FICO 5,4,2 and 100 - 125+ points below Fico 8, Help PLS!

[jkdem85]

I am pulling my hair out trying to understand what's going on here.

I am going through a divorce and had Merrick bank, my first credit card, reported a $3 dollar charge as 30 days late, because they continually charged an old bank account for an automatic payment, even though I called and asked them to change to a new bank account. They had the new bank account set up, but never authorized the monthly auto draw. I called multiple times to change etc. Anyway I'm in the process of fighting this, however my scores got pulverized from near an 800 down to the lower 700s for the Fico 8, and as low as a 590 for Fico 4 on TU. I am just shocked. I literally have a single 30 day late (happened this month, reported a few days ago.) 

I have a pretty high salary and alot of installement and revolving cards. I hold onto cash more than I should during the divorce but my utilization #s are still relaitvely low outside of my mortgage which is 9%, as we put basically less than 5% down a few years ago when we bought an FHA mortgage. 

Account Type Open With Balance Total Balance Available Credit Limit Debt-to-Credit Payment
Revolving 10     7                             $19,297         $79,553        $98,850    20.0%          $536
Mortgage   1      1                             $205,063       $20,771       $225,834   91.0%         $2,007
Installment  7     7                               $69,697         $32,811         $102,508  68.0%          $1,879
Other
Total            18  15                $294,057 $133,135       $427,192 69.0% $4,422

I have 7 open revolving cards use about 20%, I could pay this off 100% right now, but the number fluctates alot as I put alot of work expenses through it. I missed 1 payment 30 days late that I mention above and I'm fighting in October 2017

I have 1 mortgage that I pay 2 times a month, never missed a payment in 3 years

I have 3-4 school loans for a total of 18k left with the fed government, never missed a single payment

I have 3 auto loans (2 cars for me, 1 for my ex wife) I never missed a payment. I was going to sell 2 of them soon and close account. 

My Fico 5 , 4, 2

Mort - EQ 639, TU 619, EXP 695

AUTO - Eq 631, TU 590!!, EXP 700

FICO 8 - Eq 729, TU 723 EXP 745

What the hell is happening here? How do I fix this, I need to get the 5, 4, 2 up, Im just pulling my hair out. 

Jon

[medicgrrl]

Contact the executive office. Search for an email address or physical address for the CEO and VP's. Write a letter to them all explaining what happened and that it was over a $3 charge. Tell them about your perfect credit history and request a goodwill adjustment to the reporting of the account.

[Anonymous]

The next steps moving forward is to work on your derogs.  (Which I believe you say consists of exactly one Day 30 late.)  I recommend adopting a non-confrontational stance, one that is relaxed and friendly, as you negotiate with the original creditor and/or the CRAs.  I also recommend you hop over to the rebuilding forum, which is where the people who know most about derog removal congregate.

It's unclear to me why you need your mortgage scores to be much higher, and what the sense of urgency is with that.  Do you think you will be trying to buy a house soon?  If so, what is the timeline for it?  (Best guess.)

Your installment loans are fine and you do not need to do anything different than what you are doing now, which is to make sure you are never late on any payments for them.  If you think you might wish to pay one or more of the loans off altogether, be sure to get plenty of advice from the folks here before you do that.  The better approach generally is to pay the balances on loans down without paying them off -- but again we can help you better with that when the time gets closer to a payoff.

Finally, as far as CC balances go, all FICO scoring models, but the mortgage models especially, will like it best if you have most of your open credit cards reporting zero, with the remaining card reporting a small positive balance.  The fact that you have a lot of expenses on your cards doesn't mean you can't do what I just described.  If it is unclear how, let us know and any number of people will explain further.

[jkdem85]

I’m sorry if it was confusing but I’m getting divorced and need to buy a new home within 6mo - 1 year. Also need to sell 2 cars and buy a new one and not sure if I could with these fico 5-4-2. Most importantly I’m just super upset as I worked my rear end off to get my scores high and there’s literally 1 $3 dollar 30 day Late and it lowers my score this much. I just don’t get how it could be this low if I literally missed 1 payment one time for $3 dollars!

If I did need a new home would the lender account for the sale of my current home and it helping my score? I would buy my new home with more down.

As for my cc usage, the business expenses take time to get reimbursed at times. I make a very high salary, but I save aggressively and make use of my credit. I don’t pay interest by paying the entire monthly statement but there may be 5-6k in charges posted after that date and before they report.

If I pay my 2 car loans off and close, should that help my 5-4-2? I really need to get those fixed.

Lastly if merrick fights me for the $3 would hiring a lawyer be worth it? I would gladly pay a few thousand to fix my scores if I knew there was no other way.

Thanks everyone and sorry for rambling. I’m just panicking

[Anonymous]

As I mentioned earlier:

*  Paying off installment loans will not improve your scores, whether you are preparing for an auto purchase or a home purchase.  Loan payoffs can, however, hurt your scores, depending on the scoring model and your profile.  If you wish to pay the balances down some (while be careful not to pay any of them off), that might help a little, though I doubt it, given that you have a mortgage still.

*  Working to get the derog removed is the best single thing you can be doing.  The folks in the rebuilding forum can help.  Avoid the mindset of "fighting" -- which will decrease your chance of success.

*  Since you have enough money to consider paying off loans, you certainly have enough money to keep all cards reporting $0 with the remaining card reporting a small balance.  If you are unsure how to do that logistically, ask and any number of people will explain how.  You can do this and at the same time be charging large amounts to your cards.

