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raeannfritsche · Joined: 12 Mar 2010 Posts: 6 3.05 Dollars($)

We talked to the bank and their min. score for an FHA loan is 640. We are at 610. We have decided to wait until Jan 2011 to try again. All the accounts on our credit report are paid off except a disputed account for $147. Our debt income ratio is 4%. Most of the "paid charged offs" on our report are medical which according to the FHA wesite are usually not considered. Oh well it was by the bank we went to.
So, we are thinking about doing an (1) installment loan for $5000 to get a camp trailer which we will need to live in next year when we are preparing our property for the house. We have enough money in savings to cover the loan in case something unforseen were to happen.
(2) We were also thinking about getting a credit card that we pay our bills with and then send one check to them for our monthly bills.

Do you think these 2 things and the fact that about 5 or 6 items are set to fall off our reports between now and October are enough to raise a score substantially?
I can't stand the absurdity of creating more debt for our family in order to increase our credit score!!

jveenstra · Posted: Tue Mar 16, 2010 10:34 am Post subject: Credit

I can not tell, do you have any open lines of credit on the credit report?

You should have at least 3, probably 4, open lines of credit. If you open three or 4 credit cards you have not increased the family debt, except if you use them.

Some FHA lenders require 640 scores and some 660, however, some also at 620

The account in dispute could be annoying if not resolved before you apply for the mortgage. Some lenders will kick that over to manual underwriting rather than automated. Not the worst thing to happen, except some lenders do not do manual underwriting. Either resolve the dispute or just pay it to get rid of it.

What do you mean by preparing the property for the house??? FHA has rules about about what they lend on for homes under one year old.

raeannfritsche · Joined: 12 Mar 2010 Posts: 6 3.05 Dollars($)

We do not have any open lines of credit on our credit report. Oh actually we do have a Les Scwab account with a zero balance but they don't report your credit limit. I'm not sure they even have one it depends on what you are wanting to buy. Anyway that would count as one. I also have a student loan I am paying on that doesn't show any late payments or anything. That would be two and then if we open the other 2 new accounts. We would 4 open accounts. 2 on his report and 2 on mine. Don't we have to establish a payment history with these also? I didn't know if using a card and paying it off every month would do that or if they want to see an open balance being paid on regularly??

Two of the credit bureaus have removed the account from my report but Equifax will not, but then they didn't take care of some other issues as well. The bank had a us sign some report correction forms to send to the credit bureaus for a couple of items. So, I'll wait and see if they will remove it. If not, we will end up paying it but I still want the dispute staus to stay on there.

As far as the property. We own 7 acres (appraised at $75,000). We want to get an FHA construction loan (this is the loan the bank suggested) to put a 45 x 61.5 ft manufactured home on a foundation plus install the sewer and add a filtration system to the water system. There is a lot of excavating that needs to be done to prepare the area for the house. Best case scenario, we would also like to put a shop with water and electrical up as well.

I really appreciate any suggestions you have!

Thanks

jveenstra · Posted: Tue Mar 16, 2010 11:23 am Post subject: Credit

If the bank suggested the FHA loan, so be it.

Personally, I would probabaly use the card for $100 and pay the miniumum monthly. That would take 10 or mor months to pay off and the pay history is established. To me that is easier than use it everey month and pay it off everey month, but, either way works.

raeannfritsche · Joined: 12 Mar 2010 Posts: 6 3.05 Dollars($)

Would a clothing store credit card be just as effective as a Visa or maastercard?

jveenstra · Posted: Tue Mar 16, 2010 1:49 pm Post subject: Credit

It is written that store cards are not as useful for credit scores as are revolving credit cards.

gmakerley · Posted: Tue Mar 16, 2010 2:11 pm Post subject:

having the store card won't hurt you. i am not in favor of going out and opening new card accounts, though. you'll be dinged at first for the inquiries, and you'll not have a whole lot of established credit prior to the close of the year...the 8 or 9 months you have these new cards will actually be a detriment, i believe. the installment loan might be of assistance more so than any new credit cards.

