topic Re: Multiple account closing in Understanding FICO® Scoring

Point Raising Strategies

Anonymous — Wed, 07 Jan 2009 05:55:29 GMT

Hello all

Before I ask my questions, I would like to thank the contributors and Mods on this board. I have certainly learned alot. However, with every question answered, a question is born. Or so it seems.

Heres my situation:

I am planing to buy a house in the next 24 months. My FICO pulled yesterday is 752.

I have a 15 year file. 7 baddies total (30's). The last was 11 months ago.

4 of them will drop off next summer due to age, leaving the last 3 which occurred in late 2007, and one in feb 2008.

Open lines of Credit are:

2 major CC's, 1 classic amex, 2 store cards. $663 balance total, 5% total util.

1 Installment loan (auto lease) that will close after PIF in March.

Questions:

What type of point increases (if any) do you expect after the 4 old 30's drop off next summer?

Would you expect a point decrease after the only open installment loan (auto Lease) closes after PIF in March?

Any point raising/maintaining strategies are welcomed

other comments...

My credit file does have 3 other installment loans (previous auto leases) which are all closed and PIF.

A couple of closed major CC's.

Message Edited by TowerHill on 01-06-2009 09:55 PM

Re: Point Raising Strategies

marty56 — Wed, 07 Jan 2009 10:34:02 GMT

Welcome to the forum.

How many of the CCs are reporting a balance, I get the best result when only one CC reports a balance of 9% or less (> 0)

When I got my mortgage, the CSR said they like to see a clean 2 year history.

I am not sure about the affect of your older lates falling off your CR but IMHO I dont see a significant score increase on it since the effect of 30 day lates decay over time.

I am not sure if points for score mix require an open installment loan with a balance but If you do see a score decrease because the installment loan is PIF, your DTI will be lower which is a positive thing on a mortgage.

The top 2 mortgage rate score ranges (from MyFico) are

760 - 850

700 - 759

When all the smoke clears, you may be at 760+ but even if your arent, worst case you could refi latter if the difference in the payment will make it worth to you.

Re: Point Raising Strategies

Junejer — Wed, 07 Jan 2009 12:21:00 GMT

Towerhill, in addition to what Marty said about the number of CCs with balances (might see some points there by following his advice), I will also add that I don't expect you to see a point gain due to the 30s falling off for the following reasons:

1. You have other more recent baddies that are "hogging the spotlight"

2. The effect of a seven year old 30 dpd is quite minimal

Re: Point Raising Strategies

Anonymous — Wed, 07 Jan 2009 20:39:53 GMT

Thank you both for the replies.

I suspected I would see a whole lot of nothing when the old 30's go away. From What I have learned here FICO does not ding hard for those.

I am really concerned about the ding for (lack of) mix of credit after my only Installment loan closes. I hope its not alot.

The only open accnts I will have at that time are 2 Major CC's, an AMEX green, and 2 store cards. Maybe thats a good enough mix not to get a point reduction? We shall see.

Does the "Mix of Credit" FICO script only look at OPEN accounts? If it doesn't I should be all set because I have several Installment loans PIF and closed in the file.

Of course I must not forget that the mortgage approval will not be base on my FICO score alone, as mentioned. My DTI will be greatly helped with out an open installment loan.

As far as my credit card balances. Out of the 2 majors, one has a balance with 11% of avail credit used. The AMEX and 2 store cards are 0 balance.

I guess I am trying to scrape together an point gain I can get.

bringing my CC down under 9% will happen next month, so I'll see what that will give me.

The three newer lates will be greater than 12 months old very soon. Maybe that will give me a couple points?

Thanks for the Welcome!!

Re: Point Raising Strategies

Junejer — Wed, 07 Jan 2009 20:47:52 GMT

Hi Tower. We have members here who don't have installment loans at all, just clean reports with a long history and scores in the 800s. Credit mix is 10% of the score, so don't go and get a loan that you don't need just for the mix.

