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VA home loan with bad credit

100% disabled vet(with special monthly compensation) with bad credit.  When I first got out of the Marines in 2007, I was living off $940 month from VA benefits as they took over 2 years to process my other claims.  Was very hard to keep up with payments on less than $1000 a month.  I now have enough income to pay for a mortgage, yet it's impossible for me to get one with a credit score of under 600.  I'm trying everything I can to rebuild it, but can't even get a credit card to help with that.  With me and the lady friend together, we're pulling in over $7,000 a month, with hardly any payments on anything.  Where can I possibly find somewhere who will look at my GUARANTEED BY THE US GOVERNMENT income, and help me out?  Paying over $1000 in rent right now, but hate paying someone else's mortgage for them.  Any help would be greatly appreciated!
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July 11 2013 - Buffalo
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Replies (62)

Fortunately, I can go down to 530 FICO for VA.  You can use your full VA benefit (100% financing - no down payment required). 

Most lenders out there want to see at least a 620 FICO.  Feel free to contact me if you wish to discuss further.
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July 11 2013

We suggest that you contact a loan officer at two local banks which handle VA Loans.  If you don't qualify, ask them what you need to do to qualify for a loan.  If anyone deserves a loan, it is a Vet.

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July 11 2013
Profile picture for MsNavyVet
Mr. Purcell,

Do you do VA loans in SC, NC, or GA? I'm in a similar situation as the original poster. I qualify for the VA home loan program and have my COE.

Which FICO score do you use? I have my current Equifax and TransUnion scores from MyFico.
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July 11 2013
Down to 530? Wow that is crazy but great for Vets!

Gfunk0311- Just a few suggestions in general -
You can try to get a store credit card like a best buy or gas card and establish credit that way. Charge a little but pay it off right away each month and you'll start to build your scores up.
I would also try your local federal credit union.
You might be able to deposit money and get a charge card that way through them.

If you want to email the specifics on why your credit is low maybe I can offer other suggestions on how to increase the scores quicker than letting time pass.

Also, in case you weren't aware, if you are 100% disabled, you may be exempt from the funding fee as well as state taxes depending on the state. Both things you should research if you have not done so already.
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July 11 2013
MsNavyVet: I do VA loans in all 50 states. We use a tri-merge credit report (all 3 bureaus) and will use the middle of the 3 scores for qualifying purposes.
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July 11 2013
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Burke, where can I find out more information about you and what you have to offer?
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July 11 2013
Good luck with everything.  I had a response regarding rebuilding your credit. Here are a few tips that have helped with clients we have helped (And even myself). 

1.  Now that you are in a better financial position, make sure not to miss ANY payments. 

2.  Contact past creditors and negotiate a repayment plan/pay off for any past debt. 

3.  STOP APPLYING FOR CREDIT!!!  If you are getting denied, continuous applying is only hurting you.  Not only the score but the history of inquiries. And store cards are not always the best ones to get.

4.  Google "Best secured credit cards".  The one I found with the best (lowest) annual fee is Capital one.  By starting off with a SECURED Card, it is almost guaranteed acceptance.  Make sure you only use 30% or less of your available balance. (For instance, if you deposit $500 into the account, never use more than $150, and pay it in full every month.

These are legitimate ways to help rebuild your credit.  As long as there is not a lot of negative items currently on it (Recent collections or lates) you should start seeing your score increase in 2-3 months.  Im seeing some scores going up thru credit monitoring 10-20 points a month.

Credit Karma and credit sesame are 2 FREE credit monitoring systems that will help watch what is going on.  They only do trans union and experian though... Im not aware of one for equifax.

Good luck,    
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July 11 2013
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Thanks for the helpful replies. 
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July 12 2013
Profile picture for MsNavyVet
Mr. Purcell:

Within the last 24 hours, I've bought all 3 of my credit reports, with my credit scores, from MyFico.com. Are these the same exact scores that will be in the tri-merge report you told me about? Or, are they factored into a formula used to generate specialized credit scores for specific use in the mortgage industry?

Without getting specific on a public message board, I can tell you that my middle score is a good bit above the 530 you require for buyers using the VA loan program. 

Please advise on the next step(s) I need to take. 


