topic Re: FICO due to no mortgage and credit card only debt in Understanding FICO® Scoring

FICO due to no mortgage and credit card only debt

FICOdawg — Mon, 06 Jan 2025 22:49:48 GMT

So despite having no mortgage, and my only debt is a car loan and 41k in credit card debt across two cards (thank you divorce lawyer). My credit score is at 698 I'm victim of the credit mix and credit utlization. I have a substantial 401k balance. I own a 500k+ condo with no mortgage. I make nearly 200k. Other than the obvious of paying off the CCs, any other angle to get my credit score up? I have perfect payment history but more scores dropped once lost the mortgage and solar loans. I'm obviously not going to go get a mortgage to pay off the cards and pay all the fees. Been hitting the cards at 2500/month to kill them off but at least for the next 6-9 months my credit utilization will be above 30%. Any tips? Would getting another CC help me or would that penalize me?

Re: FICO due to no mortgage and credit card only debt

GZG — Mon, 06 Jan 2025 23:19:43 GMT

@FICOdawg wrote:
So despite having no mortgage, and my only debt is a car loan and 41k in credit card debt across two cards (thank you divorce lawyer). My credit score is at 698 I'm victim of the credit mix and credit utlization. I have a substantial 401k balance. I own a 500k+ condo with no mortgage. I make nearly 200k. Other than the obvious of paying off the CCs, any other angle to get my credit score up? I have perfect payment history but more scores dropped once lost the mortgage and solar loans. I'm obviously not going to go get a mortgage to pay off the cards and pay all the fees. Been hitting the cards at 2500/month to kill them off but at least for the next 6-9 months my credit utilization will be above 30%. Any tips? Would getting another CC help me or would that penalize me?

be very, very grateful you have no lates because your score will go up signifigcantly when you pay off the credit cards. the low score is just temporary.

don't get another cc until you pay off or down your cards signfigiantly

are the credit cards at 0% apr? other 41k at 20% apr will eat you alive ~$700 a month in interest?

otherwise pull from the 401k or take out a HELOC and pay them off now, IMO

200k/year and no rent? feels like you can do better than only $5k/month on the cards

Re: FICO due to no mortgage and credit card only debt

FICOdawg — Mon, 06 Jan 2025 23:35:03 GMT

I am currently maxing out my 401k and use a back door Roth so that comes off the top each year. I have 2 credit cards I've had for long time but inherited the balances from the divorce. Building up emergency cash fund for few more months then will hit cards with more. Divorce was two months ago so took a hit in bank account. Crazy that with my salary, paid off house, long credit history, that 41k in credit cards would kill my score so much.

Yes my cards are 18.49% and plan to apply for a balance transfer card once I get it down to under 25k in CC debt. Just having to grind through for another 4-5 months.

How long do we get dinged on credit scrore after a hard inquiry? I know during the move there were inquiries as I moved States so insurance company, utliity companies and ATT all pulled my credit.

Re: FICO due to no mortgage and credit card only debt

Patient957 — Tue, 07 Jan 2025 00:16:17 GMT

@FICOdawg wrote:
Crazy that with my salary, paid off house, long credit history, that 41k in credit cards would kill my score so much.

Salary and paid off house do not factor into credit score.

It's your utilization that's killing you, and it probably would be even worse if not for your long credit history.

Re: FICO due to no mortgage and credit card only debt

FICOdawg — Tue, 07 Jan 2025 00:53:23 GMT

I get it. FICO scoring methods are truly stupid but obviously have huge impact so I need to be in the upper 700s again. A paid off home SHOULD be part of credit scoring as should a 401k balance but that argument won't solve my current problem having a 695 credit score. Never had this problem until paid off house and other long term loans like the solar loan. Very frustrating. When I bought my condo they actually ran credit check.

Re: FICO due to no mortgage and credit card only debt

FicoMike0 — Tue, 07 Jan 2025 03:35:13 GMT

Ditto @GZG

Utilization is killing you.

The good news is utilization has no memory, once it's under control , your scores will rise.

Re: FICO due to no mortgage and credit card only debt

Thomas_Thumb — Tue, 07 Jan 2025 04:29:37 GMT

@FICOdawg wrote:
I am currently maxing out my 401k and use a back door Roth so that comes off the top each year. I have 2 credit cards I've had for long time but inherited the balances from the divorce. Building up emergency cash fund for few more months then will hit cards with more. Divorce was two months ago so took a hit in bank account. Crazy that with my salary, paid off house, long credit history, that 41k in credit cards would kill my score so much.

Yes my cards are 18.49% and plan to apply for a balance transfer card once I get it down to under 25k in CC debt. Just having to grind through for another 4-5 months.

