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Need 10 Points to get to 640 for FHA Loan

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Dear Credit Boards-

 

My wife and I are trying to approve for an FHA loan. Our loan broker states our middle FICO score is 630. I've been working with a credit repair company for a year now, and much progress has been made.

 

My wife and I and our two children are trying to get an FHA loan (since we had a foreclosure in 2010) and their wait period is 3 years (compared to 7 for a conventional loan) - as I understand it. We have a 20% down payment on a $700k purchase price ready to go.

 

My middle FICO is 630, and I need 640.

 

My question pertains to a 2nd loan I have on a primary home which was then turned into a rental property. The first loan is an ARM at 3%, and the 2nd, if I recall correctly, was used back when I purchased the home as the 20%. I called the lender and confirmed that this loan is a "line of credit" rather than an installment loan. The balance is $20k, and the interest rate is 5.5%. The balance is $20,000 on a credit line of something like $22,000.

 

Do the credit bureaus see this as a maxed out credit line and not as a 2nd on a loan? I read that this might be the case since the balance is less than $30k.

 

Would paying this down to under 30% be beneficial to my credit score, and do you think it would move the needle around 10 points?

 

I thank you very much for your advice!

 

-RetireBy2024

 

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Only way to know for sure is to pull a report and see how it reports. If its reporting as a revolver then paying it down will raise your score but the amount it does depends on your whole revolving picture.

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I was under the impression that loans are not calculated into util. I could be wrong and hopefully someone, whom is a lot more knowledgable, will answer.

 

What else is on your reports? Any CC's with balances? If so, I would start there.

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