FICO credit score

[CaliAngel]

^Loans above $417,000 are considered "Jumbo Loans" and have stricter guidelines and higher costs associated with acquiring the loan.

 

Often you'll hear "no cost refinancing" and that's because banks can credit money to borrowers based on the rate they choose, and the guidelines they fit in, paying off the fees for getting a new loan, making the cost of acquiring the loan "no cost." But with jumbo loans it makes getting that credit harder based on the guidelines and "money back credit" that gets taken away based on credit scores and things like Loan Amount to Value of Property. Often times a person refinancing a jumbo loan will have to pay money out of pocket to get into a better rate.

 

Yeah, I'm about 2 months away from buying my first house.  I'm using the VA guaranteed option that I have, and looking to get a house for 1/2 price though the HUD "Good Neighbor Next Door" program. 

 

I'm going to be shutting down using all of my cards the week I apply for the loan...I always keep them all at a 0 balance, so it will be easy.  I'm assuming my normal direct deposits from work will be fine, so long as they're the same as usual for me, right?

 

Yup. Banks typically want 2 months of paystubs up until days before they fund, because they want to make sure you still have the job. It's happened before, someone gets fired from their job the day before they get the loan and they can't pay! And it sounds like you've got it under control, but if you run into any problems or aren't happy with what you get you can send me a PM. I am still training, but I work for a mortgage brokerage and we're good at what we do!

 

That goes for anyone else here as well, for example HaloMatt's talking about getting rid of that Mortgage Insurance, which he will probably be able to do in 6 months through refinancing if his credit improves. We have guys that help with credit repair, they go through everything and do what they can to get the credit as high as possible. That's where that 30% number I brought up earlier comes into play, I've seen peoples scores raise by 80 points just by paying down a couple things, we do stuff like that all the time.

[Docwaukee]

fyi - there are only a couple of agencies that report your real FICO score.  Not sure if Discover is giving you a score that's close to your real FICO, but most of the companies that promo a 'free credit score' actually give you a FAKO score.  FICO is the universally accepted algorithm for score calc, but many banks for instance use one of the many others or even a proprietary one.  Your score may be different relative to the bank you are using but almost always, your FICO score will be less than the one the 'free credit' companies give you. 

 

Your score has nothing to do with your income.  Your ability to get a mortgage will though obviously.  There are fannie and freddy guidelines for mortgages that most bank are required to follow because they sell your loan once they write it.  Some banks keep the note in house and have portfolio lines that can be a bit more lenient on credit score, LTV, DTI, liquid assets, income requirements etc. 

 

The biggest effect on your score is your current debt ratio relative to your credit limit.  For each open credit account and the total for all accounts.  Obviously, your on-time payment history, number of accounts, how old they are etc also have an effect.  It also matters how recent any delinquencies you have are.  If it's within the last 1-2 years, it will ding you harder.  Paying your debt down to 20% of max credit limit on each card will help tremendously. 

 

ex. - if you have a macy's card and are making monthly payments on a piece of furniture as agreed upon, it will show on your credit as that line being a maxed out limit.  A real hit.  Or if you have one card that you use often and it's above 70% and the amount on the card puts your total amount of CC debt relative to other open accounts above 40%, that's also a big hit. 

 

Some creditors will actually remove a delinquency if you write a letter stating it was a reasonable oversight ie you never got a bill etc.  Others will not.  One trick I used recently was to pull my name off of a bunch of credit cards that my wife had from before we were married and I was just a card use but not on the account as joint.  We had some debt on her card but none of mine.  I refinanced under my name only and therefore they didn't have to run her credit to get the loan so the bank never saw the debt on her card.  A few of the companies actually took off a couple of delinquencies that I had from several years ago by talking to someone over the phone.  You have to speak to a manager though. 

 

The FICO website has a credit check and monitoring service that gives you updates and it's the only one I know of that gives you a true FICO score.  I also use credit karma to keep track of balances and payments due.  It's free, secure, and they send email updates. 

