I am in the middle of refinancing our home going from a 30 year 6.875 interest rate to a 15 year 5.25 rate. Already got everything locked in and just working through underwriting and appraisals.
Unfortunately today I just got a credit alert saying a medical bill for $528 ended up on my report. It’s one I’ve been disputing for sometime then ignoring when we hit an impasse but still, a bad mark all the same. Sure enough, my FICO8 score dropped from 821 to 713 bring me from excellent to good. Luckily, my wife is around 790ish so hoping that weighs into their decision.
Kinda scrambling for next steps on handling this. For added reference we are refinancing a $559k loan with a home value of $810k. Household gross income was $364k last year but showed with current pay statements and bonuses to date, we are on track to be around $400k. We also are refinancing through Bank Of America as our broker is Merril Lynch (part of BoA) where we have around $900k in assets managed by them.
All that info to ask, is this a huge road block in getting a loan or risk putting us back to square one of refinancing?
Just got a derogatory credit mark mid refinance. Does it matter?
byu/pmwood25 inpersonalfinance
Posted by pmwood25
6 Comments
Luckily, on a 15 year fixed, all credit scores above 700 are priced the same. They may see and ask about it but as long as it doesn’t push your DTI over the limit ($528 won’t), ultimately it’s fine.
They will use the lowest credit score if there are multiple borrowers, but a 713 itself wouldn’t be much of an issue. An unpaid debt could be though, so get ahead of it and call your loan officer and explain the situation.
Not to be judgmental, but you make $400k/yr and didn’t pay a $528 medical bill? Depends on where you are in the process. Maybe they’ll run your credit again, maybe they won’t. But that seems so silly to me to not pay a $528 medical bill and now have it impacting your credit. Mortgage lenders use the lower of your two scores, so if they run it again, it’ll be the 713 they use.
My wife and I run into this every time we buy a property. On paper, her credit is 790+. But because she had student loans she didn’t pay over 7 years ago, that DONT show up on her full credit report, her credit reflects a 750 every time we get a mortgage. My credit is 790+ through and through. But every time they say ‘we have to base it on your wife’s credit’. Annoying.
Are they charging interest on your medical bill ?
Regulation V was recently amended. Medical debt cannot be used as a factor in credit decisions.
CFPB Finalizes Rule to Remove Medical Bills from Credit Reports | Consumer Financial Protection Bureau https://share.google/me2azec7IFd4JrUOl
Medical debt isn’t weighed heavily. Especially not for such a small sum. Call your underwriter and let them know. It probably won’t nerf your plans.