Credit Score in San Jose>Question Details

Mrtommyquach, Home Buyer in

I have a FICO score of 672, 647, 639. I have a few charged off collection for $360 an under. Should I pay those too boost my credit?

Asked by Mrtommyquach, Wed Jun 20, 2012

Wanting to buy a home in he next few months. Should I also get another credit card as well? Does being an authorized user on my dads account help? I will be a first time buyer. Thank you your help!

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I'm sorry you are getting conflicting answers. I can tell you that if you pay a 5 year old charge off now, you will have a lower credit score in September when you are looking to buy. I have run the "what if" simulator and seen enough people make this mistake to feel confident in what I am telling you.

FHA changed the rules about paying off old collections briefly, then rolled that decision back so paying this off will most likely be underwriter discretion and not mandatory. There is absolutely no reason to pay it now and the reason I suggest you wait and pay it through closing, if required, is that it won't affect your credit score that way until after you already have your house. The scores you gave are right on the cusp of qualifying for the best FHA rates so you don't want to do anything to damage that. If the charge offs need to be paid, its a very easy thing to pay it through closing where it won't affect your mid score.

As to whether to get a credit card or not; well that's a double edged sword. You may need the added trade lines and it will eventually help build your credit, but applying for any revolving credit will initially drop your score. If you are looking in September, the new credit card will likely have no positive effect unless you actually need the trade line to qualify. The only way this question can be answered is to know exactly what is currently on your credit report.
Web Reference: http://WeFixRates.Com
0 votes Thank Flag Link Thu Jun 21, 2012
Yes you can get approved with a 647! You probably don't need to get your scores up anymore. There are Lenders that can do a 600 mid score home loan. They just aren't always easy to find and some try to over charge you on the rate and fee's. I have had a lot of my clients with 580-600 scores approved for a home loan with The Lenders Network, not bad rates either. If anyone can you get approved they can!
1 vote Thank Flag Link Fri Aug 16, 2013

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0 votes Thank Flag Link Wed Oct 28, 2015
Your best bet would be contacting Home Loans For All. They specialize in all home-buying situations and especially credit issues. They have lenders/partners that also offer mortgage loan preparation in the event they cannot get you approved. Here's a link to them.
0 votes Thank Flag Link Wed Oct 28, 2015
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0 votes Thank Flag Link Sun Apr 19, 2015
I want to know how much does your credit score jumps once you pay off a collection account and have it removed from your reports and you have all other bills paid in a good timely matter.
0 votes Thank Flag Link Wed Feb 4, 2015
If you will please, read all the notes that are from MORTGAGE brokers -see responses from Mitchell & Gregorio, or contact the recommendation from Terri - not agents or others - and I believe you are getting pretty consistent advice. I've been following this thread because it is a common question. Thanks for asking it and for the answers from the experts! P.S. AFTER you buy your house, unless the experts say to do it before, pay the rest of those debts even if they are old. It's the right thing to do, and that has its own reward. Just my two cents!
0 votes Thank Flag Link Fri Jun 22, 2012
Do I need atleast 3 trade lines to qualify for an FHA loan? I do not have 3 at this moment in time.
0 votes Thank Flag Link Fri Jun 22, 2012
To clarify,charge off and collection are some what different. Charge off is something the bank/lender/creditors already forgiven and a person is no longer obligated to pay back that debt. However, many bank/lender/creditors out there charged off those accounts to write off tax but then they sold them to collection agency and your credit report would show up a new and active collection from a that creditor/collection agency in relation to the old debt.

Of course paying off a charged off account in this case could negatively affect your credit score. However, paying off the active collection accounts would definitely help your credit score a great deal.
If you would like to consult more into detail or would like to see proof, I'm more than happy to assist you.
0 votes Thank Flag Link Thu Jun 21, 2012
Unfortunately, I just paid off to accounts that I had owed on. But neither of them were a charged off account. I had paid a $98 parking ticket that was sent to collection and a $366 library bill for lost books. Neither of them were credit cards though. I thought it would be best to pay off two debts that I was owing to the Gov't. I hope that as a good idea. In your professional opinion will that hurt my score?
0 votes Thank Flag Link Thu Jun 21, 2012
I have interviewed two and neither of them stood out to me. Both License Mortgage broker both told me to complete different things about paying my charge off. The charge off were from more than 5 years ago when I was young and not working. Now I am asking advice on here and I am still getting two complete different answers about paying it. If I plan on buying a property through an FHA loan around September-ish, should I open a card now? I am meeting with another adviser next week, hopefully he will gain my confidence. Thank you for your responses.
0 votes Thank Flag Link Thu Jun 21, 2012
By all means always do go with a professional but only after you've had a chance to interview a few just to make sure how professional they really are.
0 votes Thank Flag Link Thu Jun 21, 2012
You really need to ignore the advice of those telling you to pay the charge offs. The only time you should pay a charge off when trying to get a mortgage is at the direction of your licensed, experienced loan officer. Paying your charge off will absolutely drop your credit score, it will not increase it. If the mortgage program you are applying for requires the charge off to be paid (not all do) then it should be done as part of escrow and only at closing.

