Maximizing my mortgage scores. Is there anything else I can do?

[DeeBee78]

I am under contract for a new build home, with a closing date of July 15, 2026. My lender has me approved for FHA, but my loan officer believes I can get my mortgage scores to their minimum required for conventional financing, saving me $400 a month in PMI. 

My FICO 08 scores are 650-690, but the mortgage scores she pulled are ABYSMAL, with the middle score being 600. I need to get up to 620 to get approved for their conventional financing and I have six months to do it. 

I have little revolving debt, just one 0% financing balance from IKEA that I will pay off in four more months (8 months early), and my Citi card that gets paid in full every month. My understanding is that mortgage scores are massaged by revolving lines reporing "AZEO at less than 10%"  so I can do that.  I have two auto loans, one with 22 months and one with 58 months left. I can shuffle some money around and pay one of these off, but I don't want to if it's going to make my mortgage score drop. 

What is really holding my score back is chargeoffs from 6 years ago  from a failed business partnership. I have been told by my loan officer to do absolutely nothing with them, since disputing them can spook underwriting, and paying them off can lead to my score dropping again. 

Other than massaging my revolving debt for score maximization, is this pretty much the best I can hope for? 

[LIGHTNIN]

What is the interest rate for FHA? And the conventional interest rate?

This would be a question, I believe @ShanetheMortgageMan  could answer.

If you don't get advice, I would suggest having your post moved to the mortgage board.  Upper right, 3 dots,click on report conduct. ( I know weird title, but it reports to a mod. Just put that in your message)

[AndySoCal]

@DeeBee78  The mortgage score is the middle FICO score. Look at the credit reports of your lowest and middle FICO score to if you can do if anything to raise either. I would investigate early exclusion which would remove the charge off if they qualify for it. Before doing so get advice on if you should proceed or not.

[FicoMike0]

If you post more details, you might get more help from the experts.

The chargeoffs may be killing your utilization, if they are reporting a balance. That will prevent you from getting under 10%.

I think the advice "and paying them off can lead to my score dropping again"

Is wrong. Paying them off or early exclusion might be the biggest improvement available.

[LIGHTNIN]

Do you know your states SOL? That's the time period that they can sue and win.

Do you know who owns the debt the OC or CA's? You've not heard ,from a CA?

Your post is asking 2 part question, 1 for improving CS, which is ok for this board. 

Your 2nd part is about mortgage loans, which I would suggest you ask those questions on the mortgage board, to get the most replies.

Can you post, how much down paymentis required for each loan? 10%, 20%?

Don't give up on your dreams of owning a home. It took me 3 banks and 6mos, before I was approved by the 3rd bank.

Having a mortgage is the biggest decision you'll make in your life. Take your time to get it right🙂

[BrutalBodyShots]

Hey there @DeeBee78! Definitely implement "AZEO" with respect to your credit cards. Number of accounts with a balance ("too many"...) will hurt your mortgage scores.

As far as your 2 loans go, you'd just have to look at your before and after installment loan utilization to determine if paying one off would help, hurt or remain the same. If your installment loan utilization would stay the same or drop, paying off one loan would be beneficial and not a detriment.

[Thomas_Thumb]

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@DeeBee78 wrote:

I am under contract for a new build home, with a closing date of July 15, 2026. My lender has me approved for FHA, but my loan officer believes I can get my mortgage scores to their minimum required for conventional financing, saving me $400 a month in PMI. 

My FICO 08 scores are 650-690, but the mortgage scores she pulled are ABYSMAL, with the middle score being 600. I need to get up to 620 to get approved for their conventional financing and I have six months to do it. 

I have little revolving debt, just one 0% financing balance from IKEA that I will pay off in four more months (8 months early), and my Citi card that gets paid in full every month. My understanding is that mortgage scores are massaged by revolving lines reporing "AZEO at less than 10%"  so I can do that.  

I have two auto loans, one with 22 months and one with 58 months left. I can shuffle some money around and pay one of these off, but I don't want to if it's going to make my mortgage score drop. 

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Paying one of the Auto loans early will certainly reduce your DTI. However, it will likely hurt your Fico scores. Why? Fico looks at aggregate balance to loan ratio on open loans as a scoring metric. So, paying off the smaller loan balance with lower B/L ratio will result in a higher remaining B/L ratio. This increase in B/L likely will hurt score if the change is significant. Debt consolidation to one loan certainly won't help scores.

One of the 3 CRAs also looks at length of payment history on open loans. Longer is better. Closing the older loan would be detrimental to that metric. 

Early exemptions are CRA dependent. As I recall, one CRA will do a EE 3 months early, another 1 month early and the 3rd no EE. Others can provide better details. 

Yes, AZE1 is a good strategy. However, I'd keep the reported balance under 9% vs 10%. As you likely know, avoid any new hard inquiries. 

[AndySoCal]

@FicoMike0  Doing anything that might/ or will update the date reported of those late account must be avoided at all costs. If the account is paid that will bring the date reported forward in time to the current date. This will cause the scores to drop which is a nasty side affect.

@DeeBee78  One post I saw on early exemption is thatvTranscUnion wasc6 six months Experian was around 3 months Equifax was about a month.

[ShanetheMortgageMan]

Even though their minimum score is a 620 for conventional financing doesn't mean you qualify with a 620.  You need to also pass automated underwriting, which takes into consideration all aspects of your borrowing profile - a 620 credit score usually needs compensating factors to pass automated underwriting, such as 10% or more down, a lot of reserves in the bank after closing, and/or a low DTI. 

You mentioned by switching to conventional financing you would avoid $400/mo in PMI, so does that mean you are putting 20% down?   With less than 20% down conventional financing will have PMI is why I ask. 

Lastly, the interest rates with conventional financing at a 620 credit score are much higher than FHA rates with a 600 score, so even though you would be reducing or eliminating $400/mo in PMI, you would have a higher monthly P&I payment since the interest rate will be higher. 

If you haven't already, you should ask the lender what the terms would be with conventional financing assuming you had a 620 score and would pass automated underwriting.  Make sure to compare the total monthly payment and not just the PMI portion.  

[BrutalBodyShots]

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@Thomas_Thumb wrote:

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One of the 3 CRAs also looks at length of payment history on open loans. Longer is better. Closing the older loan would be detrimental to that metric. 

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Do you know which CRA? What is the negative reason code associated with it? Something like "length of time open loans have been established?" Do you have any data points to quantify the impact of that metric?