How best to pay down credit card balances to improve a FICO mortgage scores

[Anonymous]

I have a feeling CreditGuyInDixie and BrutalBodyShots might have an answer to my question here. If you do, thanks in advance, I already learned some valuable things from both of your posts. Hope to hear from you guys in particular.

In the list at the bottom, First number is owed amount/second number is credit limit.

As you can see, credit utilization is very high.  Moreover, I refinanced my first mortgage in December (5.25% down to 3.625%) which is good, but as a new mortgage account, and with the hard credit pulls associated it reduced my FICO 8 scores by rougly 25 points.

They are now at 674equifax/685 Trans/683 exper

I need Mortgage FICO to be at 680.  Transunion is there already, at 685, the other two are a bit under at 671 Equifax and 674 Experian.

The goal is to pay off all credit card debt with a HELOC, which I qualify for once my mortgage score is 680 on all 3 bureaus.

Last week I paid 15,000 towards my 21,000 balance on USAA Visa 21405/22000 which is now at 6405/22,000 or 28% utilization

Its only been one day since USAA reported, but MYFICO is already showing Experian as reporting the $15,000 drop in balance. No credit score change yet.

The other two will show up in the next few days.

First question is: When would you expect to see any change in my score from this action(paying down $15,000 on one card)?

Second question is, I have another $28,000 I could use to pay down my other credit card debt. How should I deploy this money to best increase my scores?

I could pay off all of some of the balances. Distribute the $28k evenly. Some other combination?

It is irrelevent what the intrest rates are, the only consideration here is FICO score, and to see a positive change ASAP, because as soon as that happens, the mortgage refi will pay  off ALL these balances that very day.  So I only want to know how to best deploy this $28k before the refi to help my FICO score rise on all three bureaus as soon as it can.

And I want to know how long it might take to see an actual change in the scores from this payoff activity.

Other than the too high credit utilization, I have no negative items on the report. No late payments ever, no collections.

USAA Visa WAS  21405/22000  as of  last thursday, is now 6405/22,000

Chase 14457/44700 Closed  account- in payoff

Chase Amazon 2436/2500 

CitiBank-old  5395/5600

*CitBank 5654/5750 

*Discover 14153/14400 

*Synchrony Bank Amazon   0/3500 

Synchrony Bank PayPal  5477/5600  

USBank Visa 12869/12900  

USBank REI MC 24388/25000 

 Wells Fargo Car Loan  753/$1130 

Thanks

[EW800]

Congrats on paying down such a big chunk on the USAA account!  I know that feels great!  

It will be interesting to see what the thoughts are of our experts, as I have a fear that you may not see much of a score drop because there are still about seven other accounts that have 90% to nearly 100% utilization.  I did not calculate how much this large payment brought down your total revolving utilization, however unless it made a decent dent, I think having so many other high utilization accounts could still haunt you.  I may be wrong though.  Like I said, interested in what our experts have to say.  

Again, congrats on the large payment though!  

[Anonymous]

Yes you are correct. Total credit utilization, even with that $15,000 payment went from 90% down to 76%. Still not great I know. Indeed, the MyFico credit score similator predicts the Fico Score 8 will do the following:

Equifax 674  +30   New score 704

Transunion 683   +15 New score 698

Experian 682 +20 New Score 702

Those are FICO score 8s, and its the mortgage scores I need to go up.

They, are at

Equifax 672

TransUnion 685

Experian 671

My goal is 680 or better on all 3 mortgage scores because the bank I am using pulls credit from all three bureaus, and just takes whatever score gets back to them first.  Nice and random with things that totally affect your life, isn't it.

So, will see if the FICO Score Simulator is "in the ballpark" as the MyFico literature says it is.   Do any experts here know how accurate it is? My questions were:

First question is: When would you expect to see any change in my score from this action(paying down $15,000 on one card)?

Second question is, I have another $28,000 I could use to pay down my other credit card debt. How should I deploy this money to best increase my scores?

I could pay off all of some of the balances. Distribute the $28k evenly. Some other combination?

If I implement the plan inferred by the second question, that is, pay off another $28,000 of debt, then my total credit utilization will go down from its current 76% down to 51%.

I know that should eventually help things, but right now what I am asking is, how long after paying the debt down should I expect to see a change in FICO score. AND, if I do indeed choose to pay down $28000 more, how best to allocate that $28k to the various cards to maximize the effect to FICO score.

Remember, in the end, all this debt will be paid off my the HELOC, so I am no concerned too much with anything but how the FICO scores are affected at this time. I just want my Mortgage FICO scores above 680 at all three bureaus so I can qualify for the loan.

Thanks for the congrats, I appreciate it.

[Anonymous]

There are three factors related to CC balances:

     (1) Total utilization (all cards and their limits considered together)

     (2) Individual utilization (each card considered by itself)

     (3) Number of cards showing a positive balance

#1 matters most, but it will be affected the same no matter which strategy you use.