 

Also, be very careful when getting a HELOC.  Trying to refi a jumbo with one is a real bitch.  The transaction to refi with a heloc is a cash out situation and loan limits and max LTV are much different in that situation.  ex. - I got lucky with mine during a recent refi.  When the market crashed, many lenders locked it up and didn't allow you to draw from it which Chase did to me.  My new lender was able to classify as a second mortgage instead of a heloc after I proved that it was locked and that I hadn't drawn from it for two years.  It then made my transaction a non cash out refi and the loan to value could be 80%.  If not, it would have been 60%, and my max loan would have been below what I needed. 

[Brandon]

Welcome to the world of credit repair, Doc!

 

When the bubble burst some of my brokers and loan officers jumped ship and went right into credit repair or the scammy "loan modification" business....ironically both are consumer based efforts that consumers don't know they can do on their own and people make them think they need them to do a loan mod or credit repair.

 

Most here can do their own credit repairs like Doc did. I keep in contact with one of the people in credit repair and all she does is send in letters on behalf of the consumers, which they could easily do but know they can. They creditors have 30 days to respond in writing to refute a letter, if they don't respond at all it has to legally come off your credit report. So what these credit repair places do, as this chick does, is simply innundate these creditors with letters until they either give up on responding or miss them coming in to get them remove from peoples credit reports.

[Brandon]

Yeah, loan mods and credit repair are consumers working with creditors on a solution. All these agencies do is push papers around and submit the paperwork for you. 

 

I remember when loan mods first hit the scene when all the 5/1 ARM loans hit their five year dates and ballooned to high for consumers to pay. All the loan officers and brokers that were now "broke" jumped into this right away and it was the wild wild west at first. I remember one dude standing in front of grocery stores or Wall-Marts telling people they could save their homes by doing a loan mod he could do and charging people something like $3k up front with no guarantees. I don't think anything was in place initially where collecting money up front was a RESPA violation like standard loans. And just like a consumer doing their own loan mod it ultimately is up to the bank to determine if they want to work with you or adjust your loan.....so these "loan mod specialists" could get the same no answer from the banks and didn't have anymore pull than consumers. It seemed to go on for a month or two before quick regulations were enforced to curb people getting ripped off paying up front.

[Adam]

We bought a house a couple months ago. Last summer my score was in the 670 range. I had several old debts that were due to fall of my report in Sept and Nov of 2013. The first broker we spoke to told me I would need to hire someone to settle these debts and have them removed from the report. I understand this stuff pretty well, so my first response was, if I settle these debts the 7 year clock restarts. He tried to sell me on this chick who could have them removed from the credit report in exchange for a higher settlement. I called BS. 

 

Got some help from a friend formerly in the biz. He looked at everything, reinforced what I thought about my neg items falling off and told me I'd be fine even if they didn't. He hooked me up with a broker and it was the smoothest process. Honestly, I don't think it could have been any easier. We didn't get the best rate, but it was still solid. I think we borrowed $520K and got 4.625%. 

 

Anyone looking to buy a house with any credit worries, talk to someone you trust. There are a lot of shady dudes out there who will try and get you to spend money on nonsense. Or, probably worse, they're incompetent. 

[Brandon]

Definitely. I thought one of the coolest things was being around during the market crash (or just in general) where people knew I was in the industry and would send me PM's. It was cool to get messages of thanks and saving people money or headaches from people trying to rip them off, mainly the loan mod stuff.

[Adam]

As Brandon said, I don't think the super old ones matter much anymore, depending on their nature. 

 

Mine were pretty small relatively speaking - college credit cards that got out of control. 

Edited February 24, 2014 by Adam

[Brandon]

It used to be 7 years (not sure if it has changed since) for things to fall off.....much like traffic violations and the 3 years with the DMV. Paid collections are still collections on credit reports. But things like bankruptcies while 10 years to come off, one could still purchase a home after 3 years. I know one that was lenient as far as debt/collections was medical bills. They usually just required a letter of explanation. College or mature debt is usually treated the same, especially with a good history ever since.

