FICO Scoring System SUCKS.....for The Real Investor!
Folks, hope all is well with your REI. Well, here I am on the soapbox. My FICO is just under 600, despit of a 100% perfect payment history on ALL my Mortgages PLUS no collections, no BK, no Credit Card debt whatsoever,no nothing!. Reason? The good old back end ratios ( ie debt from Mortgage) is dragging my DTI down. It doenst matter that IIam cshflowing like crazy. But.....what on earth do I do? I will soon have 10 properties under my belt , my wife has 3 and her scores are equally as "bad". I am SICK of being told that "My Credit is not high enough" by a puzzl;ed loan officer who inevitably follows this up with..."I just dont know why your scores are so low...you have a perfect payment history on everyuthing for the past 8 years...." I certainly dnt want to stop buying through conv financing, but I may have to explore alternate methids for buy and hold as well as Hard Money for Buy and Flip. Any thoughts?
Pissed off In Illinois :-x :-x :-x
Have you looked into a blanket mortgage? That's my first thought. I thought your ratio and your fico were independent of each other though. Shows you what I know.
Scott
Adelante,
Your credit score has absolutely nothing to do with your DTI ratio and has everything to do with how you utilize your credit. The FICO breakdown is as follows:
Payment History - 35%
Accounts Owed - 30%
Length of Credit History - 15%
New Credit - 10%
Types of Credit in Use - 10%
Judging from your post, it seems like the only debt you actually have are the home mortgages. While this is excellent, if you recently purchased these homes and still owe almost the original amount, it is going to hurt your credit score. Also, if you have purchased all the homes recently this will also drop your score, as FICO likes to see seasoned loans. They also penalize you if you are overloaded in one section (revolving/installment/mortgage) which it seems like you are.
I personally own several homes w/mortgages as well (8 at the moment) and actively invest (17 inquiries in the last year - all RE related) and still maintain a 700+ credit rating. For the last year or so, I have pulled my tri-merged credit report every month and analyzed what made my score go up and down. When it goes up, I do nothing. When it goes down, I undo what I did. You need to figure out how the system is working for you, and manipulate it accordingly.
-Chris
[addsig]
While it won't help your score, you might also stay on your soapbox long enough to vent to all your elected representatives. Probably won't do any good, but it might relieve the blood pressure for awhile.
Instead of getting traditional first mortgages, you might consider getting business loans which do not report to the creddit bureaus - unless you default. Of course, a business loan usually has more stringent lending criteria than traditional first mortgages...