Credit score after mortgage

Anonymous · ‎12-15-2015

My credits scores are all around 620. I have two open lines of credit total just over $1,000 and a car that is showing as closed, but paid on time each month. I will be closing on my house in a week with a USDA loan. I have very few inquriies (most of which are from the mortgage app) and perfect payment history. My utilization is a bit high, but that is mostly because of my low credit limits. I travel frequently and often use the cards for hotels and plane tickets. I have been told that one of the reasons for the low score is my lack of credit lines and how recently they were opened (both about 18 months). Do you think my scores will improve after I get the mortage? This will add another type of debt and give me another open account. I would like to request credit increases after I close on my house, but want to time it so that my score is the best it can be at that time.

Thank you.

NRB525 · ‎12-15-2015

Are the 620's mortgage scores or FICO 08 Credit Card scores? That seems a bit low, even with utilization, for a CC score and perfect payment history.

Either those are your mortgage scores from your mortgage broker or there are negatives, lates and such, in your file somewhere.

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
March 2021 $33k on $312k EQ 796 TU 798 EX 801
May 2021 Paid all Installments and Mortgages, one new Mortgage EQ 761 TY 774 EX 777
April 2022 EQ=811 TU=807 EX=805 - TU VS 3.0 765

Anonymous · ‎12-15-2015

Hi NRB. It's possible that his cards have been reporting in the upper areas of his credit limit. Like maybe two $500 CL cards that report in the area of $300-$400 each. That might explain why his scores are lower than you might expect.

His profile is very young (18 months) and very thin (two accounts total right now, including open and closed).

A very young, very thin profile with high CC utilization and terrible mix (all revolving, no installment) might well have bad scores.

Anonymous · ‎12-17-2015

Those are FICO scores. My mortgage scores actually came in a bit higher (mid was 645). Usually my utilization is high. I don't travel much in January and February, so I plan to pay those off for a couple of months and maybe get a CLI during that time, so the utilization doesn't look bad in the future. I really wondering if the mortgage, being a different loan type, will give me a boost.

Aside from a car payment, I had no credit usage for roughly 10 years. I have no negatives, no lates. Nothing going against me at all. Just young credit and only two accounts.

Anonymous · ‎12-17-2015

@Anonymous wrote:
Those are FICO scores. My mortgage scores actually came in a bit higher (mid was 645). Usually my utilization is high. I don't travel much in January and February, so I plan to pay those off for a couple of months and maybe get a CLI during that time, so the utilization doesn't look bad in the future. I really wondering if the mortgage, being a different loan type, will give me a boost.
Aside from a car payment, I had no credit usage for roughly 10 years. I have no negatives, no lates. Nothing going against me at all. Just young credit and only two accounts.

The biggest slam to your scores has not been the small number of accounts, or the mix, or your account age -- though these weren't good of course. It was your high CC utilization. That has a huge effect on FICO scores. It's unfortunate because there were ways to use your cards that would have enabled you to use them a lot and still have very low reported utilization. That in turn would have caused you to have much higher scores and in turn a lower interest rate on your mortgage.

It will be good for you to have a mortgage on your profile -- I realize that's something you are asking. It's a fourth account, it's an installment account, etc. But overwhelmingly what you need to do is get your credit card util down to 1-8%. That will help you a lot.

Anonymous · ‎12-19-2015

FYI, my interest rate for the mortgage wasn't impacted by my credit score. I have a USDA Rural Development direct loan. It is the same rate regardless of your score. If you qualify, you get 3.25% fixed. With an income-based subsidy, it can be as low as 1%.

Thank you for the advice on utilzation, but I knew that already. I pay my bill twice a month (or as soon as my company reimburses me for the previous trip).

Anonymous · ‎12-20-2015

Great news that your mortgage was not affected by your CC utilization! Very happy for you.

It sounded from earlier in your posts like your utilization has been and is high. It sounds like you are tuned in to the idea of multiple payments, a great strategy for anyone who's credit limits are not very high.

To circle back to the concerns you originally raised (I want to be responsive and supportive to what your concerns are):

* Mortgage? Yes, it will be a good thing that you have a mortgage on your credit profile. Your profile will shift from having no installment loans of any kind to having an open loan on which you will likely be making payments for a while. Awesome!

* Small number of accounts? You are right, your credit profile (which currently consists of four accounts: two open cards, a closed car and a new open mortgage) will improve by slowly adding a few more accounts. I say "slowly" only because you should only add any account after doing some research and figuring out that this particular card or loan is right for you. A great direction for you to go is to find over time two more credit cards that you think you'd really like, ones you can keep forever (ideally no annual fees and they give you some perks you like). Two more cards will (in the nedium to long term) give you a lot of of scoring advantages over just two. If a car loan naturally presents itself as a genuine need, that would be fine (but of course only if you need it). Finally you could consider adding a $500 five-year Share Secure loan -- you already have a mortgage but you just may feel like you'd like an additional installment account given how few accounts you have now. (This is purely optional, feel free to ignore the SS loan idea given that you have an open installment.)

* CLIs and CC utiliization. You are right that making a "soft" increase for a credit limit increase (CLI) on your credit cards, probably every 7 months, would be a good thing to work on, given that your CLs are low right now. Just bear in mind that the only real advantage you'll get is convenience. It makes it a little more convenient to have a low utilization when your CLs are higher. But even with a low CL you can create an ultra low utilization by paying down the card to a small dollar amount five days before the card's billing cycle ends. 1-8% total utiliization is what will give you the best score for this factor (and it is a very important factor to FICO).

Here's wishing you every good thing moving ahead. Sounds like you will be fine.