@Anonymous wrote:
On April 5, 2010 I ran my credit scores and credit reports for all three credit reporting agencies using www.truecredit.com My credit scores were shown as follows: TU-853, EXP-845, EQ-841. These scores were graded as B scores using a grading scale from 501(F) to 990(A). These scores were also ranked as compared to the rest of the nation as follows: TU-71%, EXP-65%, EQ-65%. At the time, all my credit account payments were current - no late payments showing on any account.
Towards the end of April I decided to stop making payments on the mortgage and heloc I had on an investment property - a residential condo that I owed a combined total of about $190k on but which is now worth about $100k in today's real estate market. I finally came to the realization that a short sale was going to be the only way to get out of it so I listed it for sale and advised the bank I was going to short sale it and that I would not be making any further payments until the sale took place. In mid-May, credit alerts started hitting my credit reports indicating that I was past due on these two payments.
I also owned a second home with a combined total mortgage and heloc balance owed of $512k which I sold in mid-May. I had always made my payments on time for this property, but due to a delay in the closing, the last payments I made were in March, and by the time the closing occured in May, I got hit with a 30 day past due alert for the mortgage account on this property. All my other credit accounts still show that all payments are current.
On June 13, 2010, I ran my credit scores and credit reports again for all three credit reporting agencies using www.truecredit.com again. My credit scores had plunged to the following: TU-570, EXP-572, EQ-577. These scores were graded as F scores using the same grading scale as before. These scores were also ranked as compared to the rest of the nation as follows: TU-2%, EXP-3%, EQ-3%. The changes that occured to my credit reports between April 5 and June 13 were as follows: My mortgage and heloc for my second home were satisfied IN FULL (no short sale needed) effectively removing $512k off my debt. I would think this would have a very favorable impact on my credit scores. As mentioned above, however, because the closing for the sale of this property was delayed due to buyer issues, I missed the one final payment before the closing and was hit with a 30 days past due for the mortgage account on this property.
The first mortgage on my primary residence continued to be paid on time as it always has been, and the principal balance was reduced from $175k to $171k. Credit card balances in aggregate changed from $51k to $63k. Car lease changed from $19k to $18k.
The question I therefore have is this....Given the changes discussed above between April 5 and June 13, does it seem reasonable that my credit scores would have been reduced as much as they have been - from essentially 845 to 572 - a 273 point reduction!!! I had expected my scores to be reduced becuase of my choice to not pay the mortgage and heloc on my investment residential condo which I have chosen to try to short sale, and because of the unfortunate timing issue with my last payment on my mortgage of my second home before the closing of the sale of that property, and because of the increased credit card debt that I have piled on (about $12k) during that time period, but I figured those negatives would have been partially offset by the significant reduction of my debt associated with the sale of my second home (about $512k), the reduction of debt on my primary residence for the mortgage of about $4k, and the relatively small reduction in the car lease of $1k - so NET total debt reduction during this period is about $505k.
Doesn't that debt reduction count for something to help offset the three 30-day past due alerts that hit my reports? I had expected to see a net reduction of about 150 points - so from approximately 845 down to 695 which I felt still seemed like a fair score given the circumstances. But to have my scores reduced by 273 points down to 572 seems a bit disproportionate to the circumstances associated with my situation. Are reductions calculated based on only absolute terms, or is there a factor that takes into consideration the reduction relative to where your score was originally? Please advise when you can. Thank You.
Ed
[Just edited to break into separate paragraphs to improve readability.]
The short answer to your question that I highlighted above is "it depends". A reduction in credit card debt is much more likely to result in an increase in score, because the utilization of available revolving credit is an important factor in FICO scoring. However, reduction in installment debt (mortgage loans, student loans, auto loans) don't have as much of an effect on scores - some would say that it has virtually no effect.
Keep in mind that FICO scoring (and credit scoring in general) evaluates how well someone manages his or her debt, not how much debt a person has. If the latter were true, then anyone who ever opened a mortgage would automatically suffer from low credit scores because of the new debt burden.
As has already been mentioned, the things that are hurting your credit the most are your late payments, which you are steadily accumulating ever since your decision not to pay the mortgage and HELOC on your investment property. If you were already receiving credit alerts in mid-May due to this decision, then it stands to reason that in mid-May you got hit with two 30-day late payments. In mid-June, you probably had two 30 day lates and two 60 day lates to go along with the 30 day late on your 2nd home. Multiple recent late payments weigh heavily on credit score.
And as also been noted, the scores that you got from TrueCredit are a different scoring model from FICO. It's impossible to determine what your corresponding FICO scores might be. There's no straightforward conversion from Vantage Scores to FICO scores. For example, my wife once got a Vantage Score of 972, which we figured would correspond to a FICO score of around 830. Her FICO score was actually 759. Still, if you had been checking your FICO scores, you definitely would have seen a drop in your credit scores because of the late payments. However, it's impossible to say whether they would have fallen by the same magnitude as your Vantage Scores.
