Low Score Due Only to High Utilitization

[lunch]

I just applied for my first mortgage.  The bank pulled up an average of my three scores and it was 704, which is kind of low.

The reason seems to be high utilization. Until last week, I was utilizing about 60% of my available credit.  

SoI just paid all the balances down to 0 last week.  I also paid off one of my seven college loans.  (College loans are separate for each semester.). And I increased the credit limit on my AmEx from $1300 to $3000. The current balance is $4.

I don't have any other credit problems: no late payments, no delinquencies, no collections, no court proceeding, etc.

The bank approvied me for a mortgage, but I may have to pay points and/or a higher rate on PMI if my score doesn't get above 760.

My questions: since my only problem was high utilization and I just paid everything off, it seems my score should increase fairly rapidly.  Is this a true assumption?   

[myjourney]

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@lunch wrote:

I just applied for my first mortgage.  The bank pulled up an average of my three scores and it was 704, which is kind of low.

The reason seems to be high utilization. Until last week, I was utilizing about 60% of my available credit.  

SoI just paid all the balances down to 0 last week.  I also paid off one of my seven college loans.  (College loans are separate for each semester.). And I increased the credit limit on my AmEx from $1300 to $3000. The current balance is $4.

I don't have any other credit problems: no late payments, no delinquencies, no collections, no court proceeding, etc.

The bank approvied me for a mortgage, but I may have to pay points and/or a higher rate on PMI if my score doesn't get above 760.

My questions: since my only problem was high utilization and I just paid everything off, it seems my score should increase fairly rapidly.  Is this a true assumption?   

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Welcome to the forum

Congrats on paying down your debt and yes this will play an important role in increasing your scores. However there are also other factors that come into play as to how much they may or may not go up...AAoA, INQ's, size of CR files.

Best wishes on the new home 

[09Lexie]

Welcome to the forum! I'm going to suggest moving this to a different board but I can tell you that util is 35% of your score. It is doubtful your score will rise that much in a short time.

Good luck!

[roniram]

A 704 is not a low score.  You do not need a 760 to qualify for the best rates.  If you receive an approval electronically, that means you meet Fannie Mae underwriting guidelines.  You have to shop around for your loan to get the best rates.  Don't worry about the credit pulls...any credit pulls within a 14 day period for a mortgage the FICO system recognizes as just one inquiry. 

Check out the Forum on mortgages for more information.

[lunch]

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@myjourney wrote:

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.... However there are also other factors that come into play as to how much they may or may not go up...AAoA, INQ's, size of CR files.

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Thank you for your answer. What does AAoA and INQ mean?  Is a big CR file a good thing or a bad thing?  How big is big?

[lunch]

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@roniram wrote:

A 704 is not a low score.  You do not need a 760 to qualify for the best rates.  If you receive an approval electronically, that means you meet Fannie Mae underwriting guidelines.  You have to shop around for your loan to get the best rates.  Don't worry about the credit pulls...any credit pulls within a 14 day period for a mortgage the FICO system recognizes as just one inquiry. 

Check out the Forum on mortgages for more information.

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Thanks for your answer.  I did not apply electronically. I went to a bank and they plugged my datat in.  I probably would have been approved electronically but I didn't go that route. The mortgage officer showed me a sheet that seemed to have carved-in-stone PMI  based on credit score and a sheet that showed points also based on credit score. Are you saying, different banks may look at this differently?  

[Settemio]

I would wait till all your accounts report as paid... You didnt say how long it is been so I am assuming some of them at least havent reported yet to the CAs. When I last paid off that amount of util%, my scores went high 600's to high 700's... but that doesnt mean yours will go up that high, every accout is different... but if you eliminate a 60% util, I bet your score goes up at least 30 pts.

[lunch]

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@Settemio wrote:

I would wait till all your accounts report as paid... You didnt say how long it is been so I am assuming some of them at least havent reported yet to the CAs. When I last paid off that amount of util%, my scores went high 600's to high 700's... but that doesnt mean yours will go up that high, every accout is different... but if you eliminate a 60% util, I bet your score goes up at least 30 pts.

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It's been less than a week, so there is no updated reporting. I added a signature to my posts that shows scores, dates, and scources.  While waiting for updated reports, I went to Credit Sesame which says 721 and Credit Karma which says 693.  Credit Karma clearly stated the report date for each of the reporting accounts and they were all before I paid off accounts.