Edited February 24, 2014 by Brandon

[Adam]

My brother in law just bought a new house with a foreclosure on his report. 

[Brandon]

Yeah, after three years of a BK or foreclosure everyone is good to start buying again.....granted the rate won't be ideal.

 

It works out anyway as that gives someone three years to get their credit in order. Without the debt a lot of people come back with better scores after the three years.

[1nutkruk]

Last time I checked my score it was 817.  We did just unload our condo which removed the remaining $37k of a mortgage off of the report.  Never missed a payment in my life.  

 

I used to work foreclosures for a servicing company when I still lived in San Diego.  Half the files that came through my desk were first payment defaults.  Also people would continually file bankruptcy to stop the foreclosure process.  

[halomatt]

Hmm...someone upthread wrote something interesting.

 

I had a HELOC that was capped and the funds were shut off and it was about three or four years ago.  If, as the poster stated, I can get them to look at it as a second mortgage that was settled and charged off will it improved my credit score? 

 

That was one of two negatives on my credit that was dragging it down.  My ex-wife settled with the debt collecter and paid the negotiated amount.  That was last year.  Does it matter what it's called because the fall-off time is still seven years? 

[Brandon]

Last time I checked my score it was 817.  We did just unload our condo which removed the remaining $37k of a mortgage off of the report.  Never missed a payment in my life.  

 

I used to work foreclosures for a servicing company when I still lived in San Diego.  Half the files that came through my desk were first payment defaults.  Also people would continually file bankruptcy to stop the foreclosure process.  

 

Seen both. Actually came across a lot of of first default fraud cases or buy back situations. 

[Brandon]

Hmm...someone upthread wrote something interesting.

 

I had a HELOC that was capped and the funds were shut off and it was about three or four years ago.  If, as the poster stated, I can get them to look at it as a second mortgage that was settled and charged off will it improved my credit score? 

 

That was one of two negatives on my credit that was dragging it down.  My ex-wife settled with the debt collecter and paid the negotiated amount.  That was last year.  Does it matter what it's called because the fall-off time is still seven years? 

 

Not 100% sure of your situation, might want to ask Doc about the process. Charge offs are still bad and unpaid debt. It just means the creditor put the debt as a loss, it doesn't change anything for a borrower or their credit. But yes, if you get it listed as a paid or settled charge off that is better than your credit report saying charge off. It would positively impact your credit in about 90 days.

 

It only matters whether it was settled/paid. If you just leave it as is then it's the same seven years. It's also seven years even as a settled or paid charge off, but isn't as negative to your credit score if paid or settled. The only way to clear a charge off is to wait the seven years or work with the creditor to remove it.....this is what credit repair does, sending in those letters one after another getting them to sign off or lapse the 30 day period and having it automatically removed.

[halomatt]

Okay, I get it.  Thanks Brandon.  I should just keep writing the letters and pushing for them to update.  I'll definitely look into getting the charge off listed as "paid" or "settled".  Thanks again.

[Brandon]

No problem. Double check with a buddy or family friend in the industry. I keep my ear to the ground and business connections, but am not in the industry anymore...for the most part. Most of what I mentioned in this thread was just base or general credit info, but some thing may have changed in the past three years or so since I've been out of the business on a day to day basis.

[Docwaukee]

Hmm...someone upthread wrote something interesting.

 

I had a HELOC that was capped and the funds were shut off and it was about three or four years ago.  If, as the poster stated, I can get them to look at it as a second mortgage that was settled and charged off will it improved my credit score? 

 

That was one of two negatives on my credit that was dragging it down.  My ex-wife settled with the debt collecter and paid the negotiated amount.  That was last year.  Does it matter what it's called because the fall-off time is still seven years? 

I am not too sure about this situation.  Having a heloc vs. a 2nd doesnt affect your score as far as I know but how you would be able to refi them.  So the bank you refi with cares, but your fico score doesn't.