How long do we get dinged on credit scrore after a hard inquiry? I know during the move there were inquiries as I moved States so insurance company, utliity companies and ATT all pulled my credit.

It looks like you don't need new credit. Just pay down the CCs over the next several months as funds allow. Since you have a clean file and an open loan, score should get to 720 once CCs report under 29% utilization and 760 when UT drops below 9%. No need for a new card. Build up some cash reserves and get rid of high interest CC debt. A 3rd card won't help your score at this time.

I would suggest suspending Roth contributions to pay down the CCs more quickly and build-up some liquid after tax savings. I assume you may need to wait until the following benefits cycle to re-start the Roth.

Re: FICO due to no mortgage and credit card only debt

FICOdawg — Tue, 07 Jan 2025 13:13:22 GMT

That's the plan to pay down CC semi agressively as I build safety cushion first. From all the moving expenses, furniture (I have to start completely over) and relocating I burned through my cash after divorce. Was shocked when I saw I had a credit score under 700.

Was thinking another CC would help on utlization but I'm in the quandry of now having a sub 700 score. Once I pay down the card with the lowest balance of $16k, was going to apply for a $0 balance transfer card while I pay off the second card. I'd like to get my score over 800.

Re: FICO due to no mortgage and credit card only debt

Thomas_Thumb — Tue, 07 Jan 2025 16:03:35 GMT

That's a reasonable approach. However, I wouldn't apply for a new card until your score reaches 720. Otherwise your approval odds, ability to get a high SL and 0% apr or $0 transfer promo will be limited.

Be aware- a new revolving account typically drops score 15-25 points if your current youngest revolver is over 12 months old. That new credit penalty lasts for 12 months!! Thus, the recommendation not to get a new card at this time.

Re: FICO due to no mortgage and credit card only debt

FICOdawg — Tue, 07 Jan 2025 19:40:20 GMT

Yeah divorce bit me there too. Bought a new (used) car so we had clean ownership of cars so getting dinged on credit for that new loan as well. Credit scoring is truly stupid. Just started using the Experian app. Should my score keep improving every month with the lower balance or only when I hit certain percentages? I also had a PayPal credit card amount that I paid off and score bounced up but I basically took a $4k balance to zero in one go.

Re: FICO due to no mortgage and credit card only debt

Thomas_Thumb — Wed, 08 Jan 2025 02:40:35 GMT

@FICOdawg wrote:
Yeah divorce bit me there too. Bought a new (used) car so we had clean ownership of cars so getting dinged on credit for that new loan as well. Credit scoring is truly stupid. Just started using the Experian app. Should my score keep improving every month with the lower balance or only when I hit certain percentages? I also had a PayPal credit card amount that I paid off and score bounced up but I basically took a $4k balance to zero in one go.

Fico looks at highest individual card utilization and aggregate utilization for scoring independently. It also looks at aggregate balance in $. The $ amount thresholds are unknown. A few utilization % thresholds are:

Highest individual card utilization under 49% and highest card utilization under 29%. For aggregate revolving utilization, under 9% is important. Aggregate UT could use a sliding scale between 9% and 29% or have a constant impact on score. There are different points of view with data to support either opinion depending on source selection.

Regardless, 9% , 29% and 49% are important milestones. There are some higher UT thresholds but, just get both cards below 49% before paying off your lower balance card.

Don't expect every paydown to increase score. Some paydowns may not cross a UT threshold.

BTW - what are your current individual card utilizations and your aggregate utilization?

Re: FICO due to no mortgage and credit card only debt

FICOdawg — Wed, 08 Jan 2025 16:39:25 GMT

That's good to know about the individual cards. When I get alerts from Experian it always shows the total % ulitized across the two cards and Pay Pal Credit account no mention that each one matters. The only red category I have is the % utlized and it's obvious their formula is hammering me for it. All the other categories have green/excellent showing. With no mortgage and a single car loan is 800 never going to happen? I'll keep the cards open and revolve some balances on them. Anything else I should do? Next year I plan to get a boat and will likely have a loan so that will ding me yet again.

Re: FICO due to no mortgage and credit card only debt

FICOdawg — Wed, 08 Jan 2025 16:50:48 GMT

I have 40,9xx in balance. Pay Paypal Credit is $6k with now $0 balance as of mid December. One car loan that paid off old car and now new loan as my own vehicle. $23,3xx.00 on one card, $176xx.00 Experian shows 84% utilization across the three credit lines. Never had a late payment, ever. Mortgage I had for over 4 years (refi during covid like everyone else) and a solar loan from 2019 got paid in full in September. Really frustrating that for a case line mine, I'm rocking a horrible 695 while people with piles of debt are 750+.

