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Here's my situation-
I am applying for a USDA loan. $214,900 with $4,000 back at closing.
I have a good credit score mid 700's. I have been at my job for 17 years. Have paid all my rents, utilities, and all loans I've ever had, on time. Never ever late. My credit report will reflect this. As will verification from my landlord.
I do not currently have a car payment. I do not have a lot in reserves, but I do have approximately $60,000 in my 401k.
Here's the problem. I have two credit cards. One with a zero balance that I haven't used in well over a year or two. And one that I have been using, but has been being paid by someone other than me each month. It has had high monthly balances for the past two years (paid in full each month by another party). It recently has been paid and has a zero balance. I found a house which was too good too pass up and made an offer. (first time home buyer)
I stopped using the credit card knowing that I placed an offer on a home and because the card has a zero balance. I plan on keeping the card open but only use it for an emergency at this point.
Will the fact that this card has been being paid by someone else hurt my chances of getting the loan I will be applying for? Will the loan underwriters look at this as a huge reg flag, or will they not worry to much since it has a zero balance and I have job security, with prompt paying habits for all other bills.
Your credit report will only reflect that your charges are either being paid in accordance with the terms of the card, or that they're not. It's not going to list the name of the person who is actually paying the bill. At least i never saw a credit report that reflected the name of the bill payer.
Edit to say the only red flag I could envision being raised is if your monthly expenses (including your credit card payments) exceed the amount of your take home income. I could then see the lender on your potential mortgage asking where the additional funds are coming from
Last edited by Lalalally; 06-08-2014 at 09:10 PM..
Yes, unfortunately it does exceed my take home income, so when I tell them it wasn't me who was making these payments on this one card, I am scared they will deny my loan. Even though every other bill I have is paid by me, on time or early. Never once late.
It's getting easier to buy again, just don't buy something beyond your means. I have savings as well, 2 good incomes, and my veterans home loan certificate.
I had a hit on my credit over a medical bill in which case I have a letter saying the debt was paid. I also don't understand how this happened to begin with cause I carry blue cross blue shield so if I'm paying my insurance how come something didn't get paid?
Ok....so now let's say they bring it up and need verification. If I write a "Letter of Explanation" would that be enough, or would they need more proof such as copies of their bank statements showing they have been paying it?
If there are any underwriters out there who would like to chime in on this, I would be grateful..how would you handle this?? I'm trying to get all my ducks in a row before the actual processing starts. This way no time is wasted!!
Can't the cardholder refrain from using it? Just keep it at zero through closing?
It's actually a double-edged sword:
1) If that tradeline is necessary to prove that your credit score/report is "valid," ie, if, without id, you only have 1 tradeline, then we must prove you ARE making the payment via bank statements.
Conversely, however:
If there is a payment due on it, and that payment pushes you outside of approvability, you will likely need to prove that it is NOT your responsibility, and that you are NOT making the payment.
Fastest solution: pull yourself off the account and show proof that you are no longer connected to that account.
Another method: 12 months bank statements from the cardholder proving that they make the payment in its entirety.
Not the OP's situation, but I had a slight minus from zero balances. I have not let a balance carry over on my credit cards for several years. For our pre-approval my credit disclosure noted that my score was hurt by having no recent revolving account records. My score is fine, I was just surprised that *not* using my credit cards hurt me that much.
I made a $100 purchase on a credit card, paid the minimum for that month, then paid it all off the next month. Credit score went up 30 points when the bank pulled it again.
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