[jkdem85]

Thanks for the advice I appreciate it.

I do have to sell the cars for the divorce and eventually the house, surprised that would hurt my score. Outside of my school Loan my installments would only be paid off if I sell the underlying asset. I plan on keeping my tesla lease and that’s it (I’m reimbursed for the lease from my company.) On myFICO scores it states too many installment accounts as a derrog. Not sure how that hurts if I have always paid them off (and have for many years without a single late payment)

I will try my best for the derog. Merrick was going back to look at the tapes and hopefully remove the problem. Not sure if that will work or not but let’s see. Tough to have patience in a situation like this.

Is close to 0% utilization truly the best for revolving credit? Is there a specific sweet spot? Will that help with the fico 542 or just the 8?

[Anonymous]

Your FICO score will be maximized for any FICO scoring model by having all cards at $0 with the remaining card reporting a small positive balance.

Your total utilization can be higher (than the suggested ultralow amount above) without taking a hit (the typical recommendation is to keep your total U < 8.99%) but there is no scoring advantage to having a 5% util as opposed to a 0.3%.

Having all cards at zero except one (AZEO) helps your mortgage scores more than FICO 8, though it is still good for FICO 8 too.

If you list all of your loans, with the amount owed and the original amount of the loan, people can make some guesses as to what the impact will be on your FICO 8 and your mortgage scores.  Indicate the loans you hope to pay off and at what times you guess that will happen.  List your loans like this:

Loan 1.  Balance = ____    Original loan amount = ____

Loan 2.  Balance = ____    Original loan amount = ____

Loan 3.  Balance = ____    Original loan amount = ____

etc.

Include all installment accounts, even if it doesn't sound like a loan.  (e.g. include the Tesla lease)

[Thomas_Thumb]

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@jkdem85 wrote:
Thanks for the advice I appreciate it.

I do have to sell the cars for the divorce and eventually the house, surprised that would hurt my score. Outside of my school Loan my installments would only be paid off if I sell the underlying asset. I plan on keeping my tesla lease and that’s it (I’m reimbursed for the lease from my company.) On myFICO scores it states too many installment accounts as a derrog. Not sure how that hurts if I have always paid them off (and have for many years without a single late payment)

I will try my best for the derog. Merrick was going back to look at the tapes and hopefully remove the problem. Not sure if that will work or not but let’s see. Tough to have patience in a situation like this.

Is close to 0% utilization truly the best for revolving credit? Is there a specific sweet spot? Will that help with the fico 542 or just the 8?

---

No "close to 0%" is not critical. What is critical is:

1) Getting aggregate (total) utilization across all revolvers under 9%. This is critical for all Fico models.

2) Any revolver that does report a balance should be less than 29% of its CL.

3) Reducing # cards reporting balances to 1 card or at most 2 cards - more critical for Fico mortgage scores.. Even 1/3 of your open accounts reporting balances can hurt mortgage scores. If all your cards report even small balances that can drop EQ Fico mortgage score up to 50 points. In contrast, impact on Fico 8 is likely only 10 points.

4) A 30 day late regardless of amount is heavily penalized by the earlier Fico 04 (EQ score 5, TU score 4) and Fico 98 (EX score 2) mortgage models. Fico 8 is quite lenient in allowing an isolated 30 day late without a major hit on score. That single late can drop mortgage score(s) by 80 to 90 points for an extended period of time. Impact on Fico 8 is less severe, is negligible in 2 years and should, IMO. drop off significantly starting at 6 months.

5) Write a letter to the CC company to remove the isolated $3 late. Explain your circumstances. If this is a 1st time event, many CC companies will make accommodations.

Overall, you do have too many open accounts with balances and having 8 open installment loans limits your ability to reduce accounts with balances. Can you reduce total

to 3: mortgage + 2 other installment loans?

[Revelate]

590 sounds frankly low for TU 04 unless you don't have much history (which doesn't sound to be the case).

I'm assuming you got this from myFICO, what are the reason codes for it?  6ish months after I took a 30D late (admittedly I had other problems with my file most notably a tax lien and some other sins of my past) I was near 700 on TU 04, doubtful it moved much between the October late to March pull.

[Anonymous]

My advice more or less will echo the others above.  Get rid of that 30 day late.  You said your scores were ~800 prior to it being reported.  That means if it's removed your scores will return to where they were, which seemingly you were happy with and you'd be able to secure a mortgage at the best rate with, no bubbles no troubles.

All of the other advice while definitely solid such as AZEO, number of cards reporting balances, etc. but those should be "in addition to" tweaks, 1% of your effort that supports the 99% of your effort in getting that 30 day late payment removed.

Also just as an aside, earlier you were surprised that a single late payment of $3 would hurt your scores so much.  Keep in mind that dollar values with respect to FICO scoring when it comes to late payments don't matter.  A 30 day late payment for $3 will impact scores the same as a 30 day late payment for $3000.  No doubt under a manual review the $3000 would be more of a concern, but a late is a late when it comes to score and assessing the risk of someone and their ability to make on-time payments going forward.

I had an outstanding $2.93 balance on an account that I thought I paid off a few years back and it reported 90 days late before I realized what was going on.  That 90 day major severely impacted my scores until I was able to get the creditor to make a GW adjustment. 

With otherwise perfect payment history and the balance being so insignificant in your case, I would think a GW adjustment would be fairly easy to achieve.