Thank you,

MsNavyVet
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July 12 2013
MsNavyVet:  Please click on my profile and email me through the Contact Me link.  We can then discuss the particulars about your situation and get you pre-approved for financing.
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July 12 2013
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GFUNK, I am also in buffalo and at 100% with Special Monthly.  I would advise you to meet with a Credit repair specialist ASAP.  It may cost you as much as 200$ to secure their services. It is worth every penny. As far as getting a credit card. Go to [spam removed by Zillow moderator, see our Good Neighbor Policy] and give them cash as collateral for a secured credit card, which they will issue a CD that they have a lien on in case you default.  You will have to pay a one time 50$ fee with them in order to do this, but the good news is they report to all 3 credit agencies and after a year they are obligated and do issue a non secured credit card which helps further build/repair your credit. Other than that, try to keep your monthly balances on all credit cards below 20% of the limit and pay them off all on time.  Also you state that you and your significant other are nearly debt free, which I am in doubt of, since you most likely have car payments/ rent/ car insurance/ liens/ or some other issue that has caused you to come to this site to seek help from your poor credit. So if you can be more honest about your situation and finances, I would be able to further help you and maybe even give you some referrals to people who are pros as this, but I have to be wary for the vast majority of veterans I have helped thus far were less than candid.  In the meantime get your Debt to income ratio reduced and apply for your COE from the VA that process just as any process with the VA takes several months and can really be the slowest part of the process of buying a home.
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July 15 2013
Profile picture for MsNavyVet
I sent a message to Burke Purcell through the Zillow contact form as instructed. I did not receive a response. I followed up with a phone call a few days later and left a voicemail message. I still haven't received a response.

So, can anyone tell me exactly which VA Loan lenders it is that will go down to a 530 middle FICO score? I'm searching Google, but thought I would ask for help here, too. Thanks.
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July 20 2013
Burke Purcell,
You were very responsive to MsNavyVet and GFunk0311 but it is time to step up to the plate.  MsNavyVet needs help and indicates that you have not responded.  Don't let the week end go by without making contact or you will defeat the purpose of being a lender on Zillow.
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July 20 2013
There are VA loan options that allow for credit to 580+
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July 24 2013

MsNavyVet and Gfunk0311,
Did Burke Purcell make contact with you?

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July 24 2013
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Mr. Lancaster, I apologize for my delayed response. I've been under the weather and was just diagnosed with an infection in one of my lungs. It was caught early, so my recovery should be uneventful as long as I do my part and take the prescribed antibiotic properly.

No, I have not heard anything from Mr. Purcell as of yet. I really don't want to think that he just decided to ignore us after being so responsive. I hope everything is okay with him and/or his family.
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July 27 2013
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Mr. Smith, is that a 580 middle score or the highest score? Out of curiosity, are there any VA lenders that use the highest score? 

My middle score is 566, but it should be increasing in the next couple of months. I found an error on my credit report. There is also a small medical bill, and another small bill, that I know will be removed from my credit reports when I pay them off. There was also a really small leftover phone bill from a move, that I had no idea about, that was put on my credit report. I took care of that right away and it should be removed in a couple of weeks. I forgot to pay off the small medical bill (under $300), as I've had one lupus health crisis after another and have been preoccupied with my health. But, I'll be paying it off within the next 30 days.

Also, my two credit cards have high utilization. One has a really low credit limit, so almost any purchase ramps up its utilization percentage. I'm going to pay that off within the next 60 days and probably just use it to pay for my HuluPlus ($8/mo) and web hosting account ($7/mo) and otherwise let it be. 

With my second card, which has a really nice limit, I had to pay some school tuition in advance and wait to be reimbursed by financial aid. When that financial aid comes in sometime in August, that card will either be paid off or paid down enough to have a low utilization percentage. Both cards are in good standing.

