Mortgage Loans

[tduke]

I'm in the process of applying for pre-approval with a mortgage broker so I can start making offers. However, I pulled my report and saw that a credit limit increase I got 3 months ago on my discover card has not yet been reported. This is an increase from $2100 to $3500. Also they haven't reported payment activity for those 3 months. I've disputed the limit on both TU and EX websites but it might take up to 1 month.

I haven't pulled my lates FICO yet. Do you think it's worth waiting for the info to be corrected? I ran a simulation on credit karma and my score only improved by 1point after increasing the limit. Will this have a terrible effect on what rate I qualify for? I usually pay off my balances monthly and total revolving limit $10,800. My scores last december were EQ 750 (FICO), EX 756 (Auto lender), TU 742 (Auto lender).

[pakman92]

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tduke wrote:

I'm in the process of applying for pre-approval with a mortgage broker so I can start making offers. However, I pulled my report and saw that a credit limit increase I got 3 months ago on my discover card has not yet been reported. This is an increase from $2100 to $3500. Also they haven't reported payment activity for those 3 months. I've disputed the limit on both TU and EX websites but it might take up to 1 month.

I haven't pulled my lates FICO yet. Do you think it's worth waiting for the info to be corrected? I ran a simulation on credit karma and my score only improved by 1point after increasing the limit. Will this have a terrible effect on what rate I qualify for? I usually pay off my balances monthly and total revolving limit $10,800. My scores last december were EQ 750 (FICO), EX 756 (Auto lender), TU 742 (Auto lender).

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Do you know what your revolving account utilization is?  Reducing it can have quick and significant effect on your FICO.  Increasing your total CL from10,800 to 12,000 will certainly help.  However, one thing that I noticed from your post is that you are paying off balances monthly.  I assume you mean you pay the balances once the statement comes out.

Better strategy will be to pay off all but one card fully just before statement posts, so they would actually show as having 0 balances in your credit reports.  (Right now, the balance on your Credit report will show what ever it showed on your last statements).   On one card, let a small balance post in your statement say $120 (which will be 1% of your total credit limit).   Having all cards report 0 balances have been proven to hurt your score by a few points.  Letting one post a small balance has bee proven to be best strategy.

Using above strategy, you should be able to maximize the credit utilization factor of your FICO score which is a large chunk.

Of course this will take probably over a month to accomplish as you'll need a full statement cycle on all your cards. (+ time for them to post on credit reports).

I say this since you appear so close to 760 mid score mark, which will give you the best rate for mortages.  I noticed that your scores from December are for auto loan application.  They may be significantly different from the FICO's your mortgage lenders will pull.  I think it would be worth it for you to pull Equifax FICO from this site to see where you are and to examine your credit report in detail.

Good luck.

[tduke]

Thanks for your response. Yes, the scores are from an Auto Lender, but the EQ score is FICO from this site. My card all report zero balances, except for one which usuall reports 1-2%. I'll pull the scores from this site and see what gives.

[pakman92]

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tduke wrote:

Thanks for your response. Yes, the scores are from an Auto Lender, but the EQ score is FICO from this site. My card all report zero balances, except for one which usuall reports 1-2%. I'll pull the scores from this site and see what gives.

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Oh good.  You sound like you totally know what you are doing.

[Booner72]

Try letting 5% report.  You gotta find your own "sweet spot" as they say.

Regarding the CLI, I don't think it will matter since you PIF and your revolving percent is so tiny anyway.

[tduke]

Just pulled my score and it's now 735. I wonder what caused the drop. Maybe the car loan refinance I did dropped the average age of my accounts? Anyway, I'll call up the broker to find out what rates I qualify for.

[Lel]

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tduke wrote:

Just pulled my score and it's now 735. I wonder what caused the drop. Maybe the car loan refinance I did dropped the average age of my accounts? Anyway, I'll call up the broker to find out what rates I qualify for.

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Which score was this?  Was this TU or EQ?

You mentioned that you had disputed the credit limits on your Discover card.  Unfortunately, that alone can cause your credit score to change, because when an account is in dispute, certain aspects are not factored into scoring, such as payment history.  So, if this credit card had a perfect payment history, that is not being seen by the FICO scoring formula and may have resulted in a lower score.  However, there may also be other changes in your credit report over the last 4 months that may have an effect as well.

You also wrote that Discover hasn't reported any payment history over the last few months.  I assume that you have actually been using your card, is that correct?

Last question (sorry for the interrogation): in your original post you also said that you pay off your balances monthly, and then in a follow-up post you said that you let one card report 1-2% utilization.  Are you saying that you pay your balance in full BEFORE your statement cuts, resulting in a bill for $0?  Or are you saying that you receive the billing statement and then pay it off in full?  There's sometimes confusion about what defines utilization, so I wanted to make sure that I'm working with the correct assumptions.

BTW, having an open dispute on your credit reports can interfere with the mortgage pre-approval process.  I know you want the CL to update as soon as possible, but the dispute could actually slow things down until after it is cleared.

[tduke]

This was my EQ score. It was 750 in december. I didn't know disputes affected scores. Yes, I disputed my Discover account and it has a perfect payment history.  My discover card is my active card. I pay it off each month but I have 4 days between my bill due date and my statement date, so I usually get a little amount reported (varies between $20 and $200). So even though I pay it off each month, a small amount still gets reported.

Maybe I should tell the lender to hold off until I can clear things up. Thanks for this info!

[Lel]

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tduke wrote:

This was my EQ score. It was 750 in december. I didn't know disputes affected scores. Yes, I disputed my Discover account and it has a perfect payment history.  My discover card is my active card. I pay it off each month but I have 4 days between my bill due date and my statement date, so I usually get a little amount reported (varies between $20 and $200). So even though I pay it off each month, a small amount still gets reported.

Maybe I should tell the lender to hold off until I can clear things up. Thanks for this info!

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Okay, so maybe that's what caused your score to drop.  Your positive payment history is no longer being factored into your FICO scores.

I should have mentioned this earlier, but Discover apparently can be inconsistent with their reporting.  Go over to the Credit Cards forum and search "Discover reporting" and you'll find many threads, including some recent ones, that describe this phenomenon.

You may want to canceling the disputes on your accounts, though I think this isn't always easy to do and it may be better to let it run its course.  I've never tried to pull back a dispute.  In the future, I'm sure you'll think twice about disputing positive accounts!

ETA: getting back to your original question about whether the CLI would improve your scores: since your statement balance (the amount on your monthly bill, which is the amount that gets reported to the credit bureaus) is only around $20-200, then even with the lower CL your utilization has been around 9% or lower.  This utilization ratio is already quite good, and so the CLI might not result in a significant change to your scores.

[tduke]

Damn, I'm an idiot! I probably did more harm trying than good. The lender did pull my credit already though, and she said

"I received your application and pulled credit. It looks great.  Mid700s. I will send you a copy this afternoon along with an approval and an estimate".

I'm guessing that should mean something between 735 and 755. Well, fingers crossed, I hope I get a good rate.