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Credit drop disqualified me for mortgage- help please!


Credit drop disqualified me for mortgage- help please!

My fiancee and I are in the process of trying to buy a home and were pre-qualified in September 2012 for an FHA loan.  Since then, we've submitted an offer on a house, had it inspected, made a down payment, and were in the final steps of procuring financing, when they re-ran the credit scores last week.
When they did, my credit score dropped below the minimum required for the loan.  The mortgage broker explained that the only difference between the first time and second time he ran the credit reports, was the first time, I was carrrying a $600 balance on my $3000 Capital One card, and the second time the balance was $2,997.  I did not know, until today, that a high balance can have such a negative effect on my credit score.  I thought if I paid at least the minimum on time, I would demonstrate that I can pay a balance over time, and it would have a positive impact.  Since the card has 0% interest until February 2013, I used my income to pay personal debts, and used the card for day to day activities and other major purchases which needed to be made.  I fully planned and budgeted to pay the card off 100% before the interest payments started to be applied.  I really thought this was a good course of action.  Obviously I was very wrong.
The mortgage broker advised me to pay at least 50% of the balance and find out from Capital One when they report to the credit bureaus (in my case, January 7th, 2013).  After that date, he will re-run the credit scores and HOPEFULLY it will be back above the minimum needed for the loan.
So, this morning I paid Capital One 2,000 of the $2,997.15 I owe them.  I can pay another $350 to them before they report to the bureaus on January 7th.
I guess my questions are:
What are my chances of my credit score returning to the September 2012 levels when it is run again after January 7th?  I did not, nor do I plan to, do anything to affect my credit score negatively until then, and will not use the card.  I have another card with a $300 maximum (and is close to max), but will be paid in full prior to January 7th.
Is there ANYTHING else I can do to help myself get back above the threshold, where I was just a few months ago
Message 1 of 24
Moderator Emeritus

Re: Credit drop disqualified me for mortgage- help please!

Your util plays a big factor in your CR scores.  Paying down that util should put you back up over the hump.  Optimal is to have under 10%.  

Starting Score: 504
July 2013 score:
EQ FICO 819, TU08 778, EX "806 lender pull 07/26/2013
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Current scores after adding $81K in CLs and 2 new cars since July 2013
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Message 2 of 24
Valued Contributor

Re: Credit drop disqualified me for mortgage- help please!

One "trick" I've read about that can help give someone a quick boost is to be added as an authorized user on someone else's credit card account IF that account has a low balance, is and has always been in good standing, and is an old account. 


It sounds like you don't have many accounts (just two? the $3000 Cap. One and another $300 account). How old are the accounts? Do you have any other trade lines reporting on your credit report and if so, how old are they?


Also, make sure that the $300 account you have also reports to the credit bureaus on Jan. 7th, don't assume.

Message 3 of 24

Re: Credit drop disqualified me for mortgage- help please!

How much different was the score? I learn 9% utl is the magic number. Also learned being AU does not really help you with mortgage loan because they will that that acct out (but I could be wrong).

Starting Score: 2/22/12: EQ 530, TU 553, EX 528(lender). 12/4/12 (rebuilding starts)= EQ 599.
Current Score: 1/4/16: EQ 743, TU FICO 724, EX 737.
Goal Score: 750 all across.

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Message 4 of 24

Re: Credit drop disqualified me for mortgage- help please!

thanks for the help... though i am not really sure what some of these terms mean.  I'm very new here.


Shogun- I am not sure what util means?


Mike- Yes, those are the only 2 credit cards i have.  I have the $300 limit card scheduled to be paid in full tomorrow, and as I've said, I have the 3000 limit card, which I paid 2000 towards today, and can reasonably do another $350-400 more or so before that Jan 7 date. I've had the $300 card since July 2011, and the $3000 card since July 2012.  in addition to the cards, I have student loans which i pay regularly and are in good standing, though in the past that wasn't always the case.  There were also delinquent tax payments, and old credit cards, which i have since cleared up.  i am beginning to crawl out of the mess, and have been very responsible paying my bills on time in the last few years.  Also that is sound advice on checking when the $300 card reports to the credit bureau.  Thank you.


Mama J- When the mortgage broker ran credit check in late September of this year, my score was 644.  He told me about a verizon bill which i hadn't paid (and didn't know about) which i cleared up that day.  He told me to make sure i am careful to pay bills on time since 640 was the minimum, and i was right there.  Unfortunately I did not know that a large card balance, even one with timely payments, would negatively affect the score.  When he re-ran it (this morning I assume), it was 623, 17 points short of what I need it to be, and he told me the difference was the large balance on the card, and explained while it is good to display an abillity to pay a debt over time, at the same time, they want you to have alot of AVAILABLE credit, for emergencies and such.


PS- Mama J- I am unsure as to what 9% utl and AU mean.  Like i said, i am new.