Hopefully, by Thanksgiving I'll have at least a 580 middle score. I hope it doesn't take long for a 20-30 point increase with several negative trade lines being completely removed from my credit report. I don't have any new, unpaid medical bills or have anything current in collections.
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July 27 2013
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really sucks dont it buddy i,m a vietnam vet finally after 25 years i,m 100% va rated but i cant even get a loan for a house with a score of 640?
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July 27 2013
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Your score is good. Something else is keeping you from being approved. What exactly did your loan officer say when s/he told you the mortgage app was denied? If we had that information, we might be able to make some suggestions to you for fixing some of the problems/issus before re-applying. Good luck!
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July 28 2013
I know of lenders that offer bad credit VA loans as low as 580 in some states, if you would like a referral to one.
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October 22 2013
Profile picture for WCWalker
Im in the same situation im a disabled vwt 60% I work my vehicles are paid off and for months now ive been trying to get a loan for a house that cost 110thousand here in ga.. however no one will help my credit score is 575 and im really ready to stop paying rent.
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November 05 2013
Profile picture for MaxAlexander
I am 100% disabled vet (with special monthly compensation) with bad credit. I have enough income to pay for a mortgage, It's impossible for me to get one with a credit score of under 600. I need a 4 bedroom home under or slightly over 200k in Florida, Around Orlando.I need this home by January 2014.  I've tried everything to rebuild it, but can't even get a credit card to help with that. I NEED someone who will look at my GUARANTEED BY THE US GOVERNMENT income, and help me out?  Paying over $900.00 in rent right now, and hate paying someone else's mortgage.  Any help would be greatly appreciated!
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November 08 2013
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My hubby is also a vet and should qualify for the VA home loan. His score is right below 600, but our combined incomes is around $7500. We currently reside in Florida and pay $1200 a month for rent. Does anyone have any contacts for VA lenders in Florida that can help with our situation?
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November 10 2013
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I apologize for what I am about to do, to everyone who is reading this board, I have to make multiple posts in a row, I just typed a long response to Ms. Navy Vet and I just learned I have a limit of 2000 Characters, so I am going to chop it up in order and post it.

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November 10 2013
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Ms. Navy Vet, I am so sorry it took me so long to respond.  I have been very busy as of recently and to make things better dealing with the VA and my medical problems, not being handled, my health deteriorated until I ended up in the ER 3x in two weeks and I need to focus on my health for a while and unfortunately my attention here had/has withdrawn. So I apologize.  Before I go further giving any advice or explaining what I have done to get to where I am, I feel obligated to be honest and say that I am not a professional in this matter, but to say I am very well versed only because I was motivated to improve my own situation and have solicited and employed the assistance of professionals. I am so grateful to all the people who assisted me in getting where I am and what I have learned, so in order to pay it forward I am willing to give as much information I can to assist anyone who wants it, and in particular you Ms. Navy vet, I owe you an apology for falling behind, so I am terribly sorry to keep you waiting.  Good news, I am back in the net for the time being (health is doing better for the time being).  


