I recently applied for financing to make a home purchase. I was rather swiftly turned down. They gave me a copy of the report they based their decision on. The scores were: 581 - 616 - 618. Last I knew, I checked one and it was 525. I was impressed since this was less than a year ago. There are two bad things that I can change and I can pick only one. I have 3 collections accounts totaling around $5000. I have three credit cards that are maxed totaling around $5000. I have around $5000.
The two debts that make up 95% of the collections debts will be 7 years old 08/09. Should I let them alone until they pass the 7 year mark? Will they just vaporize at that time and my score magically go up?
I really want to pay the credit cards off. I've been paying the minimums for a year and they aren't going anywhere fast. Not paying their 30% interest every month would leave a lot more money in my pocket.
Furthermore, should I look around and see if another lender may in fact give me a mortage loan with this score and these problems? I make 30k and also have almost 20k in perfectly paid student loans. I live in an area were, if I can attain financing, a mortage would be 30-40% less than my current rent. I've never been late on a rent payment. Why aren't landlords required to submit info to credit bureaus?
So. . . what are your thoughts on this situation.
Wait and let those things fall off then your score should go up.
Not sure why landlords are not required to report your rent activity, not sure why a lot of things are like this, they sure don't hesitate to report the bad, amazes me sometimes.
Hang around and maybe some one else will come along with some more suggestions for you. I wish you luck, hope you can get this all straightened out and get your mortgage soon. [/list]
Hi Black Sunshine
It is very difficult to get financing to purchase a home with a credit score below 720. You first need to improve your credit score and then apply for a new mortgage loan. To improve your score, send debt validation letters to the three collection agencies and the credit card company and if you get a proper validation of the debt, try to negotiate for pay for deletion agreement and pay off the debt through a repayment plan.
One of the main reasons behind such low credit score is the fact that you have maxed out your credit card limit. Now since the "amounts owed" factor contributes about 30% in your FICO score your credit score has gone down.
If the collection agencies do not ask for the debt now, just ignore it and wait for the seven year time to expire. The negative items will get removed after this period and the credit score will improve. However, in the meanwhile try to pay off the credit card debt and improve the "amounts owed" factor.
I think I'm going to send validation letters to the collections agencies just to see if I can get lucky and get them wiped off immediately. Otherwise I'm just going to wait for those to age out. I'm going to pay off the current revolving debt within the next month. The SOL on the collections accounts is long past so they can't 'make' me pay it anyway.
Yes, if the creditor cannot validate the debt properly, you can dispute the item with the credit bureaus. The collection agencies must send you a copy of the original loan agreement and must prove that they have purchased the debt from the OC. If they cannot prove, you can easily get them removed from your report. However, if the debt is past SOL, you need not send any debt validation letter. For sample debt validation letter, you can visit the link letters of credit.
Black sunshine, I would dispute them and then if they do not remove them wait for them to fall off so you do not start the SOL over again. I see they fall off here rather shortly 8/09 but sometimes it is actually 7.5 years...still not that long to wait. Does your report say they fall off on 8/09? If so then that is when they will go off. Check the other reports and if the dates are longer on any of them after a debt falls off one report then dispute the others as obsolete. If you are not in a big hurry waiting for the old debts to fall off will save you from paying them and you can pay off your newer debts. I would try to stay away from recharging more than you can get paid off in a couple months. I hear they are going to raise credit card interest rates.
Oh, I'm definitely not going to be recharging any accounts at all. I haven't charged at all in over a year. I even managed to pay cash for a refridgerator yesterday when mine died. Although, I'm considering charging strategically from time to time, but never charging when I don't have the cash to support the charge.
At Lowe's they tried to get me to apply from their card. I was like, "How much of a discount do I get?". They were like, "None, but you get 12 months same as cash.". I was like, "But I have cash!?!".
Black Sunshine
I would not give money to any CAs that are about to pass the SOL. I would also make payment arrangements with the remaining CAs in order to get more accounts in good standing as opposed to paying them right off. Make sure you get an agreement in writing with the CA to make monthy positive payment reports to the CRBs. This will soften the blow to your credit from the collection accounts. Also, positive monthy payment history goes a long way to building good credit. Obviously, You should send DV letters and try to work out a lower settlement price for the debt.
Blacksunshine, I just wanted to give you a small idea on the Lowes card. We used one to help build up our credit. If you are really good at handling money you could have put up the money in a savings account and chrged the frig. Each month you could have taken so much out an applied to the debt paying it off before the 12 months. It would help build your credit by showing a "good debt". Just an idea for maybe the next time around.
Fire- I have done that in the past and it works well. I bought a dyson from sears when they were still $600. My debt to credit ratio is too high right now, so if I got more new credit it would amplify the situation, even if I didn't max the new line out. Besides I don't think I would have been approved because of my current debt to credit ratio.
Of the three CA problems I have 2 are quickly approaching the report SOL and have long since past the civil SOL. I don't intend to actively do anything about these. I might send the DV letters just to see if I get lucky. I just usually don't get that kind of luck. One time I got a traffic ticket 6 months after the incident. The other one is related to a dumb car insurance policy I canceled and didn't realize I owed on. The amount is only $200 so I don't think that trying to stretch it out will be worth while.
It seems like you really know your way around the credit world. Thats excellent. I can see where you need to get you debt to income ratio down more. Awareness of your situation is really important when working to improve your credit.
I would not send debt validations to ANY collection agency until you know the SOL has passed. Asking for debt validation is like asking for a lawsuit so hold off on that for now (unless SOL has passed). I would suggest paying the $200 and asking for a pay for delete before you do so. If they agree get it in writing before paying. Good luck.
old debt
I have 2 credit card bills in freedom debt relief & was wondering if I should stop paying on them or not
Hi Blanche,
Why are you thinking of stopping the payment? Are you unable to make the monthly payments to the debt relief company? If that is the reason, then I believe you can talk to the company requesting them to negotiate with the creditor regarding the amount. But stopping payment completely would mean that you become delinquent on your debt account and that will affect your credit report and your credit score badly.
Good News
Well,
Here's how this whole situation panned out for me. I ignored the two large debts and they aged out.
I was trying to get my score high enough to qualify for a home loan. Just simply waiting for these to debts to vanish did the trick.
My lender wasn't happy that I had the $200 debt in collections. So they told me I had to pay it to get the mortgage loan. So I paid it. Now I just have to wait 7 years for it to really vanish. I was hoping that I could have not paid it, because it had been four years since I got the debt.
I got the house, so the plans that I layed on this forum worked. I want to thank the people that gave me advice.
Now I have a score around 675 and it will get steadily better as my other blemishes get old. Plus I have real estate debt now, so I think that may increase my score. I have two satisfied judgements that should age out next year. I can't wait to see how that will increase my score.
I don't really have desire to ever use credit cards again. I have always paid cash for my vehicles. Now I have a home loan. I believe that my credit score is now just for entertainment purposes and just in case I need it. I am working Dave Ramsey's cash only plan to try and be more financially free.