Q: I am in a serious tax situation and would appreciate your advice.
I would like to borrow enough money to pay the IRS for payroll taxes (about $22,000 in total) that I am now responsible for as principle of my corporation.
I own a house that’s worth $46l,000 and my mortgage is only $64,000. But I cannot qualify for a conventional loan because of my low FICO score – which gets lower with each inquiry I make.
My credit score went from 617 at the end of November to a current 471 (I just learned this today). I am a hard worker (3 part time jobs in addition to the business). I have to believe there is somewhere I can go and put one of my houses on the line. Thank you in advance for your help
A: You should be able to pull a copy of your own credit history without causing your score to drop. However, you cannot have mortgage companies and other possible creditors pull it without having your score drop dramatically.
It appears that this is one mistake you made. Now, you have to find a way around it, or wait until your credit score starts to self-correct over the next six months.
Since you’re not going to be able to borrow the cash without paying credit card interest rates, you should talk to the IRS about a payment plan that will at least keep you from having a much bigger problem.
You could also talk to the better B/C lenders (also known as sub-prime lenders) that specialize in helping people borrow against their home equity even with a poor credit score. All of the major national mortgage companies have B/C subsidiaries that might be able to help.
But, be prepared: you’ll pay higher fees and a higher interest rate.
You might also try a “no-doc” loan, where the lender does not pull any documentation. Again, this may not be an inexpensive option, but you’re not in the position to argue that point right now.
Here’s the better news: If you keep your credit clean (pay on time, no more inquiries, etc.) you should be able to raise your score over the next six months to a year. Hopefully then, your score will be high enough to allow you to tap your home equity at that point, and perhaps trade a more expensive loan for one that is more affordable.
By the way, since your goal ultimately may be to borrow against your home equity (and to do that in the near future), be sure you do not sign a loan today that has a prepayment penalty attached to it. Otherwise you will limit your refinance options in the future.
Published: Feb 25, 2005