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Contributor
0x47
Posts: 92
Registered: ‎03-17-2013
0

Trying to get 750+ ...

[ Edited ]

First time user here, hoping that someone would be kind enough to give me a bit of advice about our credit scores.  To make a long story short, my wife and I recently had to consolidate a LARGE revolving debt of hers (about 90% utilization) AND we while we are trying to pay that down we are also trying to save up for a mortgage.  The goal is 5% down (10% if we're lucky), median credit score of 750+ for both of us, while also paying down the credit cards.  Did I mention our apartment lease ends at the end of September?  So we are trying to juggle savings and credit utilization so that we have the amount down we need, closing costs, etc.  Our credit union has already said that if we can get our scores to 750+ we would save $2K at closing.  That would give us another $2K for a downpayment which, while it isn't much, gets us that much closer to hitting 10% down.  If we can pull off both 750+ scores and 10% down then the cost of PMI would be dramatically reduced which again saves us a lot of money in the long run.

 

Problem is that my score, since we applied for that joint CC at 1.9% APR (11.99% after 12 months, got to love credit unions!), has been stuck at 740 give or take (mostly take).  It was a good move since she had several high interest cards (24.99% and 15.99%) so consolidating was a huge help and I won't question that decision ... but the new utilization on my credit hasn't helped either!

 

Anyway, this is where my credit score stands today.

 

EQ: 734

Acct 1 (opened late 2004): $880 / $4500

Acct 2 (opened late 2011): $770 / $5500

Acct 3 (opened late 2006): $0 / $4000

Acct 4 (opened 11/2012): $14,700 / $22,000 (this is the card we both consolidated to, and it was at $19,500 balance three months ago)

Acct 5 (opened mid 2004): $300 / $8000 (this is the card I use daily for small purchases, pay off monthly)

Acct 6 (opened late 2010): $100 / $5000 (only used this one out of fear of them closing it for lack of activity)

Accts 7-12 (all student loans): $37,600 balance remaining, very little payment history since my grace period has not ended yet.

 

There are no negatives, no collections, and no late payments on any of our accounts.  My credit history will exceed 9 years by the time we apply for a mortgage and my AAoA is 3yr/9mo.  Total utilization is just about 35% too.  Equifax shows one inquiry on my account that may be hurting my score, and I know TransUnion shows 7 inquiries (what the? ... I'm going to have to talk to my credit union about pulling my score as they have since they are 4-5 of those pulls).

 

We already talked with a financial/mortgage advisor who, right off the bat, said we needed to get #4 down to 50% utilization before we apply.  He has also advised that I not close ANY cards until after closing.

 

:robotfrustrated:


I've already been reading on the forums and I gather than (1) utilization of less than 30% is the next benchmark for a good score, (2) utilization of less than 10% is better, (3) and carrying balances on more than half of your cards is bad.  To that end, once the credit cards are updated and reflected on the FICO scores this is what my profile should look like.

Acct 1 (opened late 2004): $790 / $4500

Acct 2 (opened late 2011): $0 / $5500 (paid off, not closed)

Acct 3 (opened late 2006): $0 / $4000 limit

Acct 4 (opened 11/2012): $10,500 / $22,000 (47% utilization)

Acct 5 (opened mid 2004): $0 / $8000 (I know when they report the balance to the three agencies so now I know I can make it show $0 every month)

Acct 6 (opened late 2010): $0 / $5000 limit (back to the freezer for this card)

Accts 7-12 (all student loans): $37,600 balance remaining, very little payment history since my grace period has not ended yet.

 

Any guesses on what my credit score (previously 734) is going to look like after my profile is updated?  Any thoughts on my chances of getting to 750+ in the next three months?  If we can get Acct 4 down to $6,500 (< 30% utilization which would take $4K) would it help push my score clearly over 750 (and give me wiggle room to withstand another inquiry for the mortgage application) -- if it did I would transfer $2K to Acct 5 and allocate $2K in cash which would otherwise go to closing costs.  If we can't get to 750+, then we're probably better off saving for the down payment and staying content with 740+ scores.  Same story with Acct 1 -- I pay 0% interest on that so if paying it off does not help my score enough I would rather have the money available for closing costs or the downpayment.

 

We are planning to apply for a mortgage in 3-4 months (basically the second we hit 5% down goal and lock in the interest rate before it goes too high) and close in August or September. 

 

Any advice you can offer (even if it is just to stay the course) that helps us get to that goal would be very, very much appreciated!

Moderator Emeritus
llecs
Posts: 32,869
Registered: ‎08-04-2007
0

Re: Trying to get 750+ ...

If I did my math right, you are going from 34% to 23% util. If util is listed as the #1 negative on your FICO report, then I'd guess a 20-25 gain due to the added balances. If util isn't listed at the top, then I'd guess less. If you look at your lender's report you'll see the top 4 negative reasons for each report. This also assumes that there are no other accounts factored in like CO'd CCs, LOCs, HELOCs, and the like. It also assumes that none of the consolidated CCs will be closed. Also try to pay off #1 and that might add another small boost.

