topic Re: Mortgage/Fico Score/Previous Collections in Understanding FICO® Scoring

Mortgage/Fico Score/Previous Collections

Anonymous — Wed, 17 Feb 2016 23:32:22 GMT

First, thanks for reading. I'm trying to be thorough so I apologize if this is long.

These are my current scores. First is the Fico 8 and then the Mortgage Fico (Which I don't understand why there are 2 different numbers)

EQ: 628/587 TU: 594/558 EX: 630/632

First, what would cause such drastic differences for Equifax and Trans Union when it comes to the regular and the mortgage numbers?

Second, we are trying to get a mortgage within the next 4 months. We were looking last year but couldn't get approved or approved for the terms we wanted. So, we decided to wait and pay everything that was late and try to aquire additional "good" credit history.

As of now, it has been 14 months since my last late payment which were all of my student loans. I consolidated them all into one small (146.00) payment per month. I do have a very small (32.00) collections on transunion that appeared in January of this year for a medical bill that was never billed. That is in the process of being due to a legit billing error on the doctors office end. I have 2 old credit cards that were charged off that have both been paid. One is showing as a paid collections with a 0 balance.

I have had 3 credit cards. One for over a year thru Capital One with a limit of 500. I aquired another Capital One that started with a 2000 limit which was increased to 2500 and a Discover Card that has a 1600 limit. Both of those were aquired in July or August. Needless to say I have never been late on these accounts. They do have high balances right now due to a Vacation that we had in October and Christmas. My last update had the total balances at 4000. That was updated around the 20th of January. I have since paid them down to about 2500 total and by the end of March should have them paid down to no more than 500 total. The only other debt I have are the above mentioned student loans and a car payment (balance 5100, monthly payment 320).

I was feeling confident that by now I'd have a nice bump in my score. I cancelled myfico in August and was just using Credit Karma to get a general idea of where I was at. I reenrolled today and those numbers are horrible to me. Especially the Mortgage fico's. I can't see a drastic change in the next few months when we start applying for a mortgage again.

Anyone have any ideas as to what I can do to bump those scores up higher? When it comes to the money needed for moving/loan type we are trying for USDA or FHA and have about 10,000 saved for costs. In addition, we have a gift of about 10,000 to put towards the house/closing fees. Dealing with credit is really getting frustrating, especially when I've been trying for the last year to improve things. I read on message boards how people in my situation seem to get huge bumps in a couple months and I can't seem to do the same.

Thanks for reading and ANY advice or experiences are very much appreciated.

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 04:47:56 GMT

A big reason that you have horrible credit scores right now is your CC debt debt. In fact, your last reported CC balances show all of your credit cards being almost completely maxxed out ($4000 debt on a combined credit limit of $4600 = 87% utilization).

It sounds like you plan to pay all your CC debt down to $500. That will help your score a great deal, especially if you make sure that two of the three cards are reporting at $0. (I.e. you want all your CC debt one one card.) You will get an even better score boost if you can lower you CC debt to $400, which will be < 8.9%.

The biggest problem you have is not your CC debt. It's your lack of understanding about credit and how to prepare for a loan. You have a major loan that is crucial to your future -- you feel that strongly about it -- and you choose to max out all your cards on a vacation in the months beforehand. You actually have had an extremely close shave -- you might well have had your cards cancelled or at the credit limits drastically lowered by maxxing your cards out like that. The sentence that struck me most in your post was this:

I was feeling confident that by now I'd have a nice bump in my score.

You maxxed out your cards and were confident that you would have a nice bump in your score. This betrays such a deep misunderstanding about how credit scoring works that it's hard to describe it. I am not giving you a hard time, but am trying as clearly as I can reveal the extent to which you need to educate yourself about how the FICO scoring system works. My advice:

(1) Spend the next few weeks learning about how credit scoring works. Read everything you can lay your hands on. Start with the Learn About Scores button at the top of this screen. Find two or three good books and read them too. Learn also how credit cards work, when your three cards report to the three bureaus, and what numbers they report and why.

(2) Continue to pay your CC debt down. Your goal should be to get it under $400, only on one card, and that card should NOT be the one with the low credit limit. You want two of your three cards to be reporting a $0 balance.

(3) Make a complete list of your negative records (charegeoffs, lates, collections, etc.) and head over to the rebuilding forum. They may be able to help you with getting some of them removed. You would have more leverage to get the creditor to remove them if you had not paid them. You'd be able to say: I will pay them IF you agree to delete them. You lack that leverage now, so you might not be able to do anything, but the folks in the rebuilding forum will know.

(4) Continue to make all your payments and on time of course. Be sure not to pay off the car loan before you have completely closed on the house and own it.

Very best wishes and good luck.

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 18:39:01 GMT

+1 for the advice above. You need to pay down your credit card balances ASAP. You definitely dodged adverse action and credit line decreases despite maxing out your cards.

