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I'm confused about "the last 2 years" and mortgage credit scores


kailix
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especially for firstsource -

I was looking at this page:

http://www.bestmortgageinfo.com/bad_credit.php

and noticed that it keeps score according to what's happened in the last 2 years. I have a clean last 2 years (well, I will after this August when a paid $153 medical collection passes the 2 year mark), but my credit scores are still only 656, 667 and 670, which is hardly "A" credit. So what matters more, my FICO scores, or my last 2 year history?

thanks for helping to clear up my confusion!

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especially for firstsource -

I was looking at this page:

http://www.bestmortgageinfo.com/bad_credit.php

and noticed that it keeps score according to what's happened in the last 2 years. I have a clean last 2 years (well, I will after this August when a paid $153 medical collection passes the 2 year mark), but my credit scores are still only 656, 667 and 670, which is hardly "A" credit. So what matters more, my FICO scores, or my last 2 year history?

thanks for helping to clear up my confusion!

Both matter. Many lenders won't touch you if your last two years is spotty. Derogs in the past year are a sure way to get declined.

Score will determine rate. clean two years will help determine approval.

But loan programs that aren't score driven (VA for example) will look more at the 2 year clean record.

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There are many lenders that won't care about derogatories on your credit unless they 1) are a lien on your property, 2) affect your monthly debt (such as child support payments), 3) or are in regards to your last two years of mortgage loan history.

Where other negative trades like that collection will hurt you is in your credit score, which is one of the key elements in determining your interest rate. It sounds like you are in the "Alt-A" category and should get a fairly good rate provided everything else is okay such as your income documentation, etc.

If you are about to refinance or purchase a home, you should really consider some quick steps to bump up your credit score, such as disputing the negative tradelines on your credit report. You will have to wait another 30-45 days before getting a loan, and there is no guarantee your score will improve, but it could end up saving you a lot of money.

Just to give you an idea, lenders will put borrowers into backets based on their middle credit score. This means that an extra 3 points could put you into and higher bracket and give you a lower rate.

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Both matter. Many lenders won't touch you if your last two years is spotty. Derogs in the past year are a sure way to get declined.

Score will determine rate. clean two years will help determine approval.

But loan programs that aren't score driven (VA for example) will look more at the 2 year clean record.

Let's not link 2 separate facts....it gives an incorrect impression....

Yes, VA is not score driven...BUT VA looks at the the last 12 months history, not 2 years. Other lender types may use 2 years as the benchmark, not the VA (except from foreclosure and BK)

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Your credit scores are fine, I would not be concerned about them to get good rates. If you are trying to get into programs that are not standard Single Family Residence loans, then it might be a concern, but I would not worry about that at this point.

Yes, median scores in the USA are 720, to me that is a rare thing, but it is true. So, you don't have "A" credit, but you do have good enough credit to get a good rate.

You may have to pay your collection accounts off - if you do, wait until closing.

The other concerns you might have to get the "best rates" are your reserves, you will want 2-3 months of PITI (Principal, Interest, Taxes, Insurance) in the bank.

other than that I think you are probably fine.

Charles

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You may have to pay your collection accounts off - if you do, wait until closing.

The other concerns you might have to get the "best rates" are your reserves, you will want 2-3 months of PITI (Principal, Interest, Taxes, Insurance) in the bank.

thank you Charles! I have already paid both of the collections, before I read on here about how it can be unhelpful to your credit score.

I am saving enough to put 5% down plus estimated 3.5% closing costs, maybe more depending upon the price of the house. it's good to hear you think I'll be ok. I'm concerned about being able to go full-doc - I have only been at my present job for 1 year, which means my w-2s don't reflect my income. Although pay stubs and bank statements do, so I'm hoping they'll let me use those to qualify, and if not I guess I'll just wait until after January 1, 2008!

If you are about to refinance or purchase a home, you should really consider some quick steps to bump up your credit score, such as disputing the negative tradelines on your credit report. You will have to wait another 30-45 days before getting a loan, and there is no guarantee your score will improve, but it could end up saving you a lot of money.

Just to give you an idea, lenders will put borrowers into backets based on their middle credit score. This means that an extra 3 points could put you into and higher bracket and give you a lower rate.

Thank you for the great advice. I will see what I can do to knock it up a few points. I'm hoping paying off my credit cards and just paying well for a few more months will give me the lift I need, because there isn't much I can dispute. The 2 (paid) collections are hurting me, which makes me sad since they were only $153 and $238, respectively. What a shame to hurt my credit score so much over such small amounts! (although the $238 seemed huge 7 years ago!)

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