 

 

 

 

Contributor
0x47
Posts: 92
Registered: ‎03-17-2013
0

Re: Trying to get 750+ ...

As per the FICO report ...

 

Hurting your score

1. New account (newest account opened 4 months ago, this is the card we opened to consolidate debt and get out of the interest trap)

2. Accounts with balances (10 accounts, are my student loans are counting against me here or is it just that a few of my cards have a low balance reporting this month?)

 

Helping your score

1. No missed payments

2. Limited use of available credit (34% utilization)

3. Established credit history (8yr/9mo history, 4yr/0mo AAoA)

 

Two months ago it looked like this.

 

Hurting your score

1. New account (newest account opened 2 months ago at that time)

2. Made heavy use of your available credit (44% utilization)

 

Helping your score

1. No missed payments

2. Established credit history (8yr/9mo history, 4yr/0mo AAoA)

3. Not actively looking for credit (for which a mortgage officer ruined this for me in January when he did a hard pull to get my scores, and I didn't know it was a hard pull that would look like I was applying for credit ... trying to get this removed from my report now if at all possible)

 

Other than those bits of data, there's really nothing else on my credit report.  No collections or HELOCs or anything like that.

Contributor
0x47
Posts: 92
Registered: ‎03-17-2013
0

Re: Trying to get 750+ ...

[ Edited ]

A few questions ...

 

#1

 

With six cards total, from a score perspective should I make sure we only carry a balance on two cards instead of three?

 

There isn't a whole lot I can do with the account that has a $10,500 balance, but the $790 balance is on a Best Buy card (very old card which I used to buy my first laptop back in college) that has 0% interest.  The $8000 limit card is my day-to-day card which I plan on paying down every month but I'm worried that it will show a non-zero balance at just the wrong time during the mortgage application process.

 

Maybe I should transfer (no fees, thanks credit union!) the $790 balance to my day-to-day credit card?  That way I'm guaranteed to only show two cards with a balance regardless of when my credit is pulled.  The interest I would have to pay between now and closing would be minimal (about 1% per month for six months on my day-to-day card, or pennies if I move the balance to the credit card with a $10500 balance) but, again, if it gets my score to 750 it'll save $2000+ at closing.

 

I've read that scores take a hit when half your cards have balances (or is it more than half?).  Does that also count student loans?  Beause then, no matter what I do, I will show having 8 accounts with balances (six student loan, two credit card).

 

#2

 

Would my score improve if I "rebalanced" the two credit union cards ($10500 / $22000 and $0 / $8000) to show the same percentage utilization (35%)?  Or am I better off leaving one card at 47% and the other at 0%?  Keep in mind I can transfer between these cards with absolutely no fees, save for the $8000 card has 11.5% interest and the $22000 card is 1.9% interest (and 11.5% after 12 months which isn't until November 2013).

 

If I rebalance it would help lower my wife's utilization too, which is just about the only thing I can do to help boost her score at this point.

Valued Contributor
chasmith
Posts: 1,062
Registered: ‎05-26-2010
0

Re: Trying to get 750+ ...

There are so many variables it's hard to give a perfect answer.  Because your score is high the moves will probably be small. 

 

I understand 740 gets you the best mortgage rates, you might ask the question of 740 vs. 750 in the mortgage forum.

 

You've done averything right from my understanding:

 

Utilization is looked at two ways - total, and per card. 

 

Keep each card below 80% and none will be considered "maxed out".  I don't know whether there are other checkpoints like the 50% your advisor mentioned..

 

Total utilization seems to have bands around 50%, 30% and 10%.  So you get a bump dropping to 29% and a bump dropping to 9%.

 

Having "more than half but not all" your revolving accounts at zero seems to be the best you can do, so going from three to two reporting balances may give a slight bump.

 

So I would expect the next plateau to occur when you have util below 30%. Stay the course.

 

Another alternative would be NACA unless you plan to buy a home for more than $365K.  They would take you now, but might take three months or more to go through their process.  Their plan is 30 yr fixed at around 3%, with no downpayment, no closing costs, and a $50 monthly fee instead of PMI.  You could use the money that would have gone to downpayment and closing costs to buy the rate down to as low as 0.65%.

 

 

 

BK7 Filed 8/11/2009 Discharged 11/23/2009. Purchased new home 4/11/2012
Starting Score:11/16/2009 EQ 566 11/16/2009 TU 538
Interim Score: 12/27/2012 EQ 683 09/17/2012 EX (lender) 670 1/01/2013 TU 701
Current Score: 11/06/2013 EQ 708 11/06/2013 EX 702 11/16/2013 702 11/06/2013 TU 729
Goal Score: EQ 740 EX 740 TU 740
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Contributor
0x47
Posts: 92
Registered: ‎03-17-2013
0

Re: Trying to get 750+ ...

[ Edited ]

Yeah, I know there's going to be no solid answer.  Still ... if its something worth trying than it something I'll probably try.

