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Money Alert: New FICO Scoring Methods & A Wounded Warrior's Dilemma

18 October 2014
  Lee Amble

New FICO scoring methods may help more people purchase homes. 

I don’t want to mislead anyone as the new scoring method may help many and some not at all.  It does depend on how the Home Lenders and others react to the new system and how fast they begin activating it.  

Also the last part of the article discusses a true example on financing for one of our Wounded  Warriors.

 CREDIT SCORES NOW USED TO BUY A HOME:

TYPES OF LOANS:

 Conventional loan: FICO SCORE - 620+

 Fannie May/Freddie Mac: FICO SCORE - 660+

 F.H.A. (as low as): FICO SCORE - 600

 V.A.: FICO SCORE - 620+

 U.S.D.A. (as low as): FICO SCORE - 620+

 

The New System FICO 9:

 Unpaid Medical Bills:

 Unpaid medical bills will be treated less harshly because these bills often do not tend to stem because of bad money management but from unforeseen medical emergencies and/or billing disputes.  The difference on your score could be as high as a plus 25 points.

Bills Sent To Collection Agencies:

Bills sent to Collection Agencies will no longer hurt your score when they are paid off or settled.  Under the previous system, they could hurt your credit score up to 7 years after they have been paid off or settled; possibly 100+ points on your score. 

Lenders:

Many will take 6 months to a year to make changes.  Government mortgage lenders usually are the slowest; Fannie May, Freddie Mac, etc.  It certainly looks like this will be helpful and for once made some logical sense.  How lenders will look at it and when is anyone’s guess; we all hope it will be right away.

How Should You Prepare:

If you have medical and/or settled collections on your credit, ask the lender which FICO scoring method they are using; either the old one or the new revised one.  If they use the old method, you may want to wait for them to change or go to another lender or better yet ask them why they have not changed to the new method.

I Need Your Help To Help A Marine Wounded Warrior And Others Like Him:

I do not normally write about something I am personally involved in, but I am compelled to share this story with you and to others who may be able to help.  We all need to help change the system you are about to read about.  It is our duty to do so!

I am going to try to make this factual problem as simple as I can, but it is anything but.  The home buyer, a Wounded Warrior, with the Marines spent 23 months in a Military Hospital as they were trying to save his life so he would be able to go to rehabilitation after that.  He was wounded by an IED, an improvised explosive device.

While in the hospital, he got lost in the military financial pay system and had no income for 8 months for his great wife and three children.  He was forced to go through bankruptcy because the Government lost him in the pay system; they probably thought he was dead, well, not really, but close.  The Government’s failure to follow through and make sure he was being paid, created the mess.  Because of this, his FICO score is 580.  For a Government V.A. loan, he needs a score of 620.  Without the help of an Arizona Congressman, he probably would still not have been paid and back in the system.  This is very tragic for him and his family and, I assume, more Wounded Warriors like him.  I personally feel like this has to be exposed as someone out there may be able to help him and others like him.  There should be some exceptions to the rule while trying to get a V.A. loan.  The lender reviewed his credit and because of that, he cannot get a Government Backed V.A. loan.  Is this really fair?  I hope someone will help and probably pass along to Bill O’Reilly and others like him.  This ties the FICO scoring system all together----a health related problem. 

Conclusion: 

We must all attempt to help the Veterans and Wounded Warriors in any way we can.  If you have any ideas, please use all of your resources to help solve the problem; yes, even Bill O’Reilly is a good start.  Shawn Hannity is another, or your Congressman.  This is nearly as bad as the V.A. scandal.  


THOUGHTS OF THE DAY:

•  If you only see the hurdles, you will never win the race!

• A person with little faith will have little hope!

Thanks for reading this “Food for Thought” article!  It’s written to help everyone and gives you much to think about.  Please, if you have any real estate questions, call me at 928 533-4455.  The call is free and so is my email:  This email address is being protected from spambots. You need JavaScript enabled to view it..

REMEMBER, EXPERIENCE ISN’T EXPENSIVE, IT’S PRICELESS!!

 

LEE AMBLE, REAALTOR, CONSULTANT 

NATIONAL REALTY OF PRESCOTT 

LEE’S CELL:  928 533-4455

JAN’S CELL:  928 533-4488

This email address is being protected from spambots. You need JavaScript enabled to view it.