650 Credit Score, Want to Purchase Home

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
User avatar
Topic Author
soup_can
Posts: 22
Joined: Sat Apr 21, 2018 2:40 pm

650 Credit Score, Want to Purchase Home

Post by soup_can »

A friend of mine is struggling to get a mortgage. Her real estate agent claims that she needs her credit score to be 10 points higher. I wanted to ask here for advice on how to best obtain a mortgage for her. The details are from creditkarma.com:

She is divorced with four children. She works as a nurse. She has the 20% down payment for the house. Unsure of income.

Summary:
Credit Score: 664 Transunion, 650 Equifax
Payment History: 92%
Credit Care Use: 28%
Derogatory Marks: 0
Credit Age: 1 year 9 months
Total Accounts: 4
Hard Inquiries: 5

3 Active Accounts:
Credit Card 1
- $274/$1000
- 88% payments on time
- 2 years, 1 month

Credit Card 2
- $139/$500 balance
- current
- 100% payments on time
- 7 months old

Account 3
- Child support, wage garnishment?
- 2 years, 7 months

What would you advise to raise her credit score?

1) Would closing Credit Card 2 increase her score or decrease?
2) She should ask to raise her credit limit on her two credit cards correct? Assuming that this does not result in a hard inquiry?
3) Would you recommend telling the credit card company that she is interested in raising her limits to purchase a house?
4) Are there any programs for nurses she can take advantage of?
5) Any other recommendations for something with bad credit?
Detroittl
Posts: 98
Joined: Wed Jun 10, 2015 12:12 am

Re: 650 Credit Score, Want to Purchase Home

Post by Detroittl »

Keep the cards. Pay down the balances so there is 1 percent use at any given time. In a month or two it should jump 10 to 30 points.
Detroittl
Posts: 98
Joined: Wed Jun 10, 2015 12:12 am

Re: 650 Credit Score, Want to Purchase Home

Post by Detroittl »

In 4 months I bet it’s an even 700
User avatar
celia
Posts: 12120
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: 650 Credit Score, Want to Purchase Home

Post by celia »

Increase that payment history to 100% by paying all bills in full by the due date.

It also looks like her credit history is less than 2 years old. Making prompt payments for a longer time should also help.
bayview
Posts: 2321
Joined: Thu Aug 02, 2012 7:05 pm
Location: WNC

Re: 650 Credit Score, Want to Purchase Home

Post by bayview »

celia wrote: Sat Mar 14, 2020 5:31 pm Increase that payment history to 100% by paying all bills in full by the due date.

It also looks like her credit history is less than 2 years old. Making prompt payments for a longer time should also help.
+1

Tell her not to open any new accounts for a while, and just stay on top of the ones she has,

While doing that, she should be building up her emergency fund, along with a new-homeowner-headache fund. (Or combine the two, knowing that she WILL have to write out checks for some surprising things in the first half-year or so.)
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri
HomeStretch
Posts: 5734
Joined: Thu Dec 27, 2018 3:06 pm

Re: 650 Credit Score, Want to Purchase Home

Post by HomeStretch »

Your friend can set up autopay for monthly payment of each credit card/loan’s minimum balance or full balance. This will insure all payments are made on time going forward.

She can make multiple payments per month on credit cards to keep her credit utilization low.
User avatar
Nestegg_User
Posts: 1629
Joined: Wed Aug 05, 2009 1:26 pm

Re: 650 Credit Score, Want to Purchase Home

Post by Nestegg_User »

credit utilization along with a very short history would mean that it'll take a while for increase in score. The low limits also are a cue that she might not be a good credit risk yet... hence I'd suspect that mortgages would be hard to get, although the 20% down should help.
michaeljc70
Posts: 7470
Joined: Thu Oct 15, 2015 3:53 pm

Re: 650 Credit Score, Want to Purchase Home

Post by michaeljc70 »

soup_can wrote: Sat Mar 14, 2020 5:03 pm
Derogatory Marks: 0
...
88% payments on time
If she made 12% of payments late on one account, that is a derogatory mark. As others said, time with making all payments on time is the thing that will help her. She should be able to see a trajectory of her score if she checks a free site monthly.

Most conventional mortgages require a 620 credit score so maybe she should talk to a lender and not rely on the real estate agent. She may need a higher score though depending on other factors like income to loan value.

She has 5 hard inquiries and that is a lot and brings down your score. She should not keep having her credit run.
User avatar
Rob5TCP
Posts: 3546
Joined: Tue Jun 05, 2007 7:34 pm
Location: New York, NY

Re: 650 Credit Score, Want to Purchase Home

Post by Rob5TCP »

There are several sites where you can do "what if" scenarios.
What if I cut my balance on my cards to 15%; what if I pay on time for the next 6 months.
It's not perfect, but it is useful. In your current situation,
as stated by others probably the best options would be lowering the balance owed
and having all payments the next few months be on time.
Post Reply