How to most quickly get middle mortgage score(fico4) up 8 pts to 700 for jumbo loan?

[tacosman]

My fico8 scores are fine(over 750-760 all I believe), but my mortgage specific scores are 720, 692(TU), 687.  

I need to be above 700 asap to qualify for a jumbo loan(yes I am still putting a bunch down....over 65% cash I will put down on the house, but the other 35% is still likely to hit jumbo loan amounts).  I don't have a house that I'm ready to bid on yet, but the issue is that when the right house comes up I need to have the letter in hand saying I can borrow enough(with my liquid assets) to see the house and have an accepted bid.  Anything I like will be sold within 1-2 days, and I'm already at a big disadvantage in the first place not paying all cash here.  

My credit is as follows:

mortgages-  I have two current mortgages(one house Im living in now and will sell before or after this new primary house is bought and one vacation home).  Both have current payments up to date with no late payments, and both have been in existence for several years.  The balance on the primary house is about 200k(orig loan about 400k), and the balance on the vacation home is about 300k(orig loan about 500k).  Both have > 60% equity in terms of current value(I guess that doesnt matter though).   I also own a house I paid cash for a few years ago and rent out now(I guess thats not a factor either?)

credit cards-  none.  I have one that was paid off maybe 10 years ago.  I don't have any credit cards since then, individual store credit cards, etc.  Would prefer not to get/start any.  

car payment-  I have one current car loan about a year old.  Balance is about 50k(i put about 50k down).  Monthly payment is like 1200.  No late/missed payments.

boat payment-  This is about 4 years old  and since it was a 5 year loan I only have 12 more payments left(representing about 13k).  No late/missed payments ever. 

student loans- I owe about 80k on student loans total(Navient).  No late/missed payments.  Balance was initially about 300k, but have paid off pretty steadily over last 8 years.  I haven't paid rest off because they remaining amount was locked in at very low rate(like 2.5%).  

collections-  I had a collection account I didn't know about(and just assumed when they called they were telemarketers) from the water company originally.  It was for a really small amount(100 dollars) and posted as a collection back in December 2023.  When I found out about it 2 weeks ago, I have since paid it off and now it is reported on my credit report(just today actually) as being paid down to 0.  But unfortunately it remains listed as a collection(just one that has been paid).  I have begged the entities involved to remove it as a condition of it being paid  and also appealed, but no such luck and it remains(I am guessing this listed collection is why my mortgage scores arent better).  Unfortunately today when I got an alert from transunion on the myfico service that the collections account has decreased down to $0, there was no corresponding increase in score.  

So basically thats all the stuff that is on my credit history the last several years I guess.  The question is simple-  is there any 'quick fix' I could do to get my middle mortgage score up 8 points to the needed 700?  I am assuming it will eventually get there if I just continue to pay all my bills/mortgages/loans on time, but Im also guessing that may take months.  And I would like to be over 700 so if a perfect house comes up I can buy it.  From a financial perspective I am more than comfortable with the loan(the dti on all my loans even with this new mortgage would be like 15% or so so I'm not worried about that at all).  I also could liquidate some assets over the next couple months and just pay cash for the home, but those are more geared towards long term investments and I'd rather not touch them.  

So is there a quick fix?  Like if I just paid off the 13k on the boat loan, do you think that would get me up 8 pts?  What about either paying off the 50k car loan(either by just paying cash for it or trading it in for a lesser car)?  Would paying the balance on all or part of the student loans(they are broken up into 3 different loans) get there?   Anything else I could do?

thanks!

[ShanetheMortgageMan]

A big component of a strong mortgage score is having revolving credit.  I know you don't prefer to have them but you can just open credit cards and never use them, or use them periodically for small items and pay it off immediately so the cards don't get cancelled for non-use.  That might not be a quick fix right now though, as usually new accounts will lower your score for a short time before you can see any benefit.  Is there anyone that can add you as an authorized user to a long-standing credit card of theirs that has a $0 balance?  If so, then that should give you an immediate boost once it starts reporting (which can be as soon as immediately after being added).  I'm also going to tag @Thomas_Thumb for you since they seem to be very knowledgeable about how to improve mortgage scores.

