Credit and Home Refinance

[Anonymous]

I have been battling with trying to get my credit scores up to over 700. I have several CC (limits of $16k, $8k, $5k and $2500), have several retail accounts (all have been paid off except one). Over the last 4 months I have paid off $27k and only have balances on my CC as of now. I recently just got my Experian score to 670 which took forever.

I just refinanced my home to lower my interest rate (2.75%) but now it is reporting a closed account and a new mortgage account. All 3 bureaus have dropped my scores by 15-25 points due to this (even though I paid off 2 accts of over $6k). Every time I get my scores on an upward rise they hit me for a huge drop in score. It then takes months (6-12) to get back to where I was. Is this normal? How do people get their scores to 800 and higher? I am always getting hit for some reason (usually because I make a purchase on a card). It has gotten frustrating and not sure where else to turn.

(EQ=660 (dropped 18 pts due to refinance), TU=685 (dropped 17 pts due to refinance), EX=648 (dropped 26 due to refinance))

[M_Smart007]

Has your average age of all accounts dropped?, or is the new loan reporting near 100%?

[Anonymous]

The original loan shows paid off and a new mortgage loan added. So the new account is 100% new even though my mortgage is 3 yrs old. 

[Anonymous]

All other accts did not factor into the drop in my score even though as I mentioned 2 retail accts were reported as paid off (almost $6k) but these did not come into play even though my utilization dropped quite a bit. 

[ccquest]

Like M_Smart007 alluded to, a new loan at 100% balance will hurt your score, a new inquiry will hurt your score, lowered age of accounts will hurt your score, and I've read CFAs will hurt your score for a long time (regardless of whether they are paid off - CFA = retail account).

In the long run, the refinanced loan will age and that effect will wear off, as will the impact from a new inquiry. Balance will come down with time of course, but the other important part is that DTI might improve unless you went with a shorter term which brings up your payment and may lower your ability to qualify with some creditors.

[CreditInspired]

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@Anonymous wrote:

I have been battling with trying to get my credit scores up to over 700. I have several CC (limits of $16k, $8k, $5k and $2500), have several retail accounts (all have been paid off except one). Over the last 4 months I have paid off $27k and only have balances on my CC as of now. I recently just got my Experian score to 670 which took forever.

I just refinanced my home to lower my interest rate (2.75%) but now it is reporting a closed account and a new mortgage account. All 3 bureaus have dropped my scores by 15-25 points due to this (even though I paid off 2 accts of over $6k). Every time I get my scores on an upward rise they hit me for a huge drop in score. It then takes months (6-12) to get back to where I was. Is this normal? How do people get their scores to 800 and higher? I am always getting hit for some reason (usually because I make a purchase on a card). It has gotten frustrating and not sure where else to turn.

(EQ=660 (dropped 18 pts due to refinance), TU=685 (dropped 17 pts due to refinance), EX=648 (dropped 26 due to refinance))

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The worse thing you can do, well almost the worst thing, IMHO, is to continuously monitor your credit scores. When I first started tracking my score (640), I micromanaged everything and it drove me crazy. NO MORE! Just remember that scores have no memory.

Okay, on to answering your questions:

First, this is probably what happened with the refinance. You paid off a loan (mortgage), so no more installment loan (unless you have a car loan). So points drop there. Then you do a mortgage refinance (new installment), so you'll gain some points back. Also, when you applied for the mortgage, you took a HP. If you applied at several FIs, you got more HPs. These will show up on your CRs. It only counts as one HP when mortgage lender does manual review.

Second, if you have any derogs on your credit report (it appears you might be), you're in a dirty bucket, so your scorecard will have trouble increasing much until those derogs are removed or corrected.

Third, how many cards (bank and retail) still have balances and what is each card's indiviudal UT. This is important!

Fourth, how long have you been carrying balances and were those balances high before you paid a lot of them down? It can take ~30 days for PIF CCs to update.

Fifth, it's not good for your scores to have many retail cards. 

Finally, this is how I increased my scores to 800+ and it took 3 years. 

• My aggregate UT is almost always <5%
• One individual CC UT is always <8.9% unless I do a BT at 0%; and it is always paid off in half the time.
• I practice AZEO because I always PIF
• I have never been late 
• I have no derogs (my tax lien fell off my reports ~2 years ago)
• I only have 3 inquires across CRs (I was in the garden for 17 months)

I finally realized that to get to 800 scores, which was my ultimate goal--I had to have a different mindset. Believing and understanding that building great credit was a marathon, not a sprint, is key.

You'll get there. It just takes continuous hard work, persistence and patience.

GL2U