 

740 gets us the best mortgage rates, yes, but with 750 our credit union charges about $2K less in closing costs (0.25 points if 750, 1.0 points if lower).  I'd rather put $2K towards the downpayment since that gets us that much closer to 10% down.  If we get 10% down then we can dramatically reduce PMI which is always a good thing.  We might even have a strong enough application to go with an 80/10 mortgage which, for our personal situation, would be ideal.  But I have to find a way to get to 10% to do it!

 

The 50% "checkpoint" was just a rule he advises everyone to do to help their score.  Not to mention getting that one card down to 50% utilization would have put me ~25% total utilization, which gets you below that second band you mentioned.

 

Next month it will show two cards with balances, 23% total utilization, and 47% utilization on the high card ... so I'm very very very close to seeing if that will get me the bump that we want.  My wife is also going to show only one card with balances (the joint card), 26% total utilization, and 47% utilization on that same high card.

 

I'll look into NACA but I do not think we would qualify thanks to unemployment I had to deal with last year.  It took me six months to get a full-time career started after finishing graduate school.

 

I also have one inquiry from two months ago that shouldn't be on there.  Basically one finance guy pulled my credit report so that we could get the FICO scores.  Big mistake.  Of course they are now saying that I am wrong to assume that is negatively impacting my score.  I'm trying to dispute the inquiry but I doubt I will be successful.  I think the rest of the credit report is accurate but now I'm motivated to go over it with a fine-toothed comb for anything that might help :smileyhappy:.

Contributor
0x47
Posts: 92
Registered: ‎03-17-2013
0

Re: Trying to get 750+ ...

[ Edited ]

Looks like utilization was the key!  Now we garden accounts, check the DW's scores, and save up for the mortgage!

 

1/30/13 -- EQ FICO 740, EX FICO 748, TU FICO 720 (45% utilization)

3/18/13 -- EQ FICO 734 (34% utilization)

4/04/13 -- EQ FICO 768, TU FICO 769 (23% utilization)

 

Thank you again!

Moderator Emeritus
llecs
Posts: 32,869
Registered: ‎08-04-2007
0

Re: Trying to get 750+ ...

I guessed 20-25. It was 34. Missed by a mile. Congrats!

Contributor
0x47
Posts: 92
Registered: ‎03-17-2013
0

Re: Trying to get 750+ ...

[ Edited ]

It probably would have been 20-25 points, except I went from having 5 of 6 cards carrying a balance to 2 of 6 cards with a balance. :smileyhappy:

 

Not-so-oddly enough, my wife's scores are clear into 770's now.  Her utilization is a few % higher (23% v 28%) because of overall lower credit limits, showing one card (joint CC) with the same balance that is reported on my report, but she has a few months on me with respect to credit history (9.x years v. 8.5 years).  She started in January with (EQ FICO 747, TU FICO 740) but now she is at (EQ FICO 776, TU 771).  But seriously, it feels good to know we are done paying down the cards until after the mortgage is taken care of.  Our median FICO scores are definitely high enough to shave off some costs (points, PMI) and put a bit more towards that down payment.

 

Both our EQ reports now cite the "new account, 5 months old" as the only factor hurting the scores.  EQ also says that no missed payments, low credit util, long history, and recent card use are helping. Both our TU reports now cite "high credit usage" as the only factor hurting the scores.  TU also says that no missed payments, long account history, recent card use, and no collections or derogatories are helping.

 

Kind of reaffirms my original thought process about our FICO scores.  TU is less forgiving on utilization and new inquiries, EQ is less forgiving on young credit lines.  At least that's what it seems like for the bucket we're in. Now we just have to hope neither of us get rebucketed at just the wrong time!

 

:robotsurprised:

 

Question -- if we continue to only make the minimum required payments on the CCs (on time, only minimum, got to think about the down payment now) that is not going to negatively impact the FICO scores right?  I think we will probably just use the joint card for groceries, bills, etc and then pay it down to the exact balance that is reported in today's FICO numbers ($10.5K, confirmed to always report on the last business day of the month).  Until we close on a house that is, then the card gets paid off by December.

Established Contributor
VirtualCuriosity
Posts: 724
Registered: ‎09-10-2010
0

Re: Trying to get 750+ ...

[ Edited ]

0x47 wrote:

Yeah, I know there's going to be no solid answer.  Still ... if its something worth trying than it something I'll probably try.

 

740 gets us the best mortgage rates, yes, but with 750 our credit union charges about $2K less in closing costs (0.25 points if 750, 1.0 points if lower).  I'd rather put $2K towards the downpayment since that gets us that much closer to 10% down.  If we get 10% down then we can dramatically reduce PMI which is always a good thing.  We might even have a strong enough application to go with an 80/10 mortgage which, for our personal situation, would be ideal.  But I have to find a way to get to 10% to do it!

 


That is an interesting point I never considered.  I would have thought once 740 was achieved, all else is moot in regards to a mortgage.  Thanks for sharing your story because it always teaches someone a lesson beyond just getting an answer. 

 


TU98 700 , TU08 700 , EQ 726 , EX 694  (As of 10/2014)  - Personal Goal = 760

Gardening since 11-21-14






























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