Imagine only having 40k in debt with my income and getting a worse loan rate than someone with piles of debt. Make it make sense. The smart thing to do would be cash out some of my Roth and pay off the cards but I just don't have the will power to touch any of my retirement stuff. More incentive to hammer these balances.

Re: FICO due to no mortgage and credit card only debt

Thomas_Thumb — Wed, 08 Jan 2025 18:24:24 GMT

@FICOdawg wrote:
I have 40,9xx in balance. Pay Paypal Credit is $6k with now $0 balance as of mid December. One car loan that paid off old car and now new loan as my own vehicle. $23,3xx.00 on one card, $176xx.00 Experian shows 84% utilization across the three credit lines. Never had a late payment, ever.

That's a brutal aggregate utilization level. If one card is 89% or higher, that card is considered maxed out and triggers even greater penalties. Overall, your revolving utilization penalties are likely costing you 80-90 points. Getting under 49% on all cards and 29% in aggregate should provide a nice initial score boost.

Capacity to service debt does not correlate with desire to manage it. Credit payment history and degree of leverage of available credit - particularly unsecured credit do.

Re: FICO due to no mortgage and credit card only debt

GZG — Wed, 08 Jan 2025 18:01:52 GMT

@FICOdawg wrote:
I have 40,9xx in balance. Pay Paypal Credit is $6k with now $0 balance as of mid December. One car loan that paid off old car and now new loan as my own vehicle. $23,3xx.00 on one card, $176xx.00 Experian shows 84% utilization across the three credit lines. Never had a late payment, ever. Mortgage I had for over 4 years (refi during covid like everyone else) and a solar loan from 2019 got paid in full in September. Really frustrating that for a case line mine, I'm rocking a horrible 695 while people with piles of debt are 750+.

Imagine only having 40k in debt with my income and getting a worse loan rate than someone with piles of debt. Make it make sense. The smart thing to do would be cash out some of my Roth and pay off the cards but I just don't have the will power to touch any of my retirement stuff. More incentive to hammer these balances.

yeah, kinda dumb

if you had 5 other credit cards with $0 balances and 200k in limits (which wouldn't be abnormal at your income)

your scores would be mostly fine

Re: FICO due to no mortgage and credit card only debt

FICOdawg — Wed, 08 Jan 2025 20:50:21 GMT

ANY scoring system than penalizes you for paying off debt or having a 0 balance is flawed. That's FICO.

Does the amount paid off per month or as a percentage matter?

As to the ability to manage debt, this is where FICO lacks depth in their data to predict credit risk and debt management. I'm north of $1M in 401k/Roth/Stocks. Mortgage free. Kinda have to be able to manage money to save and accomplish those two milestones. Yet, I have a relatively low credit score because my debt is in the revolving category not installment loan. All the while my debt to income is very low. No amount of logic will justify my score being 695. I'd even say mine is a case study for FICO to fix their scoring. A large portion of Americans would trade their higher FICO score for my total debt of $40k LOL

In my case the divorce is why the balance shot up as usually just revolved balances on my United & Marriott cards as a part work travel and monthly expenses to get points. Divorce I had to put stuff on card to carry me through as the cash burn was crazy. If I didn't have the ability to pay the CC off relatively quickly I'd pull from the Roth to wipe it out.

Re: FICO due to no mortgage and credit card only debt

FICOdawg — Wed, 08 Jan 2025 20:55:32 GMT

I never paid attention to this much as never an issue but the HOA pulls credit and background and saw the 695 and was like **bleep**. Did a search to understand why, only to find out paying off long term loans like a mortgage actually hurts your FICO score.

Had I known, I would have opened another CC account pre divorce to play the credit score game. Hopefully this sorts itself out as I think will take 9-10 months to pay them off.

Re: FICO due to no mortgage and credit card only debt

Rogue46 — Wed, 08 Jan 2025 21:17:01 GMT

To answer your question about having over 800 credit score without a mortgage yes you can, I've never had a mortgage and only have a car loan and credit cards (under 1% UT) and all scores over 800

Re: FICO due to no mortgage and credit card only debt

FICOdawg — Wed, 08 Jan 2025 21:22:38 GMT

How much money do you revolve on CC balances? I plan get a third CC once my score goes up. Car loan. And likely boat loan. Any tips appreciated.

Re: FICO due to no mortgage and credit card only debt

Rogue46 — Wed, 08 Jan 2025 21:25:34 GMT

I don't carry balances on the cards. As mentioned above adding another card right now would likely be counter productive as you will take a score hit with the new inquiry. Likewise adding another loan wouldn't help as you already have a car loan which satisfies that criteria score wise.