If you would like a professional analysis of your financial status, please see a licensed California mortgage broker.
Web Reference: http://WeFixRates.Com
0 votes Thank Flag Link Thu Jun 21, 2012
You will have to deal with your charge offs if you're serious about getting a loan. Frankly having such petty amounts owed really makes you flakey and a very weak credit risk. If you can't even handle such small amounts how do you think any lender would ever take you seriously on a home loan?

Your Dad is not you. You should definitely get your own CC and start using it and paying it off in full every month for at least 6 to 12 months. In fact you may want to use your card to pay off your other small balances and then pay off your new CC every month on time and in full.
0 votes Thank Flag Link Thu Jun 21, 2012
Hello Mr. Quach,

If you are serious about getting any finance in the near future including purchasing a car, home, student loan, etc., then paying off your collection is the right thing to do.
If you plan to purchase a home in the next few months, you should not apply for another credit card unless you have less than 3 tradelines currently (have less than three active accounts including credit card, loans). Being an authorized user for a credit card will not help you to boot your credit score but it will help to overcome the issue of not having enough tradelines on your credit.

I hope this will help!
0 votes Thank Flag Link Thu Jun 21, 2012
No it could lower your credit score. Only pay it as a requirement of getting a loan!
0 votes Thank Flag Link Thu Jun 21, 2012

An opinion from a mortgage banker and realtor, me:

The most important things you said about your credit is that the only card you have is actually in your father's name. The next most important thing is that you are planning to buy in a few months, not now. The third is you have some old charge offs. The fourth is you have an old parking ticket.

When you deal with old credit charge offs by paying them off, your score temporarily dips and then rises. If you don't pay them off, they stay a drag on your credit score. So since you have some time before you buy, pay them off so your credit score can rise by the time you buy.

You don't have any good credit in your own name. You have bad credit, in the form of charge offs you can convert to neutral credit history by paying them off. To get credit in your own name, you need to open a credit card somewhere. Macy's cards are easy to get, as are gas company credit cards. If you are a member of Costco, get an American Express card through them. This will temporarily depress your score. However, over the months you use it, paying it off in full every month, your credit score will climb.

Pay off that parking ticket! Ask a cop what can happen if you don't.

Now, your credit is too low to get you anything but a rural housing loan, a VA loan or an FHA loan, each of which is not favored by the seller as a Fannie Mae or Freddie Mac loan. Pay off all our debts. Debt have interest which you have to pay. That is a cost you do not need. Then start saving toward your down payment. I assume in this post that you already have some savings toward a down payment. Building up our down payment is very important. Let your credit score build up while your down payment builds up, the result will be lower interest rate on your loan. You want at least 680 credit score for better terms on your loan.

If you are going to buy in Santa Clara County, the price you pay will be greater than the home will appraise for, so you will need to make up the difference with more cash down.

I hope the above helps. If you have more questions, my phone number is 408-639-0211 and my email is


Mitchell Pearce
0 votes Thank Flag Link Wed Jun 20, 2012
If the authorized user account is on your credit report, it will help you. I'm confused about your statement that you have a few charged off collection under $360. If you mean those are debts on your report that have gone to a collection agency, then yes, those you should pay asap. Most lenders will use the middle score of the three. You wil need a partial down payment with cash so you might want to speak to a lender before you pay off the joint account with your Dad. Please email me through my Trulia profile for lender recommendations. Kind regards.
0 votes Thank Flag Link Wed Jun 20, 2012
I have contacted two brokers and they are both telling me opposites things to do. One told me I should not pay off my collections account becuase it won't affect my credit score anyways. It was for $366 for a Macys Account, $99 for a parking citation, and a $366 library fee. One gentlemen advised I should pay them off and one suggested not too do anything, and it could affect me negatively. And then one broker said to open a credit card for a small balance (@ Walmart, Lowes, or JC Penny) and one broker said not too because it will drag my score down if they look at my credit. I am not sure who to listen to at this point. Any suggestion would would tremendously.
0 votes Thank Flag Link Wed Jun 20, 2012
Dave Setti
Turnkey Mortgage

The above is my recommended lender. He has a program which he will input your information and it will determine you best course, adding crediting, paying off credit, etc.

Call him. You'll thank me later.

Terri Vellios
Keller Williams Realty
Broker Association
Licensed full time since 1998 DRE: 01245418
Web Reference:
0 votes Thank Flag Link Wed Jun 20, 2012
Thank you for your Suggestion Carla, I don't have that many opened accounts. My credit report shows I have 89% revolving credit available. I make an income over $100k a year. The only open account I have right now is an account that I am authorized user with my dad. The limit is $9900 and there is a balance of $2200. Should I just pay that off? Does being an authorize user benefit me and my credit? Any answer would help tremendously. Thank you in advance.
0 votes Thank Flag Link Wed Jun 20, 2012
You really need to get with a mortgage broker who can advise you. You are very close on your lowest score. Sometimes the things that seem to make sense to improve credit scores do just the opposite, like closing accounts or paying down balances (you then are cash poor). Probably the worst thing you could do right now in my opinion is to open another credit card. Also, don't let department stores or other entities pull your credit report, because every time it is checked it can lower your score. It gets interpreted as you are looking for more credit.

I can't advise you on who to contact in your area, but someone else may have a recommendation for a reputable, reliable person to advise you. Ask around! And when you get ready to buy, do the same research for a reputable, experienced Realtor to help you.
0 votes Thank Flag Link Wed Jun 20, 2012
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