Re: Point Raising Strategies

Anonymous — Wed, 07 Jan 2009 21:27:53 GMT

You can be assured I wont be opening any new accounts just to satisfy FICO score models.

I guess I am mostly concerned with manual review come mortgage pre approval time. My FICO today is 752, so i'm in the slot so to speak with regard to FICO score, and I suspect a few points increase over the next 20 months or so with the 3 remaining 30's aging over 24 months.

When my credit IS reviewed manually I will have a good FICO, but there WILL be those pesky three 30 day lates on there mucking things up.

Is it very possible that I will be denied or have a hard time securing a loan based on (3) two year old 30 day lates even with a FICO at around 760?

My DTI will be healthy, and my Fiancee has a pristine report 800+ without any derogs what so ever. Which puts more emphasis on my report due to the bank using the lower of our two middle scores. I'm trying to be smart and giving myself 24 months to make my report look as good as it can upon manual review.

Re: Point Raising Strategies

Junejer — Wed, 07 Jan 2009 21:55:29 GMT

Tower, I don't have a crystal ball, so I don't know how tight things are going to get. That said, if it were today, I don't see you having a problem getting a loan. You can explain the 30s and tell the underwriter what you have done to resolve your issues and move on. If D/I ratio is in line and you have a decent downstroke, I see no reason why you would have an issue.

You should definitely try to GW those 30s though. Can't hurt. Only cost's the price of a stamp and some time.

Re: Point Raising Strategies

Anonymous — Wed, 07 Jan 2009 22:45:18 GMT

@Anonymous wrote:
You can be assured I wont be opening any new accounts just to satisfy FICO score models.

I guess I am mostly concerned with manual review come mortgage pre approval time. My FICO today is 752, so i'm in the slot so to speak with regard to FICO score, and I suspect a few points increase over the next 20 months or so with the 3 remaining 30's aging over 24 months.

When my credit IS reviewed manually I will have a good FICO, but there WILL be those pesky three 30 day lates on there mucking things up.
Is it very possible that I will be denied or have a hard time securing a loan based on (3) two year old 30 day lates even with a FICO at around 760?

My DTI will be healthy, and my Fiancee has a pristine report 800+ without any derogs what so ever. Which puts more emphasis on my report due to the bank using the lower of our two middle scores. I'm trying to be smart and giving myself 24 months to make my report look as good as it can upon manual review.

As long as you're approved automated (and with a 750+ FICO, uh ... you WILL be unless you're going conventional), the 30 day lates won't matter.

You will have to write a Letter of Explanation (also called an LoX) for the underwriter to review (basically, just as it sounds -- a letter giving the "whys"of why the lates occurred and what you've done to ensure it never happens again), though.

But really, if you're approved automated, make enough income, and have the required down payment, you'll be good to go. In fact, if you go FHA, just having a score over 660 will get you the best rates. 750+ isn't even necessary.

Of course, if you go conventional, it WILL be score-driven and you'll need as much in the way of FICO points as you can get. That and at least 10-20% down.

Re: Point Raising Strategies

tiger67 — Thu, 08 Jan 2009 16:54:02 GMT

Have you tried writing GW letters to get the lates removed?

Re: Point Raising Strategies

Anonymous — Thu, 08 Jan 2009 21:24:04 GMT

I am drafting my first GW letters for the three most recent lates. The 4 lates that will drop off this year I will leave alone and let dissapear on their own.

The FICO simulator is somewhat limited. I wish it would let me modify the credit mix to see what kind of hit I will take when the installment loan closes. The Simulator suggested I pay down my $600 dollar balance on my credit card during the course of 24 months for the best point gain. It estimated a FICO of 752-792 if all else stays the same at the end of 24 months. This takes into account the added "aging" and a lower credit utilization I suppose.

Instead of following that advice, I think I will pay it down sooner (like three months), and leave a tiny balance to show FICO that I use my credit.