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 18:49:00 GMT

Thanks. I paid 1500 on the highest cc today. That leaves a balance of 230 on it. The small cc will be paid off tomorrow because im waiting for an authorization to become a charge (monthly cable that is paid in full every month). That leaves another cc with a bal of 630 on it. I plan on paying that off in full by 27th so it will reflect a o balance next time updates to cb. That should leave me with only 230 bal. And its a no interest card till may. I also sent letters to my student loan companies basically begging to have lates removed since thwy were consolidated. I know its a long shot but im hoping.

Can anyone explain why the difference between the mortgage score and the fico 8 score? They seem pretty drastic.

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 18:54:04 GMT

Mortgage companies use 04 & 98 versions. Credit card companies generally use fico 08. There are different kinds of fico scores available (about 35 approx). So as far as getting a house loan, you should only worry about improving the mortgage scores.

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 19:39:15 GMT

Yup, just what Opinionated said. Mortgage lenders are (in practice) bound by Fannie and Freddie to use very old FICO models (one of them is from 1998!). The models evaluate risk differently and probably less well than the models that FICO released much later. That is likely to change in the next year or two, but in your time frame you should expect that the lenders will be using the "mortgage" scores you see.

The newer models (FICO 8 and now FICO 9) are typically more forgiving of people who had many negative records but resolved to pay off collections and who exhibited a few years of managing accounts with perfect payment history. The old models are less flexible that way -- they see a lot of negative records and hit you without cutting you much less slack for trying to be a good scout moving forward.

You should ignore any feelings you might have of that seeming unfair, because that will be time and energy you are wasting on something you cannot change (the fact that they will use the older punitive models). You should focus on the thing that is under your control, which are the things I mentioned: learning a lot about credit scoring, paying your CC debt down to under $400, etc.

Good luck...

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 19:48:45 GMT

Will those mortgage scores go up as the fico 8 goes up or is it pretty much useless until the negative falls off or mortgage companies start using the fico 8 or 9?

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 20:05:47 GMT

They will go up to a point where you can qualify for decent if not the best available terms, given enough time and maintaining a spotless record going forward. The extent to which mortgage scores follow fico 08 scores is anybody's guess coz they are proprietary algorithms that no one knows. Fico 09 are not used by anyone AFAIK, so don't even bother about them. Just work on your credit profile and take a look at the rebuilder forum. They really help

Re: Mortgage/Fico Score/Previous Collections

Thomas_Thumb — Thu, 18 Feb 2016 20:18:56 GMT

Mortgage scores, particularly EQ Score 5 (Fico 04 model), are significantly more sensitive to # cards reporting a balance and individual card utilization than is Fico 08.

Best you can do is optimize what you can control. Negatives aside, reducing individual card utilization, reducing aggregate utilization and reducing # cards reporting should likely help mortgage scores more than Fico 08 scores. For illustrative purposes say:

1) EQ Fico 08 was 650 => reduce UT% and # cards reporting => EQ Fico 08 now 665 (15 point gain)

2) EQ Fico 04 was 610 => reduce UT% and # cards reporting => EQ Fico 04 now 645 (35 point gain)

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 20:18:09 GMT

Reducing number of cards? Like closing out a card? I thought that was a big no no? Honestly, the only score i care about is the Mortgage. Im ok with 2 or 3 credit cards and the newest card (Discover) isnt a great rate so closing it wouldnt bother me. That's been open since August. Woud closing it also help my average credit length?

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 20:29:54 GMT

No. Thom Thumb is not suggesting that you close cards.

He's talking about reducing the number of cards that are showing a positive balance. He means the same thing as I told you: having all cards at $0 except for one card which will have a comparatively small balance. You are working on doing this, based on your posts today. You will end up having two of your three cards at $0 with the remaining card reporting at $230. That's great.

And yes, both the very old models and the new models care a whole lot about credit card balances. So paying off your debt will give you a big help on your mortgage scores.

Re: Mortgage/Fico Score/Previous Collections

Thomas_Thumb — Thu, 18 Feb 2016 20:35:17 GMT

You don't want to close any cards - just reduce the # of cards reporting a non zero balance to the CRAs each month.

Example, if you have 6 cards and normally 4 or 5 show a non zero balance on statements each month, then Fico 04 will ding your score. By reducing the # cards reporting a non zero balance from 4/5 to 1/2, you would pick up quite a few points (perhaps 20). Key take aways:

1) The CRAs only look at balance which is reported to them - that is the amount shown on each credit card statement when it cuts. If you use a card and put $300 of charges on it and then pay the charges BEFORE statement cuts reported balance will be zero.

2) You need to allow at least 1 card to report a non zero balance each month to avoid a score penalty - but it can be a small balance.

3) Keep any balance that does report on a card under 30% of the available credit line.

