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When (If Ever) Does Your CS Increase After Taking a Closed Account Hit?

Senior Contributor

Re: When (If Ever) Does Your CS Increase After Taking a Closed Account Hit?

Have you considered the SSL technique?  Implementing that would prevent you from experiencing a score drop with your current 2 installment loans report as closed.  Getting it in place now would be your best bet (as far from your mortgage app as possible) and it only takes 1-2 cycles to report.  Then there's no harm to your score at all if you pay your other current loans off early.

Message 11 of 17
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Valued Contributor

Re: When (If Ever) Does Your CS Increase After Taking a Closed Account Hit?

Do you still need to lower your DTI? If not, because your scores are more than high enough, you could leave well enough alone and simply continue with your regular payments.

Message 12 of 17
Community Leader
Senior Contributor

Re: When (If Ever) Does Your CS Increase After Taking a Closed Account Hit?


ytzak wrote:

Dad-Burn-It

 

Following BBS’ suggestion is going to be hard, if not impossible. My car loan payments are $472 a month and I only have 13 months left. My school loan payments are $678 a month and I only have 16 months remaining. Initially I thought this was okay since I was making my house purchase in 6-8 months; but alas; in order to get to 8.9% (as suggested) I need to lower my balances below $11K. If I lower those remaining accounts by half ($3.2K car and $5.5K SL) I am there, BUT, I now have the problem of having lowered my number of payments to a point where accounts will close – bad news. Car will close in 6 months and SL will close in 8 months (not adjusting for reduction in interest payments – maybe 5 and 6 months respectively). This is right around the time I will be closing on the houseL

 


Question for our OP.... you seem to be assuming that you must continue to make the same required payment each month, even if you make a big lump sum payment next week.  Many lenders don't work that way.  For these lenders, making the big payment now pushes the "due date" for your next monthly payment way into the future.  Student loan handlers ofter work that way, for example.  Thus making a big payment now does NOT cause you to pay the loan off earlier than expected.

 

You can find out how a lender (or loan handler) handles this by giving them a call and asking them.

 

But let's just suppose you are right -- that you have to keep making the same monthly payment regardless of any extra big payment now -- and that this is true for all the loans you currently have.

 

Fine.  Then don't pay your debt down to 8.99% tomorrow.  Pay each loan down so that you have 10 payments left.  That won't take you to 8.99% but it will take you down to around 10% (say).  Then just allow your normal payment schedule to bring you down to under 8.99%.

 

A few other thoughts:

 

It looks like the scoring model we have been talking about for this whole thread is FICO 8.  But FICO 8 is not the scoring model that a lender uses for a home purchase.  Instead, the lender uses the FICO "Mortgage" scores.  So you need to be thinking about those and ignoring your FICO 8s.

 

Installment Utilization affects the mortgage models much less than FICO 8.  In at least two of the three scores it has no effect, according to the veterans here. 

 

So my practical advice is:

     * Pay all your loans down to a place where you have 10 more payments.

     * Ignore your FICO 8 scores and focus only on your mortgage scores

     * Track your scores as the loan balances come down further.

     * Do not apply for any more accounts of any kind.

 

And a slightly more obscure piece of advice:

     * For every one of your cards, make sure that you have used it once for something small and let that balance report to the three bureaus.  (After it reports, pay the card back to $0).  A very long string of nonuse (12 months?) has been conjectured to cause FICO's algorithm to tag that card as inactive and therefore drop it from consideration (e.g. utilization, number of accounts reporting a balance, etc.).  Nobody knows for sure that this happens but it might (and we have one case study that was very hard to explain any other way).  You can address this problem now.  Buy something on every one of your cards this month.  Then you are set in this respect for the planned home purchase of 8 months from now.

Message 13 of 17
Valued Member

Re: When (If Ever) Does Your CS Increase After Taking a Closed Account Hit?

BBS, SSL is not what I need for I still have instalment accounts.

 

HeavenOhio, My DTI is fine now, but (as I mentioned) my scores dropped to what is posted because of closing those accounts. We figured the 8.99% was a target to get them back. CGinDixie had some good suggestions that may work. As for my scores, they are fine but you will notice they are not excellent (800 middle score) which will afford the best interest rates.

 

CreditGuyinDixie, what great advice. I made the payment but did not ask (or check the box) to have the loan recalculated. I just got off the phone with my lender who stated exactly what you did. They are making the adjustments and my payments will drop to a couple tanks of gas a month, for the total (original) length of the loan. I paid extra bucks again to get it below 8%. Since my last payment just posted the 5th of this month, it will take a couple cycles to post properly to the CRAs (I’m guessing). The recalculation is instant and I see exactly what you suggested, but it may take a while to reflect on the CSs.

 

I know I was mentioning FICO 8 (and yes that is what I was using) but my FICO 2, 4, and 5 mortgage scores are all within the same ballpark as my FICO 8 as of the last report. The reason I don’t mention them is that they are only valid for the last report (new one coming in a couple weeks), while the FICO 8 updates with any real-time changes. Since I can see any change to my FICO 8 score – well that is the most accurate I have (if you understand what I mean) even though it is not the mortgage scores.

 

Agree with utilizing the CCs. Currently I rotate my CCs using AZEO with the one changing per reporting cycle. Since I purposely stagger my reporting dates, that allows the "one" to shift as necessary.

 

Thanks again: I think your suggestion may fit the bill.

 

Y

Current FICO 8 Scores: EQ 796 (11/26/2017), TU 784 (11/24/2017), EX 803 (11/27/2017)
Message 14 of 17
Super Contributor

Re: When (If Ever) Does Your CS Increase After Taking a Closed Account Hit?


ytzak wrote:

 

Hey CG in Dixie and/or and other Comparable, Experienced Leaders/Moderators

 

Do you know of any “magic” threshold for installment accounts that are comparable to the revolving account edge of 8.99%? I fully understand that should be extraneous to my OP question, but as it is oft said. What should have, could have, would have is irrelevant to what is. My job is to rectify the situation to do what I want to be accomplished. Maybe finding that border, and crossing it, is a potential remedy.

 

I have searched the forums for the values, and know they exists somewhere; but for the life of me I can’t find them. I would appreciate any links you are aware of and any remedial “search techniques” for which you are familiar.

 

Thanks in advance,

 

Y


A "magic" number for overall installment utilization percentage, for FICO 8 and FICO 9 scores, is 9% or less.

 

It is much less clear how much, if at all, mortgage scores react to installment utilization percentage.

FICO8 EQ 721 TU 772 EX 777 Total revolving credit 500k
Message 15 of 17
Valued Contributor

Re: When (If Ever) Does Your CS Increase After Taking a Closed Account Hit?

An 800 middle score is excellent. The general wisdom is that a middle score of 740 will get one the best interest rate, and 760 will get the best rate on private mortgage insurance.

Message 16 of 17
Valued Member

Re: When (If Ever) Does Your CS Increase After Taking a Closed Account Hit?

Thanks for the compliment, but going VA. No PMI and that makes it a little trickier. I want to make sure to give myself some slack. The main reason is I want to pay down the mortgage after I get it instead of putting a down payment; but that is more for the mortgage forums.

 

Y

Current FICO 8 Scores: EQ 796 (11/26/2017), TU 784 (11/24/2017), EX 803 (11/27/2017)
Message 17 of 17