Unusual credit history. How would this be percieved by L.O.? (insurance, loan officer)

[virtuzoso]

My credit history is a bit odd and I am wondering if anyone could give me an idea of how it would get percieved by a loan officer and what actions I should take, if any, before mortgage shopping.

I had several credit cards in my early twenties and late teens, which I eventually did debt consolidation when as a youthful idiot I used them too much. That has been about 10 years or so. I made regular payments and got them completely settled and paid off several years ago. I have pulled my credit report and only one of them shows negatively, and that was charged off around 3 years ago. I am currently disputing it to get it off of my report.

During the years that I did debt consolidation, I used no revolving credit, only had a car loan which I paid off completely last year and there were no late payments at all.

I currently have no credit cards and I have zero debts (other than rent and utilities). Since I did debt consolidation I have become very accustomed to not buying anything on credit ( other than very large purchases such as a car) I currently have only a checking account with a very stable balance history ( does not fluctuate much at all).

How would my lack of revolving current credit accounts affect my mortgage chances and my current lack of a savings account- is this any sort of negative?

Is there something else I should do before mortgage shopping in the next month or so. I plan to start in about 30 days or so, depending on how quickly I can get this negative account cleared up.

[chet everett]

Scores are critically important.

I suspect yours are not very good, however lack of any major negatives may offset the infrequent use of credit. It'd be wise to get a triple score before you jump to any conclusions.

[virtuzoso]

I've got 2 of the 3 scores, havent gotten the other yet. 652 and 662 so far. Mostly I was concerned about not having any current credit accounts.

[TimtheGuy]

If you don't have any active credit, it could be a big problem in qualifying.

[ShanetheMortgageMan]

It only sounds like you have 1 trade line that never had any negatives - the car loan you paid off last year (when last year?), is that correct? How long did that trade line go on for?

Where did you get those scores from?

Your credit profile isn't strong by any means, but you may still have sufficient trade lines to qualify.

For FHA you just need to have three credit references with at least a 12 month history. These can be traditional references and acceptable non-traditional references, such as utilities, rent, insurance, tuition, child care payments, etc.... however if there is negative credit history then often non-traditional credit references cannot be used.

[virtuzoso]

I have several that have no negatives, just that they are not recent. A car loan about 9 years old, lasted for 2 years. 6 year Discover and Visa cards, no negatives, the only negative is a store card with $450 dollar balance showing I owe, which I dont and the company is now out of business. This is currently being disputed. My last car loan was for 6 years and I paid it off early in 2010.

During my credit consolidation, the accounts were automatically paid and most of them were already current, there for , they never have had late payments. Only two of my old lines of credit had late payments, and all but the one being contested have been paid and closed. It was closed in 2006.

Thiee scores I got from Experian and Equifax. I havent gotten transunion yet nor a score from myfico.com.


Do you think I should get a card or loan and establish some new history before applying for a mortgage? If so, how long should I show a record of payments before it would not throw up any flags? I've also considred a new car loan, as my mileage is getting a bit higher than I would like but I have very reliable transportation even with the high milage.

[ShanetheMortgageMan]

Well you'll want to end the dispute before your credit is checked, or else some lenders will deny you/require you to have no disputes and then will require to recheck your credit when there are none... or will manually downgrade your file (which could be the case anyway).

It actually sounds like you do have enough positive trade lines, and with the last negative being 3 years old, and the latest car loan being paid on time for several years after that, I think the chances of your credit being sufficient will be pretty good.

I do not recommend applying for any new credit 6-9 months before applying for a mortgage, as your scores may take that long to recover from a brand new trade line reporting, it entirely depends on your credit profile, which is like a snowflake in that it's unique to you, so no one can tell you exactly how it'll impact your scores. If you absolutely need a newer car, then so be it, but you shouldn't obtain a new car loan in an effort to try and better qualify for a mortgage. If you are looking to improve your scores though you'll need to obtain some new credit of some sort. I recommend at least 3 credit cards and 2 installment loans, however if you obtain all of that credit within a short period of time you should expect your scores to take a little while to recover from the initial dip, but with each month of on time payments being report they'll be increasing at a steady rate.

So you can see if you qualify now (I'd check your scores at myFICO.com first, you can get Equifax & TransUnion, Equifax score should be nearly identical to a mortgage lender but the TransUnion score is going to be a little off, for you it'd probably be higher than what the lender will get), you can apply for new credit and see where that puts your score soon afterwards, or you can apply for new credit and wait 12 months and will most likely have much higher scores than you do now.

If you are thinking about FHA, VA or USDA financing (which with your scores, unless 20% down, may be your only options) then majority of lenders just need a 640 score, a few will go down to 620 or 600.