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Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!

bobby76
New Member

Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!

Haven't been able to get much help from anyone on this topic, so hopefully someone here can shed some light on this.

 

I got approved for a mortgage loan for a new construction home this past August, 2018 with a middle Fico mortgage score of 725.  My DTI was borderline though and I was encouraged to try to pay off as much credit card debt as possible.  My FICO 8 scores were around 720-730 as well.  My Credit Utilization was around 40% (50k/125k limit)   Over the last several months, i paid a lot off as we were getting closer to 30 days from closing.  My FICO 8 was now up to 743 so i was really hoping i'd have my mortgage fico up there too....But NOOOOO!!!!  It was now 719.

Of course i'm pissed!  Nothing negative at all, only change to my credit was less utliization.  down to 24% (31k).  

Closing gets pushed back, and I take advantage of that by paying down a $10,000 credit card completely to try to get that one point back as it was going to cost me an additional $5k in points if I didn't get over 720.  Lowered my utliziation down to 16% (21k)

Got everything to post to my credit bureaus Friday.  My Experiean Fico 2 increased from 734 to 748 (my highest one)

however, get this...

My TransUnion Fico 4 dropped again from 719 to 713

My equifax Fico 5 dropped from 715 to 710

 

Meanwhile, all my Fico 8 scores are now 760+.  

I feel if I pay off more, my scores could go under 700.  

 

after 45 minutes on the phone with a supervisor from FICO, i was told it's because i'm in a new higher scoring card now and the mortage ficos are judged more critically there.  Such BS!!  No scores shoudl ever go down and penalize the consumer for paying off debt.  

 

Any advice?  Any insight?  

Message 1 of 18
17 REPLIES 17
Anonymous
Not applicable

Re: Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!


@bobby76 wrote:

No scores shoudl ever go down and penalize the consumer for paying off debt.  

  


They don't, with the lone exception being if you go from extremely low (say under 8.9%) reported utilization to 0% utilization.  From what you wrote above, though, it does not sound like you paid off all of your revolvers and that all of them are reporting $0 balances.  Is this correct?  If so and you still possess at least one non-zero balance, your scores have not been dropping due to paying down your balances/utilization.  It's an impossibility.  If your scores are dropping, it's due to a different factor.  

Message 2 of 18
bobby76
New Member

Re: Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!

It's totally possible because that's exactly what happened. Yes I still have balances. Again I had a myfico supervisor explain that once my FICO 8 went up over 750 it put me in a new tier or score card and basically it's like I'm now a bad student at the top of the class compared to being a good student at an average class. But what I need to figure out from here is if I make further payments will my scores only go up or could this happen again?
Message 3 of 18
CreditGuyInDixie
Super Contributor

Re: Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!

Has your mortgage lender been pulling your scores periodically over the last ___ months?  Each time he does that constitutes a hard pull.  Depending on when those are timed they could be lowering your score.  The score harm for mortgage inquries is always delayed by at least 30 days, so a prolonged period of looking for houses can result in scores dropping (due to inquiries).

 

The $40/mo credit monitoring service called the myFICO Ultimate will get you your mortgage scores each month without any hard pulls (though it doesn't make score harm from the lender's hard pulls go away).  I strongly suggest subscribing to that tool now if you don't have it.  Make sure you have the $40 flavor so you can get new mortgage scores monthly.

 

The best approach for you to take at this point is not to speculate on what might have caused the drop before, and instead work with us on known strategies for improving your scores now.

 

It sounds, for example, like you still have quite a lot of CC debt reporting to the bureaus (21k).  Do you think you could lower your total CC utilization to under 8.9% and each card to under 28.9%?   Another help would be to create as many $0 balances as you can (although the other strategy is more important).  Note that if you do try to get under the thresholds I just mentioned, be sure to take into account any interest that the CC issuer is charging you.  I.e. if you lowered your total util to exactly 8.9% and then the monthly interest took you to 9.03% you'd lose the benefit.  So perhaps lowering to 8.5% or whatever makes more sense.

 

PS.  You also mention loan payoffs: these can also lower your scores, though the mortgage scores are less sensitive to this.

Message 4 of 18
bobby76
New Member

Re: Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!

I got my scores from MyFico not the lender. My lender pulled the scores once. The drop in scores was only due to paying off that 10,000 credit card completely.

I can't do much more than I already did, just waiting to see how these last payoffs help, and hoping enough to get back to 720

I paid by BOA card down from 1650 to 729. That should report tomorrow. Unfortunately that is 29% as I was told to get it under 30%.

I also just paid off my discover card completely $5500 so that will go down to 0

So best I can do is 29% on one card and 16% down to 11% overall. Can that get me at least 7-10 points? Praying it will. I have to lock in rate this week with closing set for April 19
Message 5 of 18
CreditGuyInDixie
Super Contributor

Re: Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!