If you were asking purely about FICO 8 (not the mortgage models), I'd say focus on #2.  FICO 8 cares about #3, but not it's a weaker emphasis when one's individual U is extremely high (as yours is).

But the mortgage models do care about #3, more than FICO 8 does.  So hard to say!

For sure I can tell you that you need to get all your cards below 69% individual.  After that it's a crap shoot.  Does it make sense to create a bunch of $0 balances on your low limit cards?  Or should you move toward getting as many under 49% as you can?  Or should you do both/  (Get a few under 49% and create a couple $0 balances?)

Thomas Thumb may have an opinion.

[Anonymous]

Thanks CreditGuyInDixie, that is illuminating.

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@Anonymous wrote:

There are three factors related to CC balances:

     (1) Total utilization (all cards and their limits considered together)

     (2) Individual utilization (each card considered by itself)

     (3) Number of cards showing a positive balance

#1 matters most, but it will be affected the same no matter which strategy you use.

If you were asking purely about FICO 8 (not the mortgage models), I'd say focus on #2.  FICO 8 cares about #3, but not it's a weaker emphasis when one's individual U is extremely high (as yours is).

But the mortgage models do care about #3, more than FICO 8 does.  So hard to say!

For sure I can tell you that you need to get all your cards below 69% individual.  After that it's a crap shoot.  Does it make sense to create a bunch of $0 balances on your low limit cards?  Or should you move toward getting as many under 49% as you can?  Or should you do both/  (Get a few under 49% and create a couple $0 balances?)

Thomas Thumb may have an opinion.

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I will be interested to hear what Thomas Thumb has to say, but, $28,000 is indeed enough to pay down ALL the cards below the 69% level on each one.  I will not be able to get ALL the balances to $0, but I could do some.

What do you think about the one Chase card that is closed and in payoff. Should I pay it down at all at this juncture? Since it is closed, I don't think its individual credit utilization will change.  I assume it is factored in in Total Util though.

By the way, how long do you think it will take for the effects of these paydowns to be seen in the credit scores?  Nothing has happened yet, but its only been a few days since the $15k payoff.

Thanks again.

[Anonymous]

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@Anonymous wrote:

By the way, how long do you think it will take for the effects of these paydowns to be seen in the credit scores?  Nothing has happened yet, but its only been a few days since the $15k payoff.

Thanks again.

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Your scores are always based on what is in your reports at the inbstant that the score is generated.

So your question is really: How long do you think it will take for the new CC balances to get reflected in my credit reports?  Do you see why that is the best way to ask that?

Best answer is to figure out when your next statement will be.  Then add about 10 days to that.  That's a rough estimatee of when the new balance for that particular card will be reflected in your reports.  Sometimes it is quicker than 10 days -- only 5 say.  Sometimes it is longer, like 12 or 13.

[Anonymous]

Ah yes, I do see how that is a better way to ask the question. Thanks.

What is confusing me is Experian already reported the $15,000 payoff to the USAA card(about 5 days after the statement closed) to MyFico,but there was no change in score. I had thought since Experian knows about the balance change, then my score might be better at the moment they reported.

Is the delay normal, or is it an indication the Experian score wont change at all? Or will it simply occur later on, like in the 10,12,13 days as you mentioned. I did time the payment to hit within last months statement period, and I called the bank to verify they would be reporting the new balance, and indeed, Experian reported the $15,000 payment to myfico, yet, no score change.

[Anonymous]

If I am understanding you right, you are saying that:

     * You use the myFICO Ultimate 3B as your tool for monitoring reports and scores

     * You received an "alert" from your myFICO monitoring product showing that the card had been paid down by 15k at EX

     * With that alert, it gave you your FICO 8 score and that was the same FICO 8 score as it had been before the alert

Does that sound right?

[Anonymous]

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@Anonymous wrote:

If I am understanding you right, you are saying that:

     * You use the myFICO Ultimate 3B as your tool for monitoring reports and scores

     * You received an "alert" from your myFICO monitoring product showing that the card had been paid down by 15k at EX

     * With that alert, it gave you your FICO 8 score and that was the same FICO 8 score as it had been before the alert

Does that sound right?

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Yes. That is exactly right.

[Anonymous]

That is a bit of a surprise.  If the 15k was going to give you a score boost you would have seen it in the alert.  I am wondering if that suggests that, once you have done enough damage to your score with bad utilization, you can't do more.  If so, perhaps you are right now slowly wending your way back from the 9th circle of utilization hell.  You went from the 9th to the 6th but it's still hell so you won't get any relief until you get to Purgatory (e.g. perhaps total U of 79% with half your cards < 69%). 

Just speculating.  Regardless you are moving in the right direction.