@Anonymous wrote:New guy, frustrated and looking for answers. Hopefully I can find something here.
Back ground, 40 - Business Professional, married, gross income of roughly $150k. I have never been unemployeed, never missed ANY payments, never had a cell phone disconnected, etc... I do have one negative on my report. I had a 2nd mortgate (construction loan) and paid it on time. It was sold to a little bank who didnt cash their checks on time (true story). They hit me with late charges I refused to pay. Ergo, they reported me as 30-days late. I called their Bank President and he removed it from my score. Within a year it was back on there. My score averaged over 720 (Experian or Equifax) so I didnt worry too much about it.
Flash forward. My wife and I decide to sell our home and build a custom "Dream Home" and downsize our property. We had to do some work on the house before putting it on the market so we used about $10k in credit cards and planned on using equity in the home to pay off the debt if needed. The home sold 2 weeks after listing and we immediately held good to our promise and paid the debt and even used the equity to pay off more debt. When we spent about 10k the score dropped as you would expect, like a rock. I was ok because I assumed freeing up money and paying off that debt would boost my score back..... NOPE.
As of this morning my score dropped another 10 points. I went from 720+ initially, spent around 10K and my score dropped to 680. Paid off the 10K we utilized and my score dropped to 670. The other installment loans we paid have not hit my score yet and I shutter to think what they will be when they show paid. Also, my mortgate will show a balance of Zero within a week... Crap, I may have a 500 score by the first of December at this rate! What happened?!
Keep in mind - This is where we sit...
Mortgate - Was $108,000 and is now $0 (not showing on equifax yet)
Revolving - shows $8,000 and will be $0 any day
Installment - one tractor, a 4-wheeler, and a Nissan for a total of roughly $35,000
We have had active credit lines (cars, credit cards, mortgages, etc) for better than 20-years! Now I want to build a $250,000 house and my credit score is dropping!
Sorry.. end of rant. Please help.
1. Mortgage... ok on that.
2. Revolving... go out & charge a hamburger or something, it's best to have one card reporting a small balance than all cards reporting a zero balance.
3. Installment... what is the total of the original face amounts of the non-mortgage installment loans?
When we have the answer to 3 we can advise you on where to go next.
Meanwhile you have to be patient to let the 30 day cycles play out, to see where you are. E.g., your credit card balances don't mean a thing scorewise until the statements cut, the statement balances are reported, and the bureaus incorporate the new reported balances.
I don't think your score is "dropping" at all. I think, when the dust settles, it will be just fine.
Also, just so we're on the same page... what score are you talking about? FICO 8?
@Anonymous wrote:For some reason couldnt access my account so I created another this morning?
Anyway, Credit Cards we have (all are 10+ years old). Some were taken out in my wifes name, some in mine but we are both on the cards
Amex - 10k - Waiting for Zero Balance to be Reported
Visa - 8k - Waiting for Zero Balance to be Reported
Visa - 3500 - Zero Balance
Best Buy - 4500 (hasnt had a single doller on it in 5+ years) - Zero Balance
Lowes - 9200 - Waiting for Zero Balance to be Reported
Installment
* Tractor - High Balance, $18,500 (Opened about 4-6'ish months ago. Balance now is $17,500 - Local bank
* Nissan - $23,500 High Balance - Currently just over $14,000 - Local Bank
* Polaris - $8,000 high Balance - Currently $4,000'ish - Local Bank
* Forgot the land I financed for the new Construction - $35k Putting cash in it now for equity. Its 5.5 acres so im clearing trees, moving dirt, etc. Also paying cash for a $20k Shop.
As far as new construction - The shop footings will start in December. I will hire the crew to pour the pad shortly thereafter. My PM wants to start late December if at all possible. I was ready to start the paperwork now but it looks like I have to wait. Plans are finished, estimate is finished, waiting on the scores.
And forgive my ignorance. I am fairly new to all of this. Evertything Ive purchased has been walk in and get the money, etc. No worries. This is a bit different so I am not sure what scores to use. Right now I am suscribed to the Equifax plan that allows me to pull my score daily, etc.
As far as the late payment. Because I have challenged once before (over the phone) and they removed it I hope to have it removed. I did challenge recently through Equifax. I noted that it had been removed and put back on and asked that they remove it. If that doesnt work I will call too. If you look at the way they tagged me late, it was on the quarter every time for a total of 6 times. They flagged it late in January and again in Q3 (August) for 3-years. Initially it was just twice but when they put it back on it was a total of 6-times. They ALWAYS received their payment so this frustrates me to no avail. It is literally a late fee I refused to pay because they were days late cashing a check. I was told legally they couldnt do that but here we are. After that one check everything went certified mail so incase I needed to get a lawyer. In the end I did pay off the total (which included the late fee) so they couldnt dispute that.
OK, so
1. in terms of revolving, take a visa card and charge something small on it so you'll have one account reporting a non-zero balance
2. in terms of installment, you've just got to pay that stuff down. the faster you pay it off the better, except: once you get your aggregate installment utilization below 10% you're in the 'sweet spot'... at that point your scores will be maximized in terms of installment loans... once in that neighborhood you have to be cautious about paying stuff down to zero, because as soon as you do, you lose that loan's face amount from your denominator...
e.g. 3 loans, total face amount 50k, paid down to 35,500 collectively, installment utilization = 71%
3 loans, total face amount 50k, paid down to 4,500 total with each loan paid down to 1500, installment utilization = 9%
at that point if you pay off 1 loan to zero, let's say the 23,500 loan, you've now got 2 loans, paid down to 3k, with original face amount of only 26,500.... so you've got 3k/26500=11.3%... i.e. you've gone out of the sweet spot
@Anonymous wrote:
@SouthJamaica wrote:
2. in terms of installment, you've just got to pay that stuff down. the faster you pay it off the better, except: once you get your aggregate installment utilization below 10% you're in the 'sweet spot'... at that point your scores will be maximized in terms of installment loans... once in that neighborhood you have to be cautious about paying stuff down to zero, because as soon as you do, you lose that loan's face amount from your denominator...
e.g. 3 loans, total face amount 50k, paid down to 35,500 collectively, installment utilization = 71%
3 loans, total face amount 50k, paid down to 4,500 total with each loan paid down to 1500, installment utilization = 9%
at that point if you pay off 1 loan to zero, let's say the 23,500 loan, you've now got 2 loans, paid down to 3k, with original face amount of only 26,500.... so you've got 3k/26500=11.3%... i.e. you've gone out of the sweet spot
Hello SJ. I think our OP is looking to get a home loan very soon. Next 60 days. I think that is what is driving his worry and anxiety.
If so, then it is likely that the credit scores he should be solely concerned with are his mortgage scores. I have asked him to contact his lender and find out what kind of FICO scores that lender will be using (with a special focus on asking about whether these might be the mortgage scores). See my last post to him.
If the lender is going to be using the mortgage scores, then his TU and EQ sores will not budge by doing further paydowns of open installment loans. That might help his EX score, but until we know what his mortgage scores, we can't know whether improving his EX will help his bottom line (i.e. his "middle" mortgage score).
My advice to him was therefore to get his cards reporting properly and then pull his mortgage scores. After that he'll know whether trying to improve his EX score will help.
I'm pretty sure the advice I gave him will help his mortgage scores. My mortgage scores are all lower than my FICO 8's, but they move pretty much in the same direction.