I have a question regarding the FICO 1%-9% sweet spot I read alot about here.

Will I gain more FICO points for slowly paying down a balance over 24 months (like the simulator told me to)

Paying it down tomorrow and leave a small balance (1%-3)?

On one hand, it has been stated here that FICO does not have a "historical" utilization score, but only the moment the score is pulled a good credit utilization will be awarded FICO points.

The score simulator made it seem otherwise....

Message Edited by TowerHill on 01-08-2009 01:22 PM

Message Edited by TowerHill on 01-08-2009 01:23 PM

Message Edited by TowerHill on 01-08-2009 01:24 PM

Re: Point Raising Strategies

Junejer — Thu, 08 Jan 2009 22:09:55 GMT

Hi Tower. Unfortunately the simulator needs better language. What it means is pay it down and keep it down and in about 24 months your score should be thus and such. FICO has no historical utilization memory. So, pay down as quickly as possible and begin to reap the rewards. Allow 1-9% to report then pay off by the due date.

Re: Point Raising Strategies

Anonymous — Thu, 08 Jan 2009 22:17:57 GMT

Thanks Byrdman. That makes sense.

I guess I can only hope my GW letters work on my 3 lates.

Multiple account closing

Anonymous — Wed, 21 Jan 2009 00:02:07 GMT

Its me again.

Just to recap, I had to close my Comp usa card because it was going to close on it's own without anything I could do. I saved a "Closed by Grantor" notation in doing so.

My credit mix will suffer even further in March when my only installment loan will close (auto loan).

My only remaining store card is a .... You guessed it; Circuit City card issued by Chase.

Circuit City when BK in November and now has announced all stores will close.

Great.

My credit mix will (after March) be ... Two Major Credit Cards and an AMEX green.

My "Average account age" is 5 years. I have 2 INQs on EX, 1 on EQ, 0 on TU. TU FICO score is 752 and is my high score. I have not checked my FICOs on EX or EQ yet. FAKO's are 727, 741, and 749 respectively.

I am looking to avoid new INQ's and new TL's due to their inherent negative affects on short term FICO scoring.

My 2 year plan is to buy a house.

What would your strategie be? New TL like a gas card or store card to keep the mix happy? Just let it be?

Re: Multiple account closing

CreditAble — Wed, 21 Jan 2009 02:02:45 GMT

TowerHill wrote:

* Two Major Credit Cards and an AMEX green.
* My "Average account age" is 5 years.
* TU FICO score is 752 and is my high score.

I am looking to avoid new INQ's and new TL's due to
their inherent negative affects on short term FICO scoring.

My 2 year plan is to buy a house.

What would your strategie be?
New TL like a gas card or store card.......?
Just let it be?

Just Let It Be.

My strategy would be to apply for nothing unless I absolutely needed it between now and applying for a mortgage.

Then again I have gone as many as 4 years without an app. Instead I would work on inquiry free credit limit increases on existing accounts.

The most important thing to consider is that GW letters usually have the best results if there has been 12 months of on time payments made on an open account since the occurrence of the last late.

I would not send any GW letters out until March. All recipients of the letters should be able to see that you have not been late with anybody for a whole year.

You can GW some of your older late accounts that you have paid on time for a year if you want, but I personally would wait until March myself.

Not last and certainly not least, I would pay off any balances as soon as possible and make a practice of PIFing.

In two years I would guess 770 TU FICO even if a couple of lates should hang around. Without lates in file the score could be somewhat higher. Don't hold your breath for a much higher score however. At least in my experience, the rise in FICO above 760 was painfully slow Especially with TU.

Re: Multiple account closing

Anonymous — Tue, 27 Jan 2009 16:06:55 GMT

Just want to remind you that there are 3 FICO scores. A mortgage company will usually take the middle one. I only saw you reference one score so I thought I'd point out that your middle one will need to get to 760 for you to get the best rate. Also, it will have to be FICO scores, not the FAKO scores.