several months of on-time payments ought to be sufficient to bump your scores - keep on top of everything to ensure that there are no new negative items appearing, too. you can update yourself with some of the new sites around (quizzle.com & credit.com are two).

it's my opinion that using your credit card every month and paying it in full every month is more beneficial than charging $100 and then paying the minimum. you'll save the interest charges by paying it off every month. and you don't really have to use it every single month - you could use it sporadically just to keep the cc company happy with your usage, and that will assist in building your scores.

joshuaheckathorn · Posted: Wed Mar 17, 2010 6:59 pm Post subject:

The retail card won't hurt in getting you started as long as you pay it on time (in full!) and use a very small amount of your credit limit. Retail cards generally offer small limits up front, which can hurt your credit utilization ratio if you buy $100 of clothes and only have a $200 limit. Just keep that in mind.

Your current score of 610 also puts you in the bad credit category for credit cards, so you won't be able to find any "no annual fee" cards with reasonable interest rates. It may be best for your scores to go with the installment loan (you need a place to live anyway), and secure at least one retail card. Set everything up online, pay them on time each month, and watch your scores to see if you get a boost after several months.

If you want to get a credit card down the road, look into it once your scores bump above the 650 range and you find yourself in the "fair" credit range. And I agree with George, use your credit card sparingly for necessities and pay it off in full each month. Don't mess with interest and minimum charges...use your cards as an interest-free loan during the grace period and then always pay them in full.

gmakerley · Posted: Fri Mar 19, 2010 1:28 pm Post subject:

it's nice to be agreed with once in a while...i see too many posts urging people to carry a balance on their cards. that advice is useless - there's no sense in paying interest. the cards will be reported to the credit agencies in either case, and paying in full every month looks just the same as making the minimum payment every month on a credit report, but it's a lot easier on the long-term pocketbook.

joshuaheckathorn · Posted: Fri Mar 19, 2010 8:19 pm Post subject:

Yea, my personal favorite is when people say it'll help your credit score if you leave a balance every now and then, let some finance charges accrue, and then pay it off because the credit issuers like to make some money off you. I can't believe how many people actually believe that's true...one of the greatest credit scoring myths ever.

gmakerley · Posted: Mon Mar 22, 2010 9:38 am Post subject:

i think most of that advice comes from well-meaning but uninformed folk...and i include bankers, mortgage loan officers, credit officers...the whole gamut of the financial services industry. it's shameful that folk who claim expertise (in many cases) have never educated themselves sufficiently to provide valid advice.

gmakerley · Posted: Mon Mar 22, 2010 9:41 am Post subject:

so of course i hit the "send" button immediately before i realize that i incorporated "well-meaning but uninformed" and "shameful" in the same commentary.

that apparent contradiction is, however, my view on how we in the credit industry (whatever way, shape or form) treat the poor souls who seek out our advice. we've learned, in many cases, from fools; and we become fools all our own when we parrot the pap given us previously.

Posted: Sun Apr 04, 2010 7:49 am Post subject: first time home buyer

My Equifax score is 553, Transunion 683, Experian 603. I do have $168k in student loans I'm still in school so they are deferred. I have a vacation loan on there that went to collections that I can make arrangements on it and that't the only things I have left to pay can I get a mortgage?

gmakerley · Posted: Sun Apr 04, 2010 12:39 pm Post subject:

guest, that 603 score may get in your way of obtaining mortgage financing at this time. it would be most beneficial for you to repay the vacation loan. it is also going to be beneficial to you to determine why there's such a large discrepancy in the numbers. TU may have you artificially high because some derogatory isn't reported or they have some showing as paid that others don't. And Equifax may be reporting duplicate negative entries, which would drive that score down to that level, of course. it's worth your trouble to review and analyze, as best you can, each of the reports to see what gives in terms of those scores.

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