Score confusion

[Anonymous]

I think it is SO UNFAIR and I question whether it is legal to drop a credit score due to an inquiry. I've been at a 612 and when my most recent late pay hit 6 months, my score rose 7 lousy points hitting a 619. The problem is that I need a 620 to qualify for a mortgage loan and I've been working for ONE SOLID YEAR to clean up, pay off, and pay down my debt to buy this house. And because we ran my credit, my points dropped by a few so now I'm even farther from it. Any suggestions other than to wait, wait, wait?

[Revelate]

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@Anonymous wrote:

I think it is SO UNFAIR and I question whether it is legal to drop a credit score due to an inquiry. I've been at a 612 and when my most recent late pay hit 6 months, my score rose 7 lousy points hitting a 619. The problem is that I need a 620 to qualify for a mortgage loan and I've been working for ONE SOLID YEAR to clean up, pay off, and pay down my debt to buy this house. And because we ran my credit, my points dropped by a few so now I'm even farther from it. Any suggestions other than to wait, wait, wait?

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Welcome to the forums!

Time is one component, but beyond that everyone's file is a little different.  From where you're at (even where I am a full ~100 points above you) there's likely various derogatory marks on your file assuming we're talking FICO scores (where are you getting your scores from?) and in some cases there's nothing you can do to address those except for time passing, but in others it's possible to do so.

Also FICO scores do factor in both the amount of debt, but also how it's distributed.

Anyway if you're willing to share what's on your report (obviously nothing personally identifiable like account numbers, just tradelines, balances, limits, negatives, etc) there's lots of information that can offered to help... and it's an excellent idea to check over in the Rebuilding Your Credit board for ideas on addressing said negatives.

[Anonymous]

OP it may be in your best interest to wait it out before applying for a mortgage.  While you may be able to achieve getting one at a 620 score, the interest rate won't be favorable at all and you'll end up paying tens of thousands of dollars more in interest over the life of the loan.  Waiting another year to strengthen your credit profile/score could literally save you all that money.  Just something to consider!

[Anonymous]

I understand what you're saying. I'm Trying to qualify for a mortgage through USDA because the interest rate is SO good and it's possible to finance 100% whereas an inhouse mortgage through my community bank is possible but it's far more costly and the bank requires a substantial (inconceivable) down payment.

[Anonymous]

I did learn today that having a zero balance in my credit cards does not help and in fact hurts my credit. That's bizarre to me! I'm going to keep a 6% balance on one of them to build a payment history. Hopefully that will help some since it's 35% of my score. Thanks for the tips.

[Anonymous]

All zero balances will hurt your score.  The best thing is to allow just one balance to report and have it be small, say $5-$10.  1% utilization on 1 revolving credit line should yield most people the greatest amount of FICO points with respect to the utilization sector.

[Anonymous]

Do you have any installment loans reporting? You might consider this technique. http://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secu...

Most report 20-30 point increases in their scores. That comboned with letting a balance report could give you a nice boost.

[Anonymous]

Thanks WendyP!  Unfortunately the SS Loan Technique does not help improve one's TU and EQ mortgage scores.  It does, however, help a person's EX mortgage score,  So if a person had these as his three scores, for example...

     EQ: 701    EX: 715    TU: 741

... then the SS loan approach would be great.  (It would raise his EX score to above 741, causing his TU score to become his new middle score.)

In our OP's case, he needs to focus on getting his CC balances in better shape and to explore derog removal, after which he can pull his mortgage scores and then see if the SS loan approach will help.

[Revelate]

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@Anonymous wrote:

Thanks WendyP!  Unfortunately the SS Loan Technique does not help improve one's TU and EQ mortgage scores.  It does, however, help a person's EX mortgage score,  So if a person had these as his three scores, for example...

     EQ: 701    EX: 715    TU: 741

... then the SS loan approach would be great.  (It would raise his EX score to above 741, causing his TU score to become his new middle score.)

In our OP's case, he needs to focus on getting his CC balances in better shape and to explore derog removal, after which he can pull his mortgage scores and then see if the SS loan approach will help.

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Agreed but my fiddling with my installment utilization when we were first figuring it out flat saved my 720 in my own mortgage process; talk about better to be lucky than good .