Collections, Judgments, and FICO scores
After 13 years of reviewing thousands of credit reports, and working with several professional credit repair specialists including premier credit in Draper, Utah, I’ve learned a thing or two about what works and what doesn’t for having great credit. First things first, let’s establish that when I give people advice for their credit, I’m not a licensed credit service specialist. I am a mortgage loan officer helping people understand what our loans require. I’m trying to get them the best loan. I’m not trying to repair or fix their credit. I’m trying to help them get the best deal on a loan with the least land mines in their credit report. Now, here’s guidance that my borrowers hear a lot. We often don’t require medical collections to be paid to qualify. FHA omits medical completely. Literally, you could have $100k in medical collections (in theory) and not be required to pay them. But don’t do that! That’s bad! Conventional loans allow up to $2,000 before you’re required to satisfy them. Regular, non-medical, collections might matter. It depends on how much there is. Premier Credit only counsels people to “pay off collections SOMETIMES; and ONLY if they can delete them or if we are about to close.” Premier Credit goes on to say that “with a collection, the damage is already done. Satisfying/paying a collection will only further hurt the score. Deleting it or ignoring it is best for the score. Some people are under the false impression that paying it improves the score. This is NEVER true. It updates the activity date for a collection which in turn lowers the score the same way a brand new collection would.” Ouch! Judgments are a different story. They’re also negative, but in most cases must be satisfied in order to close a loan. SOMETIMES we can show payment agreements and proof they’ve been paid at least 90 days and get them subordinated and close the loan. If not, they may and most likely will lien the title. We don’t want that so we can’t close without that. Premier Credit often advises my clients to pay down their revolving debts to under 10% of their limits. We’ve seen this activity bring many many credit scores up as much as 100 points in only days. We CAN rapid re-score this info, but if people will just keep this in mind, once those balances are under 10% for 30 days, they’ll almost always have the better score the first time I pull credit. Just in the last 90 days, I’ve had several clients that pre-qualified with a lower score, but did these things and before we submitted their score went up and they scored MASSIVE savings. One of them dropped his rate .125%, MI .25% saving him $100/mo on what was already a good deal. Obviously he was SUPER STOKED!! Ask yourself, WHO DO I KNOW that needs this info right now? Should I SHARE it with them now? Yes!