Middle Score and Info on one report but not others for Mortgage

[wife2froggy]

Hi Group!

I've searched the forums - if this already exists please point me in that direction.

I know the mortgage co uses the "middle score." Does this mean that the other 2 reports are completely discarded? 

Situation: Working remarkably hard to recover from 5 years of using no credit at all (stupid stupid stupid.) We are [this] close to being ready to apply for a mortgage. Scores are finally back into the lower 600's and now just waiting on Dep't of Ed to update now that SLs are out of rehab.

Transunion is notoriously slow at updates. EQ and EX have now deleted the Dept of Ed Collections. Scores 620+ which theoretically makes my middle score qualified for an FHA loan. TU still showing Dept of Ed. 

The question is, will TU be discarded all together or will they look at it, even though it's not the middle score, and tell me I need to wait until it's cleared off that too so that it doesn't appear to be valid?

Current credit: Auto loan, 5 CCs, 1 Retail card, Auth User 2 CCs, Student Loans in repayment (switching to consolidation, in progress) 2 small medical collections. All open credit current with no lates. Utilization hovering between 25-40% depending on the month. AAoA is low due to only starting the rebuild last year.

I've learned that if I pay the CCs a few days before the statement cycles it makes my utilization look far better when they report. Added bonus: less interest!

Thank you! The waiting game is harder than paying the bills

[junebug225]

While they do use your middle mortgage score. They take in account everything on your report from all three bureaus. IMO I would let my report settle out and everything is reporting correctly before proceeding.

[wife2froggy]

Thanks, that's what I was afraid of. I am beginning to seriously hate TU. The other two are really quick with updates.

[Anonymous]

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@wife2froggy wrote:
Utilization hovering between 25-40% depending on the month.....

I've learned that if I pay the CCs a few days before the statement cycles it makes my utilization look far better when they report. Added bonus: less interest!

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In the second sentence it seems as though you are capable of paying off your cards before the statement prints.  If that is so, why is your urilization 25-40%?

[wife2froggy]

@wife2froggy wrote:
Utilization hovering between 25-40% depending on the month.....

I've learned that if I pay the CCs a few days before the statement cycles it makes my utilization look far better when they report. Added bonus: less interest!

---

In the second sentence it seems as though you are capable of paying off your cards before the statement prints.  If that is so, why is your urilization 25-40%?

My limits are really meager. It doesn't take much to go over 20%. I've been great at keeping them around 18% but then got stupid and bought a few things I didn't really need. I'll have them paid back down to under 20% for the next cycle.

[Anonymous]

It sounds like even after you get them paid down you will have:

      (a) multiple credit cards reporting a positive balance, and

      (b) a utilization of around 15-19%

Both of these things will hurt your score.  You will get a significant bonus to your score if you have all of your cards reporting $0 except one, with the remaining card reporting a small positive balance (like $10).  This can be done while having very small credit limits.  If it's not clear how to do this, then ask and any number of folks can explain how.

[wife2froggy]

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@Anonymous wrote:

It sounds like even after you get them paid down you will have:

      (a) multiple credit cards reporting a positive balance, and

      (b) a utilization of around 15-19%

Both of these things will hurt your score.  You will get a significant bonus to your score if you have all of your cards reporting $0 except one, with the remaining card reporting a small positive balance (like $10).  This can be done while having very small credit limits.  If it's not clear how to do this, then ask and any number of folks can explain how.

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I've heard the opposite - that each account should have a teeny balance... not only to show some (responsible) usage but also to prevent the cards from closing due to inactivity/underusage. I can pay them all off if it truly is better to have the 0's. I have autopays spread over the cards, small stuff like Hulu, Spotify Premium, etc just to keep the cards active. Not a good idea?

[Anonymous]

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@wife2froggy wrote:

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@Anonymous wrote:

It sounds like even after you get them paid down you will have:

      (a) multiple credit cards reporting a positive balance, and

      (b) a utilization of around 15-19%

Both of these things will hurt your score.  You will get a significant bonus to your score if you have all of your cards reporting $0 except one, with the remaining card reporting a small positive balance (like $10).  This can be done while having very small credit limits.  If it's not clear how to do this, then ask and any number of folks can explain how.

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I've heard the opposite - that each account should have a teeny balance... not only to show some (responsible) usage but also to prevent the cards from closing due to inactivity/underusage. I can pay them all off if it truly is better to have the 0's. I have autopays spread over the cards, small stuff like Hulu, Spotify Premium, etc just to keep the cards active. Not a good idea?

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This is an extremely common (but false) belief, often promoted by lenders and/or realtors.  All this shows is that failure to know how the FICO models work is widespread, even among the people who brush about against it daily for a living.

I think it is important that you not rely solely on what I have to say, but that you also confirm it with several other people.  You can do that by heading over to the Understanding FICO Scoring board and posting a very focused question there.  Something like this:

I have 8 open cards on my reports.  I am preparing for a mortgage.  I had been told that my score will benefit from having every card reporting a small positive balance.  Is that true?

(I couldn't tell for certain how many cards you have.  It sounded like it was 8 total from your earlier post: 2 AU cards, 1 store card, and 5 other cards.)

The one card that reports a small positive balance should be a true credit card (not a charge card) in your name alone (not an AU card).  The small balance should be between $5 and $15.  Therefore you can conclude that all your AU cards should report $0 (and most of your other cards as well).

Final note:  What you have heard is not completely untrue.  There is an advantage to using all your cards to prevent them from being closed due to inactivity, for example.  But using a card once every six months is sufficent for that.  You do not need to use a card every month.  Certainly having multiple cards reporting a positive balance is bad for your mortgage score.  You want exactly one positive and all others reporting zero in the 45 day runup to pulling your scores.

[wife2froggy]

Great insight and explainations. Thank you much!