Credit Sores/ Want to Buy a House

One thing that you do want to be very careful about is that if you pay a debt off, the creditor or collection agency will report it as paid off collection account and that is as bad as having the collection on your report in the first place.

You should never pay one crying dime on an account that is in collection unless you have a written contract with the creditor stating that upon paymont of the account in full that all references to that account will be removed from all public records.

Absent such a written contract, I force the creditor to forget about the debt entirely and take it off the credit reports too. He can either agree to take it off voluntarily or get forced to do so and not get any money either. His eventual alternative will be to get sued for the largest possible amount I can get put against him and make it stick.

So far, I've nover had one of them that wanted to talk to a jury about their problems.

 

Get your credit scores (Beacon, aka FICO) from Equifax (www.scroepower.com). Let us know what they are. The scores from Experian may be their new score (the Fako-O, not the FICO). Trans Union is doing the same goofy thing. They're on a different scale than the FICO, and mortgage lenders use the FICO, anyway. Don't listen to their garbage.

Call a few mortgage brokers who do FHA loans. Apply to one who knows how to use automated underwriting through Freddie Mac (Loan Prospector ("LP")) and Fannie Mae (Desktop Originator ("DO" (pronounced Dee-Oh)), and who knows how to make corrections to your NATIONAL credit files so the scores change. Pay them the money that they need to cover their costs for credit reports and the submissions-- don't be a cheapskate. If they want $100, give them $100. Have them underwrite your situation based on how it will be in, say, 6 months-- that is, with the amount of debt you'll have then, and the amount of money you'll have in the bank. Get copies of the reports they use in underwriting. Pay attention to-- and act on-- the reasons ("reason codes") given with the 24 scores.

The single-family maximum FHA mortgage amount is $138,985 for Dade County, and $144,590 for Broward. In what county will you buy?

Are either of you a veteran?

Is the minimum payment of the Ford student loan $300? If not, start making the minimum payment and saving your money, instead. As I understand it, the account is no longer a collection-- is that correct?

Lenders don't deal with net income or income after deductions or child support. You may not count it, but they do. The debt-to-income ratio is figured on gross income, and child-support as a debt. How much is the child support? What are the minimum payments on your debts? Is your income 90K plus your commission?

Don't pay off the $4,000 credit card. An additional $4K toward a downpayment or in reserve could make or break your approval. And, you may need the credit history that card could build.

Consider a credit repair service-- as opposed to doing it yourself or the mortgage broker doing it. It is probably worth the $600 it might cost. They have a few tricks, and will keep track of the details. For tougher cases, the services are probably worth their fee just for the administrative tasks-- typing, mailing and recordkeeping. You can probably make more money working than their service will cost-- so you'll come out ahead.

But, if you enjoy this kind of crap, or a looking for a new career, do it yourself.

You said you're trying to "gain the proper 'know-how' to correct the inaccuracies" in your files. There isn't any magical language. Just write letters to the credit reporting agencies, order them to correct the file and expect them to act like adults. If they don't follow the law, sue them. What do you mean by, "I don't want to repay, and have it hurt instead of help my overall rating(s)"?

But, if Bill Bauer can show you how to get a legitimate account REMOVED from the public record and from the credit file collections section, let him.

 

Greg:

I guarantee to get the job done in at least 90% of the situations.
Never failed to meet that criteria yet.

Just so long as it isn't child support, valid tax liens, and student loans.
Tax liens can be eliminated also, but not by standard methods. To get anywhere with those takes a lot more than just a few letters. It takes actual legal work, and while I do have people who can do that, it's a lot more expensive. The collection agencies that try to collect student loans can be vanquished and their adverse remarks removed too, but not the actual student loan itself. That has to be paid off with the exception of certain circumstances such as 100% disability or going on a full pension for whatever reason. If one goes at it with some persistance after disability or other pension is granted, student loan will forgive the loan and take it off credit reports. It just takes them a while to do it, but they will. It does have to be in default, however.

 

Y'know Greg, I've been reading your posts for a while back on MSN Money Talk, and now here, and I have to give you "dap" on the most JAMMING INFORMATIVE posting...

Deb
P.S. So what if they were veterans? Would a poor credit rating still matter?

 

Here's an assignment for you:

Figure your proposed housing/income ratio and your total debt/income ratio. Show your work.

Consider using an electronic spreadsheet-- try putting your debts, income, and a payment calculator for proposed housing payments on it. Do some what-if? scenarios.

I haven't had any experience with credit repair agencies, so I couldn't recommend one.

You are on the right track and seem to be past the major hurdle that most encounter: The fact (and kidding themselves that it isn't one) that savings-- for reserves as well as down payment-- counts heavily. Many (many, many) ignore it, do not save, and try to scare up their loan with little or nothing down. It's folly because they should be saving in the first place. Yet, merely coming up with the amount of cash to close is a typical problem-- they beg, borrow and steal to get the last 50 bucks they're short. And that means no reserves, and that means no lesson learned-- and that means disaster looms again.


Debmac:

Thank you.

VA loans have lower credit standards than conventional loans.