We can advise you better if you list all your revolving accounts and their limits, like this:

 

Card 1.  Balance = ____   Limit = ____

Card 2.  Balance = ____   Limit = ____

Card 3.  Balance = ____   Limit = ____

etc.

 

The breakpoints for utilization are the ones I gave you.  Thus 29.01% is not nearly as good as 28.97%.

 

If you think you could get friends or family to help you out a little to get your CC debt down below the various breakpoints I mentioned it would be really good for your score.  I am thinking especially about getting your total utilization under 8.99% and every card individually under 48.99% (or better yet under 28.99%).  Remember to assume that the CC issuer will add interest, so you need to get to under the breakpoint even counting a last minute addition of interest to your balance.

 

When were your hard inquiries by the lender?

 

Message 6 of 18
bobby76
New Member

Re: Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!

I'm not sure if I have time to do anything. I did pay another $25 to my boa card just now dropping it to 28% but I don't think that will show up since my statement closed Friday.

I can't get help anywhere else, especially since I'm out of time. My only hope is that what shows up by Wednesday on my credit was enough to get 7 points. Again I was at 719 TransUnion before I paid off the 10k PNC balance and then it dropped to 713... And Experian has gone from 716-725-734-748 in the last month. Wish the others followed that same trend.

What's remaining
Amex 10,700 balance on 15k limit. This went from 11,100 last statement
Boa 729 on 2500 limit. I did pay another 25 down to 704 but it probably won't show up on time. Prior to this though TransUnion listed has the balance at 1229 and Equifax at 1669. So both are big % drops. The difference was boa didn't update to Equifax mid cycle and it did with TransUnion.

I have a 3085 balance in Wells Fargo on a 10,300 limit. That's also at 29.9% it should report on the 20th. I can try to pay another $100 and maybe I'll get that benefit in time.

Usaa is $22 on 9000 limit. Already paid off but didn't update to transition m TransUnion last month.

That's it
My credit was first pulled on Feb 12 and then again March 8
Message 7 of 18
CreditGuyInDixie
Super Contributor

Re: Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!

The inquiry on Feb 12 was ignored by FICO for its first 30 days -- after that you experienced a hit from it, which makes sense from the timeline.

 

The EX mortgage model will experience a 2nd scorable inquiry 30 days after the March 8 inquiry, since your two inquiries were not made within 14 days of each other.  I think that the TU and EQ mortgage scores give you a broader window to permit rate shopping, so your two inquries will be considered as one (if I am right about the window) on these two scores.

 

You are experiencing a significant penalty for the very high utilization on the Amex card.  And while you did bring the utilization down on it, you did not cross the breakpoint of 68.99%.  The breakpoints for uitilization are:

 

8.99%    28.99%    48.99%    68.99%    88.99%

 

I do wish you the best of luck on this.  It's sad for you that you are getting help from us now, rather than a few months ago.  We could have advised you much better then.  Still hindsight is always 20/20.  Hope everything works out well.

 

Message 8 of 18
bobby76
New Member

Re: Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!

Thank you and I do understand all of this. However what hasn't been explained well yet is paying off a 10,000 card elevates 29 different FICO scores of mine (roughly 740-765) EXCEPT the eq and tu mortgage scores. This was all between March 13 when I pulled it myself at 719/715, paid the 10k card and then pulled the scores March 15 and saw everything skyrocketed EXCEPT those two mortgage scores. Only rationale explanation was what I got from a senior MyFico supervisor that said it's because I jumped to a higher level tier overall and the mortgage scores are now much more penalized by credit card debt than they were when I was a lower FICO 8 score.

I will try to pay down my Amex down to 68% and maybe I can get another point or two. Regardless I think it's a terrible model to ever drop someone's scores after they pay down a lot of credit card debt.
Message 9 of 18
buildingafuture
Frequent Contributor

Re: Fico Mortgage Scores keep dropping as I pay off more credit cards....Please Help!

I am not experienced in scores dropping from paying off CC debt because I am in a low bracket and working my way up, so every payment improves my scores. However, you said the manager at FICO said you went into a new scorecard causing your mortgage scores to lower due to the new peer group you are being compared to. If that's the case then paying the CC debt down to a more favorable ratio will increase your mortgage scores in the new scorecard you are in. I know there isn't much that can be done now that you are getting pulled again so soon. Hopefully the new payments will get you on a more favorbale side of your new scorecard than it was previously. If not, can you postpone another 2 weeks to pay more down and do a rapid rescore? I am not sure how that would affect your closing and such. 




Message 10 of 18
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