Short AAoA and credit utilization: how do they impact mortgage scoring?

[jenrn123]

Hi everyone,

I am in the process of optimizing my credit to improve my mortgage scores before applying next May or June. Because I am applying one year before I was actually planning to more than half of my 26 open accounts will be under 2 years and a couple will be under 1 year. My current AAoA is 1 yr, 9 months. I just realized that my plans to optimize my credit score involve paying off my oldest open account, my motorcycle loan. I'm wondering if I should just pay the account down to a couple hundred dollars and keep it open during the application process to ensure that my AAoA will be greater than 2 years at the time of my application, or if the impact on the credit score between just below 2 years and just above 2 years would be negligible. The caveat to this is that my monthly payment is $270, so not paying it off will impact my DTI.

I currently have 26 open accounts which include 2 vehicle loans, 5 student loans, and 19 revolvers. 3-4 of the revolvers will be carrying balances at the time of application, with 1 under 49% and the other 2-3 under 29% (due to 0% balance transfers and 0% financing for 12-18 months). Utilization on my last 3B report from last week was 30% overall with 4 PIF accounts, will add another 3 PIF accounts next month, and an additional 3-4 by the end of January.

Student loans are all in deferment right now. I had considered paying off the oldest 2 to reduce my DTI, but it would only reduce my monthly debt by $40 (based on 1% of total loan amount). I suppose these could be reduced to a negligible amount reducing my debt, but keeping the account age. 

I believe, based on preliminary conversations with a couple of lenders (without a credit pull), that I will qualify for a mortgage with 45-49% DTI. In the past month my middle mortgage score increase from 648 to 672, so I'm hoping as the time since the newest account increases and credit utilization falls I can get my score over 700, preferably >720, but I'm not sure if that is in reach in 7-8 months.

So...I know this is a lot of information but I'm hoping someone can guide me in regards to the best plan to optimize my scores.

[DollyLama]

Mortgage scores are definitely impacted by the number of accounts reporting balances, with each new report with a PIF, you should be able to gauge it a bit on how much it may increase by May, keeping the utilization dropping, both individually and aggregate. 

How many inquiries you have in last 12 months, or will have by May? Those will give you some small points if you have quite a few, 12 months most impactful and 24 mos will be wiped clean off reports. 

You did not mention, so I will ask, do you have any derogs, open OR closed? Lates, collections, settlements showing on your bureau? 

[jenrn123]

I appreciate your reply! Almost all inquiries (6-7) will be at least 12 months old by application. There may be an additional 1 or 2 that are 10 or 11 months. When the mortgage company looks at inquiries are they looking across all 3 credit bureaus?

The only derog is one 30-day late that will be 5 years old but the time I apply.

[DollyLama]

Yes they will look for everything across all 3 bureaus. Some creditors when apping, may only pull from 1 or 2. Some only report to 2 bureaus and not all 3. They will cover all the bases. 

Make sure now that the reporting information is correct. Name, addresses (current and previous) personal info (current and previous). If some odd address appears where you have never lived before, contact the bureaus. This is likely to happen mostly with Jr. and Sr. , causing a mixed or split file. 

If the one derog is on an open account, begin now writing a goodwill letter, to the CEO of the company and plead to have it removed. ie, good customer, been 5 years since late, first time, grevious error on your part, etc. It will make a difference in your score. Don't give up either, you might get a phone call a within a week saying they are looking into it (a good sign), or it could be ignored. If so, send repeatedly once a month. There is a thread about the saturation of goodwill letter and success. 

Other than not applying for any new credit, goal of reducing utilization and number of accounts reporting a balance (can use card but must be PIF before the statement cuts), letting the inquires age off, while gaining age and payment history.  Since your target is May, just sit tight and get those cards PIF as you stated (*note, thresholds for score bumps are <48.9 and <28.9 on utilization), and see where you stand when the January PIF cards are reported, and hammer away on the one late payment. 

[jenrn123]

Thanks DollyL...I was thinking that since the only 30-day late was 5 years old that it would be negligible. As I look at my 3 scores Transunion is my middle mortgage score and my highest Fico 8, but the only one of the three that doesn't show this late payment. Since I have time, and nothing to lose I'll start a campaign to have it removed. 

I appreciate your help!

[JVille]

Fico 8 scores have nothing to do with Mortgage Scores. Please pull Mortgage Scores only. Available here on this website.

[jenrn123]

I have all of my scores as I began monitoring them through MyFico last month in anticipation of apping for a mortgage next year. Just wanted to see where I was starting from. If you look at the initial post you will see that I listed my mortgage middle score increase over the past month. As stated, Transunion is my middle mortgage score whereas it is my highest FICO 8, but is the only agency that doesn't report my 30 day late. It was just stated as an observation regarding the impact of a 5 yr old 30-day late on mortgage scoring models vs FICO 8, although I don't guess it is an apples-to-apples comparison.

[JVille]

Just completely leave out anything but Mtg Scores on the Mortgage Board. It has Zero bearing on anything and in this case added unnecessary confusion to your point. Which I will now need to go back and read.