High Debt Ratio
How high should I get my credti score so that my debt ratio doesnt' weigh too much? I have no credit cards but my truck payment is $600 and it looks horrible on paper. I can't get rid of the truck yet because I owe 21k and it's only work 18k. My FICO is 600 right now.... thanks everyone for your advice.
The best way to control a debt ratio is to get expenses down or get your income up. No matter what your score is, lenders are always going to have a specific requirement for DTI limits. Plain and simple.
Two things.
As your credit score is considered low for many loans then it would be a good time to work on building up the credit file. This means taking on some credit cards, etc but being very smart about how you use them (or not use them). You want long term account so you need to get the open for the clock to be running.
The truck issue could be solved if you found $3K and you then sold it. You still likely need a vehicle so you can figure out if paying down the loan to sell it makes any sense. Consider a balance transfer to a credit card (or a partial one) if the truck interest rate is higher then what you can borrow elsewhere. Just watch the payment totals if you move the funds around as it might be a shorter term (and therefore higher payment).
While all of this is going on start attending local RE investment club meetings and looking for deals that do not require good credit. If you get good at this having credit is not an issue and when you have even better credit you have more options. It will take some time to get good as finding deals and sometimes it is a while before you find one even when you are good. The important point is building credit and finding deals take time and they do not have to be done one at a time.
John
[addsig]
Sorry I don't agree with taking additional credit. It may be that he has to much credit available. Old accounts that are paid off but still open.
Pull your own credit and see what is still open and paid in full. Then close those accounts. If you have accounts that are old and very little still owed pay them off and close them.
Anything more than TWO open revolving accounts starts the frowning process, especially if you are meadian earner and these accounts have high amounts of open credit (even if you no longer have the card or account number available, its still open credit).
This will raise your score and have an affect on your DTI.
Yes your score is low. You need at least 20 points more. A score of 640 to 680 or better should be your goal.
Good luck.
[addsig]
I have read a few things before saying not to close old accounts that are paid off, because they will still show up but not be counted in your aviable credit; thus, incresing your used credit to available credit ratio. and that would keep your score down.
I also read that the limit for revolving accounts before they ding you is 7.
I'm not sure about this, but I have read it on a couple diffrent sites. Please clarify.
My husband and I are in the process of repairing credit to start aggressively in REI. However, our debt/income ratio is too high no one will lend! We own our own business, so we do not really take a large income salary. We also own 2 real estate properties right out, have a mortgage on our own home, and a kid in college. I have been applying to several places, each time someone gets my rate, it causes my rating to go down! How about that! "too many inquiries into my credit" This really stinks.
First, Old credit is good as long as it isn't late. New credit will lower your score. Especially if it is revolving. Once you get your score above 680, you can do NINA or stated loans where your DTI won't be an issue. My question here is do you have a 600 score because you have negatives, or a 600 because you don't have enough tradelines? If you don't have enough tradelines, then you will need more. I would recommend though that you put your truck on a fast track for early payoff so you don't get yourself into trouble when you start getting credit cards. 3 to 4 wholesale deals will payoff your truck completely.
You have to be careful with revolving credit. First, you want to have more installment loan accounts than revolving credit accounts. Second you want to make sure you only use about 30% of your revolving credit or less. Make sure your revolving credit is being used. Open revolving credit will work against you unless it was opened a long long time ago.
These are just some general recommendations.
This is simple...go stated and STATE your income as higher. Your DTI will go down. Either go no doc or make sure your employment reference knows what you are doing.
Quote:
On 2004-09-22 16:35, jjetts4 wrote:
This is simple...go stated and STATE your income as higher.
Be careful here
Mario,
You are correct, I should have clarified installment to say secured installment. You are also correct with regard to balance, but you must admit that new revolving credit is considered risky, and generally speaking will drop the score. Of course, Raquel is a little between a rock and the hard place because she also needs more tradelines. That is a tough position to be in.
I am surprised you didn't weigh in on jjetts4's comment.
Initially the new credit cards may or may not cause a drop in the score. Unfortunately, in order to get an excellent score (above 720), they are an important part of the equation. If the balances are kept correctly and the limits are decent, the score may even go up initially (depends on the strength of the rest of the report), but it will definitely go up after a couple of months of payment history.
I'll leave jjetts4's comments for the mortgage brokers and bankers in the group. I agree that it can be done, but it is a matter of personal preference if you want to lie on your applications. I try to stick to my specialty where my expertise is.
Sincerely,
Mario Costanz
President
SmartServ Solutions
Raquel,
The stated mortgage loan is nicknamed the "liars loan." However, it is important for you to know that if you do misrepresent the truth on any mortgage loan, including stated mortgages, that you are committing mortgage fraud, and that has some stiff penalties, most of which which will end your real estate investing carreer. I get stated loans without falsifying anything, and I recommend you stay honest on your applications as well. I also highly recommend against even implying anyone else should lie as well.
What bureau is that 600 from? I have been noticing in the past couple of months that EX is using their own score, not FICO. Recently pulled a customer for a car loan and did both EQ & EX....went down the list and (amazingly!!!!) both had the exact same trade lines and information reported. . .Equifax FICO was 673, Experian was 640. That is the difference in a few interest percentage points as well as getting an approval or not. ALSO, I have had people come in with 720s but because of the high DTI, cannot get them into a decent rate.
Yeah giggles, EX is using what they call plus. The problem is that they are out of step with everyone else. With EX, my plus was 760. My fico with EX was 684. Go figure.
Mario,
I agree with everything you said but this:
"Anytime you apply for a mortgage within a 14 day period, all of the mortgage inquires count as 1"
Almost every broker tells me that, not one of them has proof. I believe this to be the standard answer to "why are you pulling my score again" instead of "because if you're score isn't high enough I'm not going to waste my time with you. I could care less about your credit if it doesn't qualify you for any of my programs".
I would love to be proved wrong. Did someone tell you this? I don't think even the Fair Isaac employees know exactly how the score gets computed.
JohnCl
Quote:I agree with everything you said but this:
"Anytime you apply for a mortgage within a 14 day period, all of the mortgage inquires count as 1"
***See Page 16 (numbered as Page 14)***
http://www.fairisaac.com/NR/rdonlyres/6F127C6D-E5D2-4EB3-B0CC-A0BD3FE00D94/0/UnderstandCreditScoreBklt.pdf
***See Page 16 (numbered as Page 14)***
They had better not be lying...
I agree that most of the Fair Isaac employees themselves don't know the exact details of the algorithm that they employ. I have read this in many places, including the bureaus and on fair issac's site. I also know first hand that it is true, because I ran my credit a total of 9 times with different mortgage brokers within a 14 day period and my credit didn't suffer. Many years ago when I was in my early 20's (28 now) before I got started with credit repair, I probably applied for 10 credit cards within a 3 week period and my score plummeted. So I know that it doesn't apply to credit card apps, and I know firsthand that it does apply to mortgage pulls (within that 14 day period only). I hope that explains it.