4) keep total reported balance (all cards combined) relative to aggregate credit line (all cards combined) under 9% utilization for best results.

Note: For best results with Fico 04 model (used for EQ and TU mortgage scores) - only report a balance on one credit card and keep aggregate utilization under 9%.

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 20:42:37 GMT

Ok. I read it wrong. By next week ill have all of that done. We arwnt applying again until may so hopefully a little more time will help as well.

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Thu, 18 Feb 2016 21:09:50 GMT

Good for you. And remember: it will take some time for your cards to report their new (much lower) balances, as many as 30-40 days possibly.

You are a member of Credit Karma, so you can and should be using it to pull your credit reports (ignore the scores, but the reports will be a big help to you). You can pull them for free as often as once a week.

Monitor your reports through Karma and you will be able to see when all your CC balances are reporting the way you want them. When you see that this is the case (for both TU and EQ), wait 2-3 more business days and then you can if you like pull your mortgage scores again through myFICO.

Re: Mortgage/Fico Score/Previous Collections

EvolvingCreditDiva2 — Fri, 19 Feb 2016 04:41:22 GMT

Wow I cannot thank OP & all you great folks enough for this info!! I have lost so much sleep trying to determine how to raise MORTGAGE scores & the info just isn't out there I've been watching my dream home in a great neighborhood go from $430,000 to the low $200,000 since last July while I've been trying to raise my score from the low 400s...got so excited t see Fico scores in low 600s only to find out those weren't my MORTGAGE scores. Depressing. Fico 8s move fast, but those darn mortgage scores are stubborn!!

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Fri, 19 Feb 2016 12:32:40 GMT

Thanks again for all the advice. One last thing, do the mortgage ficos update regularly on myfico? I have the 3b monitoring but may cancel it if the mortgage ficos dont update at least quarterly.

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Fri, 19 Feb 2016 15:49:32 GMT

You get a new 3B report along with all the FICO scores (including the mortgage scores) once every 90 days. Outside that, the mortgage scores do not update.

Re: Mortgage/Fico Score/Previous Collections

Anonymous — Fri, 19 Feb 2016 16:17:27 GMT

Unless you buy them again, they update once every 3 months

Re: Mortgage/Fico Score/Previous Collections

Emma1137 — Sat, 20 Feb 2016 00:21:02 GMT

I have been struggling with getting my mrtgage scores up for months and it's tough. I rarely carry more than 10% balance on any CC and have never paid them late. I have some medical collections from a while ago that I have worked on getting removed but, all in all, only a few negative items and 3 CCs that I pay off almost completely each month. I have been doing this for several months now and my scores keep going up. Even if I have to put $4000 on a card one month, I do whatever I can to pay every cent.

I can't stress this enough: Based on my experience, uour util rate is going to be what moves your score the quickest. Pay off everything asap!! I mean, pay off all but a few dollars. Really.. It took me a while to realize how sensative FICO scores are for people that have less than perfect histories. Maybe for those out there with $50,000 in CC availability, 20 years of perfect mtg history, various installment loans that have been pain down to 10%, etc. -- having a 20% to 50% util on theic CCs doesn't hurt so much. But for those us w/o such lengthy histories, it truly does. I have had my old mortgages age off my histiry and it has really hurt me. I went to a mostly cash system for about 10 years and I lost a lot of ground. Everything is magnified when there's less to work with. Below is a screen shot from a few days ago when I had a hotel charge come through between my statement end date on the 15th (where I had a $0 bal) and the reporting date on the 17th!! Huge drop for $142! The limit is $2000 so this is a very small util and the drop was still this big. I also have big jumps when I, for examle, go from a $150 bal on a $3500 limit card down to a $60 balance. It can be a 15 point jump. It's crazy. Any I'm talking about FICO 8 scores here b/c that's what I see every day. I only pull my full score versions once a months and I have no idea why they're all so different. My mortgage scores are all over the place. From the same as my 8s to 50 pts lower. I'm at a loss on that one.

My point is this: make sure you do whatever you can to pay off all but 1-3% on each card and keep it off until the card has reported a few days after the statement date. You will see big jumps. Aside from that, try GW deletes from old late pays and try to get PFDs on existing collections. However, these don't happen as fast. With your CCs, you will see a jump within a couple of days of your CC statement reporting date.

Hope that helps and good luck. I totally understand your pain but really watch what you are spending if you can't pay it off in full.....

Re: Mortgage/Fico Score/Previous Collections

Emma1137 — Sat, 20 Feb 2016 00:28:25 GMT

I was able to get a 60 day late from 2 years ago deleted and it seemed to help my 8s and my mtg versions both go up. I do think that getting lates removed helps the mtg versions. That's just based on my experience over the last year of so. Even getting a 60 changed to a 30 can help. I had Cap One auto refuse but Care Credit/Synchrony did agree to a GW delete. Even tho hey're old, it seemed to help.