So this posting from here down is deliberately for Ms. Navy Vet, but if anyone else who reads this, is certain that any of my advice is inaccurate or improper please correct me, I do not want to pass on misinformation, I am only trying to do my best to help others.    So now lets get down to the specifics of your most recent posting (July 28th) .  As far as your score, Most VA lenders look at your middle score when applying for a VA loan, but keep in mind there is something called alternative forms of credit that you can submit to underwriters who are crunching your numbers to determine eligibility for a home loan.  The alternative form(s) of credit most commonly is a persons rent. 
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November 10 2013
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So in order to prove this, is through keeping a copy of your lease/renters agreement with your landlord where you are living down, even if this is your family or friend and it is informal, make sure that you pay all your monthly rent(s) with a check, and in the subject line, annotate the month for which the check is paying rent.  (Ex: Subject: For Rent from 1Nov2013 to 30Nov2013) The reason for this is to show the underwriters that this is what the check/payment is for not only to assure them this payment is rent, but also in case there is any discrepancies in purpose for payment or the timelyness of your payments. Make sure your payments are on time or early for all rent payments.  
Next topic, Over utilizations of credit cards.  There are 2 main ways that you could and probably are over utilized.  First most obviously is with your credit cards, you want to keep your monthly usage between 20-30 % of the credit line available on any and all cards.  You want to keep 2 credit cards open and in good standing, preferably not store credit cards but rather bigger banks.  Again I am from WNY (Western New York) so my reccomendations based on what I have learned would be either Bank of America or First Niagara.  Now I can elaborate quite a bit on the benefits and drawbacks of both of these banks, but that is another long post for another day.  The reason I suggest these institutions is for two reasons. One, they both report to all three credit reporting agencies unlike most department stores who usually only report to one or two agencies, so in turn, when improving your credit it is better to have all this positive activity reported to all 3 agencies rather than just one or two.  So if you dont like these institutions or dont have them locally to where you are, just ask whomever you are considering using for a credit card if they report to all 3 agencies and then compare the annual fees and such.  If you are unable to secure an unsecured credit card ("a traditional credit card"),if you have some liquidity (cash), you can give a bank an amount that you are comfortable with, in my case I started with 1K, and in exchange they gave me a CD (Certificate of deposit) that I could not access, that they locked down in the form of collateral for the Secured Credit Card I got with a limit of, you guessed it 1K.  Now keep in mind, I didnt care what the interest rate or late penalty would be, because I knew I was ready to improve my credit and knew that I wouldnt miss a payment or be late as long as I could help it. So from there, I would reccomend setting up an automatic payment from your savings/checking account whichever you can afford to do so with to pay automatically both of these credit cards so that they will never be late no matter how hectic your life gets.  I always pay these cards off in full each month so I never have to pay interest.  If you continue to have issues with over utilization percentages, try increasing your limits either
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November 10 2013
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with your traditional credit card companies, by calling them and explaining honestly the situation and what you are trying to do, now I dont reccomend this as a first course of action, and please forgive me because I want to be as honest as possible with you,and dont want this to be offensive, if it is please forgive me, but to be candid, most people find that if approved with a traditional credit card for a credit limit increase that they have difficulty keeping them from spending that extra increase, hence why people get in this situation in the first place. Now again, the better option if you can afford it right now is doing a secured credit card, just give them enough of CD to keep your utlization down. For example if you carry a balance of 2,000 dollars, give your bank 6 to 10 thousand dollars for a CD so as to reduce that utilization down to 20 to 30%. I personally gave my bank 1,000 because I was apprehensive at first and didnt want to over extend myself, The only thing I put on my credit card was my time warner bill and i think my cell phone bill, so as to keep my rotating monthly amounts between 2 and 3 hundred. Then I set up an automatic payment from my savings account to pay off the credit card in full every month so I didnt/ dont have to ever pay any interest. Now to set up these secured credit cards anticipate an initial fee, unless you have a great credit union or bank who waives this initial fee. The fee should not be in excess of a one time payment of 50 Dollars. Also the other thing to keep in mind is that benefits of the CD, you gain interest, unfortunately as of the past several years, the interest rates are very low, but I think that any interest in my favor is good interest. I make a few dollars a month interest on my CD, and it just rolls over into the CD, making compound interest monthly, until the 1 year CD has matured and the bank from which I received the Secured Credit Card (first Niagara in my case), will then offer you an unsecured credit card (a traditional credit card) with a better interest rate than you have now, and with a limit equal or greater than whatever your secured credit card was, because as long as you have paid on time and proven to them you deserve this benefit, they will honor it at your one year anniversary. Also at the one year mark, you get the CDs Value, principal investment plus interest from the year.
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November 10 2013
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The next topic, being your school tuition, I full understand what you mean when you talk about financial aid and having to front the money in order to be reimbursed.  This could be good and bad, depending how attentive you are to the procedure. But if I had a little more information, we may be able to finance your college without any out of pocket expense to you.  But again that will be another long post for another day. So to try to stay on topic and avoid your eye fatigue reading this novel....Obviously you have used your credit card as you stated to pay your college expenses while waiting for reimbursement, now if you dont know off of the top of your head, look back and see if this timing is cyclic (following a pattern).  For example if you waiting until the day before the bursars office required payment,and put it on your CC, and it took the financial aid 3 weeks to come through, that is good and to your benefit, and to monopolize on this, just spread out the payments between your cards evenly to keep your utilization as close to 20 to 30 % as possible,and then pay them off in full as soon as you get that money on the 21st day, as to avoid interest from your CC Company.  On the other hand without knowing more details about your exact financial situation and I couldnt possibly go into the pros without waring you of the possible draw backs or negatives of this option of prepaying your tuition with credit cards.If that money doesnt come through in a timely fashion (before the completion of your billing cycle) this would not be beneficial to you for two reasons, one you are now pushing your utilization limits and freezing up your ability to spend and two now you are likely to encur interest from your CC Company and financial aid typically wont pay the interest you have to pay because they werent paying you back in a timely fashion.  So beware of this, but if you are getting your financial aid in a timely fashion, this is a good thing, because you can look forward to using this every semester or year, to rotate money through your credit cards and having a 3rd party paying it off in as long as it is within your utlization. 

