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.
Sheryl Arndt, Real Estate Broker - Sr. Loan Officer CA only
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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.
If you would like a professional analysis of your financial status, please see a licensed California mortgage broker.
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.
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!
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 email@example.com
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.
Keller Williams Realty
Licensed full time since 1998 DRE: 01245418
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.