What I assume happened is it had an uptick after I paid the Verizon bill, and then dropped 20+ points when the large balance was reported.  i just hope to get at least 17 of those points back when we check again.  fingers crossed.


Thank you for all the help.

Message 5 of 24
Established Contributor

Re: Credit drop disqualified me for mortgage- help please!

Welcome to myFICO.


Util means Utility or Utilization, it's the amount of credit you are USING out of what you have AVAILABLE.


AU means Authorized User. Being added to someone elses credit card.


Make sure you check this thread out if you plan on staying around (which we hope you will)


I'm sure you can get some of those points back by getting that balance paid down. I doubt you received any points for paying the Verizon bill, so the total loss of points is probably due to very high single card utilization and overall utilization if your total credit limit (CL) is only $3,300. Good luck to you and please keep us posted.

Starting Score: EQ: 383 2/2011
Current Score: TU: 644 EQ: 648 EX: 6?? 2/2015
Goal Score: 700

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Message 6 of 24

Re: Credit drop disqualified me for mortgage- help please!

Thank you.  i bookmarked that for future reference.


Through my conversation with the mortgage broker he said my problem was I had a balance over 50% of the limit.  He said it wouldn't matter if I paid it down to $1,000 or down to $0, just as long as i got it below 50%.  i don't know, but that just doesn't seem right to me.  If Mama J's 9% figure is accurate, I need to pay off the $300 card to $0, and the $3000 card to $297... a little more than i can swing.. at the very least, maybe i should get it down to the $600 balance it was at when the credit score was run in September and came back at an acceptable 644.  I'll do my best...



Message 7 of 24
Established Member

Re: Credit drop disqualified me for mortgage- help please!

Your debt utilization plays an important role in your credit score. You have $3300 credit limit. Your score will be best when your utilization is around 5% - 10%. So for you that will be $165 (5%) - $330 (10%).


I let mine get too high (around 50%) a few months ago. My high score Fica Equifax score was 682 (Scorewatch). It went down to 640 in a few months, mainly because of utilization. I recently paid off everything and it will take some time but I expect to get into the 700s soon. A collection acct just came off too so that will help as well. Lenders view you as more of a credit risk the higher your utilization gets.

3/2012 Experian Fako 606 4/2012 Experian Fako 655
4-8-12 Equifax FICO 630 (myFico) 4-27-12 Equifax 657
07/2012 Experian Fico 657 Equifax Fico 660 Transunion Fico 684 (mortgage pull)
01/2013 Equifax Fico 689 (Scorewatch) TU 08 (Walmart) 696
Message 8 of 24
Moderator Emeritus

Re: Credit drop disqualified me for mortgage- help please!



mortgages are so stressful! My recommendation is that you call capital one and ask for an off cycle update or ask your mortgage guy to do a rapid rescore. With a rescore; the payment would be considered without costing you yet another inquiry.

I highly recommend that you check out the MyFico Mortgage Loanforum.


Below is a short list of helpful mortgage loan related links that may help you prepare for the process:

Guide to Common Abbreviations - Barry


Mortgage Acronyms & Abbreviations (what does PITI mean?) - ShanetheMortgageMan

Good Faith Estimates Explained - ShanetheMortgageMan


The Mortgage Pre-Approval Process - ShanetheMortgageMan


Evaluating Conventional vs. FHA (VA & USDA)- ShanetheMortgageMan


Definately feel free to post any questions you have about DTI and Pre-Approval Odds over there!  In addition, you may qualify for downpayment assistance as well as other programs to help you get into a new home!


Best of Luck to you!


Starting Score: 08/29/2011 TU 671 EQ 674
Current Score: TU 754 EQ 694 EX 697
Wallet: NFCU Visa Sig 25k, Amex Lowes 22k, NavCheck 15k, Amex PRG, Amex Zync, Discover It 13.5k, Amazon Visa 5k
Platinum Spade Garden Club Member: App Free since 1/1/13. No more apps til who knows when?
MyFICO Fitness Goal: 800s Club!

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Message 9 of 24

Re: Credit drop disqualified me for mortgage- help please!

Thank you, I will peruse these links tonight...


The broker forwarded me the credit reports and highlighted the 2 cards (3,000 and 300 dollar limits which were both near max).  He knew about the $2,000 payment I made on the bigger card, and suggested I also pay the $300 limit card down to at least $80, though I paid that in full this morning.


I am borrowing $300 from family, and with that and payments I can make, I wlil have to big card down to $297 of $3,000, and the small card down to $0 of $300 before the companies report to the credit bureaus- which is 9% of my total credit, and a shade under 10% of my credit on the larger card.  Fingers are crossed that it is good enough for 17 points next month.


In the interim, the broker was able to start the appraisal process using the original credit scores.  The hope is with the holidays, it takes long enough, it leads right into the new, God willing, adequate credit score....



Message 10 of 24