payments if you never received a product.  If they say no, then remind them you never received their product and ask if their records show the same.  If they say their records also show you didn't receive the product, then that right there should be enough of an admission from them that the late payment(s) should be removed.  Just need to continue applying pressure and escalating it to a supervisor in order to get it fixed.  I like to use the phrase "I'm applying for credit and your inaccurate reporting is damaging my chances of getting approved."  That seems to get their attention in most situations.  When in a time crunch I'm not a fan of disputing something without knowing how the creditor will respond, you could end up waiting 30+ days just to find out nothing was fixed.  First find out how they'll respond, ask for them to put it in writing and ask them to directly update the credit bureaus.

Outside of that, look into the AZEO method - where all of your credit cards are $0 except for one which you'd carry a balance of 1-9% of it's credit limit.  That'll get you an immediate credit score boost as soon as the balances update.  

If you list all of your credit cards, their balances and credit limits you'll likely get better feedback.

[ShanetheMortgageMan]

Outside of those recommendations, did the lender say why you needed a 680 score?  Are you applying for a mortgage on your primary residence or on this investment property?

[Jane1908]

The mortgage is for the investment property in order to pay off my heloc on my primary residence that I took out to do the renovations on the investment property. The property currently does not have a mortgage. 

[ShanetheMortgageMan]

Mortgages for investment properties don't always need a 680 score, so it might just be this particular loan program's requirements.  If you feel comfortable using this lender then it could still be worth putting the work into improving your score though.

[Jane1908]

Visa- credit limit $7,500

total due: $2,308

AMEX 1: 15,000 Limit

total due: $6,500

Amex2: $11,500 limit

Total due $4,000

Home Depot: $3,100 limit

Total due $1,400

Capital One : Limit $7,000

Total due :$3,800

Line of Credit: $2,000 Limit

Total due: 1,200

[Jane1908]

Thank you, any recommendations on what loan programs would allow for my score mix? Or lenders you could suggest? 

[ShanetheMortgageMan]

Fannie Mae & Freddie Mac loan programs can go down to a 620 score, but the higher the score the better the interest rate is.  

[Thomas_Thumb]

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@Jane1908 wrote:

Visa- credit limit $7,500

total due: $2,308

AMEX 1: 15,000 Limit

total due: $6,500

Amex2: $11,500 limit

Total due $4,000

Home Depot: $3,100 limit

Total due $1,400

Capital One : Limit $7,000

Total due :$3,800

Line of Credit: $2,000 Limit

Total due: 1,200

---

Mortgage Fico scores are sensitive to #/% of cards reporting balances. If these are all your cards, then you have 100% with balances. That's not good. For a decent score boost pay off 3 cards (get cards reporting balances to 50% of total or less). Going from 100% reporting to under 50% reporting could boost some Fico mortgage Ficos score 20 points.

Next take reported balance on each of the remaining 2 cards below 29%. It will not help much if 1 card is left above 29%. I suggest paying down the LOC to under 49% as a minimum or pay it off.

AZE1 (all zero except one) is optimal but not necessary for a decent score boost given your current situation.

[SouthJamaica]

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@Jane1908 wrote:

Hi- I am trying to get a mortgage for a home I inherited. The home needed a lot of work, I was advised to take a home equity loan on my personal residence by a contractor and max out my credit cards. That was bad advice. Now that I am trying to get a mortgage, my credit score is horrible. I have paid down the credit cards to just under 50% over the past two months and have movd money around to other credit cards that had $0 balance. The first month, my credit score increased, but I was 2 points short of achieving the 680 score that I need to qualify for the loan. Then I paid the cards down to just under 50% and my credit score for Transunion dropped in February. In March I paid down $5k, and the credit score did not move. I had a negative report from Nordic trak back in 2020 for a product I never received, and they charged me late fees, again for a product I never received. I disputed the negative report, and they updated it last month and added more negative reports, saying I was 120 days late, again, for a product I never received. I am disputing this with the federal agency, but in the meanwhile, I really need my score to get to 680. 

Right now I have 8 credit cards, 2 of which I paid off today. 

The 6 cards that I have left, I plan to have under 29% this month. How do I know which card to attack to have the most impact this month? My total debt credit card debt is 19k. 

Is there anything else I can do to help my score jump to the middle score of 680?  FICO score 5,4 &2 as of 4/4/2024.

Equifax: 634

Transunion: 663

Experian: 684

Thanks! 

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The mortgage scores are very sensitive to number of zero balances. The more, the better. So probably the best thing you could do is pay the smaller balances down to zero.