Also, if you are financing a mortgage for $766,550 or less then that is just a normal conforming loan amount that wouldn't require a jumbo loan.  You mentioned you're putting 65% down so $766,550 would represent 35% of a $2,190,142 sales price.  Are you planning on buying a home in excess of that sales price?  I read another post of yours that says you are in a low property tax state, which most states like that aren't in high cost areas, but some portions of the state can be.  In high cost counties the conforming loan amount can go up to as high as $1,149,825 (and goes even higher if you are buying in HI & AK).  You can check what your county's loan limit is at https://entp.hud.gov/idapp/html/hicostlook.cfm by selecting "Fannie/Freddie" under limit type, 2024 as the year, and entering in the state & county name (or leave the county blank to see a list of all of the county loan limits within the state).

If the loan amount you plan to finance exceeds that limit then it would be considered a true "jumbo" loan, which typically require higher credit scores but can still be done with a mortgage score under 700.  

If, for whatever reason, you are unable to find a jumbo loan with your current credit scores, you can do a 1st mortgage up to the conforming loan limit and then finance the remainder on a 2nd mortgage.  That is referred to as a "piggyback" or "combo" loan.  Typically those are done to avoid having to pay PMI, but it can also be a useful tool to break up the amount you are financing into a conforming loan amount 1st mortgage which typically get better rates than a jumbo loan.  Since your loan-to-value (LTV) is low, the rate on a 2nd mortgage should be pretty decent.

[Thomas_Thumb]

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@tacosman wrote:

My fico8 scores are fine(over 750-760 all I believe), but my mortgage specific scores are 720, 692(TU), 687.  

I need to be above 700 asap to qualify for a jumbo loan.

My credit is as follows:

mortgages-  I have two current mortgages(one house Im living in now and will sell before or after this new primary house is bought and one vacation home).  Both have current payments up to date with no late payments, and both have been in existence for several years.  The balance on the primary house is about 200k(orig loan about 400k), and the balance on the vacation home is about 300k(orig loan about 500k).  Both have > 60% equity in terms of current value(I guess that doesnt matter though). 

credit cards-  none.  I have one that was paid off maybe 10 years ago.  I don't have any credit cards since then, individual store credit cards, etc.  Would prefer not to get/start any.  

car payment-  I have one current car loan about a year old.  Balance is about 50k(i put about 50k down).  Monthly payment is like 1200.  No late/missed payments.

boat payment-  This is about 4 years old  and since it was a 5 year loan I only have 12 more payments left(representing about 13k).  No late/missed payments ever. 

student loans- I owe about 80k on student loans total(Navient).  No late/missed payments.  Balance was initially about 300k, but have paid off pretty steadily over last 8 years.

collections-  I had a collection account I didn't know about(and just assumed when they called they were telemarketers) from the water company originally.  It was for a really small amount(100 dollars) and posted as a collection back in December 2023.  When I found out about it 2 weeks ago, I have since paid it off and now it is reported on my credit report(just today actually) as being paid down to 0.  But unfortunately it remains listed as a collection(just one that has been paid).  (I am guessing this listed collection is why my mortgage scores arent better). 

The question is simple-  is there any 'quick fix' I could do to get my middle mortgage score up 8 points to the needed 700? 

So is there a quick fix?  Like if I just paid off the 13k on the boat loan, do you think that would get me up 8 pts?  What about either paying off the 50k car loan(either by just paying cash for it or trading it in for a lesser car)?  Would paying the balance on all or part of the student loans(they are broken up into 3 different loans) get there?   Anything else I could do?

thanks!

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That EQ score is quite a bit higher. Have you compared your credit report among the 3 CRAs? Perhaps a difference in accounts listed. A closed revolving account can stay on your file 10 years which can help. Any difference in AAoA or age of oldest account.

Lack of revolving credit is holding down yout potential score by up to 60 points. The collection is costing you 50 to 60 points. Paying off the collection should have resulted in a substantial score boost in Fico 9 and Fico 10 because paid collections are ignored by those models. Unfortunately, Fico 8 and older Fico models don't consider status so no score gain.

Paying off some loans and paying down others will help your DTI but likely won't help score much. Fico looks at open loan balance to loan ratio (B/L) in aggregate along with payment history on loans, average age of all loans on file and age of oldest loan. If you are above 70% B/L, getting it under 60% B/L may give you a handful of points but no more. Really nothing to gain  reducing B/L 50% => 40% => 30% => 20%.

Your score is handicapped due to no revolving accounts.

The older Fico models consider authorized user (AU) accounts. So, being added as an AU on a revolving account which reports monthly use at a low utilization could be quite beneficial in lifting score. That could be a "quick hit" if someone will add you.