Also keep in mind, your overall Debt to Income Ratio.  If you are looking to buy a home using a VA home loan, I want to refer you to the VA website to get this exact number, but If I recall, the maximum Debt to income ratio the VA will allow when getting a loan is 40%.  Which is stretching yourself financially if you
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November 10 2013
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ask me. So for the sake of better explanation this is the best example I can give.  If after taxes you take home 3k, of that 3k only 1200 of that each month can go to reccurrent debt. So if you have a car payment for 300, now only 900 of that can go to a mortgage, and if you have reccuring monthly payments on credit cards, subtract that from the 900, so if you have minimum payments adding up to 300/month on CC's, now you can only be approved for a mortgage that will only cost you 600/ Month and figure in sub par interest rate if you apply for a loan now with a sub par credit score, you should anticipate being approved for less than that because your interest rate will be figured into that number. So a 30 year loan at 6% (horrible rate because of subpar credit score) with a maximum of 500/month, your final loan amount will be in the ball park of 90-100k. If you can get approved at all. So this is why overall debt to income ratio is so important.

So for now I think I have fully answered your questions to the best of my knowledge, without going too far off on tangents.  As a college graduate myself, I can appreciate the financial difficulty of your situation, so I wish you the best of luck through this tough financial time, and just remember it will get better, and whatever you do, no matter how bad your financial situation gets do not let the stress eat you alive and keep you up at night, for the damage the stress will do is far worse than any temporary financial impact.  Life goes on.  Again I am so terribly sorry that it has taken me so long to get back to you. If anything I have written about is vague or unclear to you, please let me know where I can elaborate. Pick my brain the best you can, once you have these topics covered and you fully comprehend them, if you want more ways to improve your credit, I have many tools and techniques I have used to improve my credit.  On a moment of inspiration for others, for me, it has taken me nearly 8 years to improve my financial and credit situation, i have had my sleepless nights and have the stomach churning stress, where I am so stressed I couldnt eat for days at a time or couldnt rest for nights in a row, and I regret not reaching out for help sooner. 
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November 10 2013
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But as of yesterday, I started my day 100% debt free with a credit score of 795. 8 months ago my credit score was 535.  Again these are middle scores, I have scores above and below.  Although I decided that after 8 years with my car, and being paid off, it was about time for me to purchase a new car, Which I had never in my life done.  My old car a 2005 Toyota had been paid off for a few years, and was nearing the end of its life, so I went to a local toyota dealership and purchased my first new car ever in my life, and I did it for two reasons, the obvious one, which was to replace a dying car, and secondly to improve my credit.  I put 14k down.  9k cash, 5k in trade in (haha, their mistake).  then financed the rest of the car, I signed up for a  36 month term, where for the first time in my life, banks were fighting to give me a loan.  I had offers at the high end of 2.75% to a low of .65%.  I settled with 1.9% for various reasons, which I will go into later on another more complex conversation of explanation.  I would've liked 0% being that it was a new car, that isnt unheard of, but since I was buying an import, they rarely offer 0% for anything but domestic (GM cars).  Hate me if you wish for not buying american, but I think as a disabled veteran, I have given enough to my country to not have to also overpay for poorly manufactured american made vehicle, that is just my opinion based on my experience.  So today was day one of driving my brand new car, and I couldnt peel the smile off of my face if I had to.  Now having a secured loan (car loan) I intend to pay it at double the normal payment as to pay it off in 18 months instead of 36, so the lending institution in total will only get roughly 200 dollars in interest from me over the life of the loan, but that is the price to pay for what should be an additional bump in my credit score in 18 months taking me to a score of 850-900. Which if by then, if I havent bought a home, I will then so I can secure better terms of financing.  As it sits right now, I was approved for 265k at 3.5% from a VA lender, but that was given my financial situation.  

So in conclusion, MS Navy Vet, best wishes and goodluck with everything.  If you have anymore questions let me know and i will try to be quicker to respond this time.  Also as far as the possible 30 pt improvement by thanksgiving, it is definately possible, but i dont want to say it will or wont happen. After all my credit score improved 160 points in roughly 8 months.  Also if you have any further questions or
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November 10 2013
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