If becoming an AU is not an option then the best approach is to get a couple no annual fee bank cards ASAP.  Pick from, Visa, Mastercard, Amex blue everyday or Discover. Then use the card(s) but and allow 1 to report a statement balance. The reported balance should ideally be under 9% of the card's credit limit but definitely under 29%.

As mentioned by the above poster, a new card(s) may drop score when it/they initially report. The short term drop could be 20 points. However, after 90 day your score could be 30 points above your pre-card score (50 points above the dip).

Key point is a card must report a non $0 statement balance every month. If all cards report a zero balance, score will drop 15 to 25 points relative to having a small balance report on 1 card. That's called the "all zeros" penalty but is more accurately a "no recent revolving activity" penalty.

To safeguard against the AZ penalty some AZE1 practitioners opt to designate a card as their "AZE1 reporter". They often pay a monthly service fee using the card where the fee is automatically charged to the card. The card can also be set-up to autopay statement balance before due date.

Again, your score is suffering significantly from lack of sufficient credit mix due to having no open revolving accounts. Getting and maintaining some revolvers should boost your credit scores for life - assuming late payments are avoided.

Secondly, consider writing a good will letter requesting removal of the collection. Then if/when it fails, write a 2nd and even a 3rd letter. There are a few threads on good will letter strategy. Search for and read them before starting a GWL campaign.

[tacosman]

Hey thanks for response.  Yeah it's in alabama(birmingham area).  A lot of the state is cheap but the area I'm looking at(about a 3k sq ft house in a specific section of a town called mountain brook) is probably going to run 2.5-2.8ish depending on the lot size, how updated the house is.  So I'm looking at borrowing maybe 900k and I think I can pay it down to 300k in 10-12 months or so(where the interest is pretty negligible at that point).  

This authorized user angle sounds pretty interesting.  I'm pretty sure my mom has a credit score about 800 and has a credit card and always pays it off every month, so I'm going to look into that and ask her.  I just think this whole system is so silly and ridiculous lol; but I guess unless I want to wait until I have 100% of the liquid funds I need to try to play this silly game.  

[tacosman]

Thanks so much for the response.  

I believe I'm going to try this authorized user angle. You think If I pick the right person I can get 8 pts pretty quickly?  And is there any chance it may go down initially from this angle?  Also what is the process for this?  Does the person I pick(I guess my mom or sister) just need to contact their credit card company and figure out how to get my on- what do I need to do specifically if you know?

The problem with the credit card thing is I'm worried about it going down initially, and I'm wondering of course if I can get the 8 pt increase needed quicker by just paying everything on time another 45 days or so vs that.  Because I would hate it if I opened a card and there is a 20 pt decrease, and then had I just done nothing I get like a 9 pt increase a month from now.  And then exactly when that happens the perfect house comes up and I'm out of luck.  But as I noted it's hard to predict how long it would take on those 8 pts if things just play out naturally.....

Finally on the asking for the collection to be removed; i've already taken a few steps and no luck.  So who should I write the letter to- the collections company or the water company?  

thx!

[ShanetheMortgageMan]

As far as the authorized user route, your mom would just need to contact the creditor and request that you are added as an authorized user.   There is no re-qualifying, although she'll need your SS#, DOB, address and name.  You can even do a joint phone call into the creditor to make it easier on her.  Once you are added then usually the entire retroactive account history is added to your report, not just from the day you are added as an authorized user.  So if the account has been open for awhile then there shouldn't be any "newness" of the account that would bring down your scores.  

Understand on the sales price and location.  $900k would definitely be a true jumbo loan.  As I mentioned though you won't need a 700 score to qualify for a jumbo loan, but it's very likely you'll be over that level once the authorized user card is added to your credit.

I'll let @Thomas_Thumb respond to your question about if it's better to contact the collection agency or original creditor/water company.

[Thomas_Thumb]

I believe the original creditor would need to remove it. A collection agency is not able to do so.

As far as after payment tactics and good will letter strategy you need to do a forum search. Some posters, such as BrutalBodyShots, had great success. Unfortunately he is no longer active and has been joined the ranks of anonymous. Still, the threads and posts remain.

P.S. OP, if you open a new revolving account the most likely short term outcome for your case is NO point loss. Why? You are currently losing 20 - 25 points for "no recent revolving activity". Adding the new account will cost you 15 to 20 points but, you will no longer be subject to the no revolving activity if the card is used and reports a balance. Furthermore, you credit mix will be better and that also nets points.