Frustrated with my credit scores

[Aprile421]

I just got my mortgage 6 months ago. They are really hyper sensitive to utilization. You will have to get that down almost to the point of having one card report no more than a 50 dollar charge. Especially if your scores are on the edge of qualifying for a good FHA or conventional loan.  

I went FHA my mortgage scores were all over 680 with my mid score being 702. All of my cards were paid off except one card reporting a recurring charge. I got hit with a 65.00 annual fee from my Best Buy card and my LO made me pay that off too before she would let it go through. I make a pretty good income and I had a lot of money in savings to cover emergency expenses. They wanted to see that too.  I had to mine my ps and qs but it paid off because I signed purchase agreement and closed 20 days apart with no issues. 

I did have 2 small collections when I applied for my mortgage. They equaled less than $1000. I offered to pay them off but my LO told me not to worry about it. If they had been any bigger that would have also factored into my mortgage approval. So if your collections are higher than $1000 you might want to look at getting them pfd or good willed. 

Wanted to add make sure you are watching your mortgage scores and not your regular Fico scores if your goal is a mortgage. They go off the mortgage scores which Myfico provides with their paid service.

Good luck with getting your mortgage. It is a pain but totally worth it in the long run.

[Anonymous]

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@CreditScoreChallenged wrote:

I have been working on my credit to get my score up high enough to be able to apply for a mortgage. My score keeps dropping even though every time I get an alert it is positive. My equifax just took a a -22 point dive and a $121 decrease was reported. Last month my transition went up to 644 then took a dive 5 days later -12 and my experian went up to 651 then 5 days later took a -22 point dive. Both with no explanation. Does anyone have any insight on what may be going on? I feel like I am fighting an uphill battle.

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For God's sake don't pay anything off. I made that mistake with my mortgage - paid it off 7 years early and lost 60 points on all 3 Bureaus the very next month. A year later and I paid off my car not 2 years early and lost another 40 on all 3. Want good credit? Pile the debt on and watch the FICO score soar. Paying the debts off is the kiss of death with FICO. After all, the algirithm rationalizes - if you stop paying (even if the reason is you don't owe anything) you will never again start paying.

[Anonymous]

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@Anonymous wrote:

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@CreditScoreChallenged wrote:

I have been working on my credit to get my score up high enough to be able to apply for a mortgage. My score keeps dropping even though every time I get an alert it is positive. My equifax just took a a -22 point dive and a $121 decrease was reported. Last month my transition went up to 644 then took a dive 5 days later -12 and my experian went up to 651 then 5 days later took a -22 point dive. Both with no explanation. Does anyone have any insight on what may be going on? I feel like I am fighting an uphill battle.

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For God's sake don't pay anything off. I made that mistake with my mortgage - paid it off 7 years early and lost 60 points on all 3 Bureaus the very next month. A year later and I paid off my car not 2 years early and lost another 40 on all 3. Want good credit? Pile the debt on and watch the FICO score soar. Paying the debts off is the kiss of death with FICO. After all, the algirithm rationalizes - if you stop paying (even if the reason is you don't owe anything) you will never again start paying.

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Note that the examples Flyingifr gives all have to do with paying off existing installment loans in entirety.  The FICO models score installment debt in a complicated way and it is true that paying off entire loans abruptly can have unintended consequences for your score.  Prior to any of our readers contemplating a full payoff of an installment loan, they should get some advice from people here about how that might affect their score -- people here will be happy to help.

That said, paying off credit card debt (as the other commenters have advised you to do) is without question a very good thing for your score, as long as you have one credit card reporting a small balance. 

While FICO does like it if you have a small amount of open installment debt and a small amount of open CC debt, the amounts can be very small, and there is no scoring advantage (and possible harm) that can come from "piling the debt on" beyond those very small amounts.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

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@CreditScoreChallenged wrote:

I have been working on my credit to get my score up high enough to be able to apply for a mortgage. My score keeps dropping even though every time I get an alert it is positive. My equifax just took a a -22 point dive and a $121 decrease was reported. Last month my transition went up to 644 then took a dive 5 days later -12 and my experian went up to 651 then 5 days later took a -22 point dive. Both with no explanation. Does anyone have any insight on what may be going on? I feel like I am fighting an uphill battle.

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For God's sake don't pay anything off. I made that mistake with my mortgage - paid it off 7 years early and lost 60 points on all 3 Bureaus the very next month. A year later and I paid off my car not 2 years early and lost another 40 on all 3. Want good credit? Pile the debt on and watch the FICO score soar. Paying the debts off is the kiss of death with FICO. After all, the algirithm rationalizes - if you stop paying (even if the reason is you don't owe anything) you will never again start paying.

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Note that the examples Flyingifr gives all have to do with paying off existing installment loans in entirety.  The FICO models score installment debt in a complicated way and it is true that paying off entire loans abruptly can have unintended consequences for your score.  Prior to any of our readers contemplating a full payoff of an installment loan, they should get some advice from people here about how that might affect their score -- people here will be happy to help.

That said, paying off credit card debt (as the other commenters have advised you to do) is without question a very good thing for your score, as long as you have one credit card reporting a small balance. 

While FICO does like it if you have a small amount of open installment debt and a small amount of open CC debt, the amounts can be very small, and there is no scoring advantage (and possible harm) that can come from "piling the debt on" beyond those very small amounts.

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So as far as FICO is concerned, paying off debts and getting off the debt merry=go-round is like vomiting on a carnival merry=go-round: Once you get off they won't let you get back on.

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[Anonymous]

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@Anonymous wrote:

So as far as FICO is concerned, paying off debts and getting off the debt merry=go-round is like vomiting on a carnival merry=go-round: Once you get off they won't let you get back on.

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Hi Flyingifr.  On a different earlier thread you started ("FICO's punishment for paying off debt") we all expressed sympathy for the bad experience you had paying off loans.  We also suggested easy cheap ways to fix it. 

The unhappy experience you had, however, is not solved by giving misleading advice to other people who are trying to improve their scores.  It is simply untrue that paying off credit card leads to score harm or that a person will be helped by "piling on the debt." 

Nor will you solve the past experience you had by using wild hyperbole.  FICO's desire for you to have one card showing a $5 balance is not analogous to forcing you to vomit on a merry go round.  A $5 balance is easy for almost anyone to have.  The minimum needed for FICO to be happy with your installment debt is likewise very low -- any number of us will be glad to help you out with that if you are willing to take positive action regarding it.

Again, we remain sympathetic and are sorry you had a surpriising experience with the loan payoffs.  Very best wishes....

[Anonymous]

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@Anonymous wrote:

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For God's sake don't pay anything off. I made that mistake with my mortgage - paid it off 7 years early and lost 60 points on all 3 Bureaus the very next month. A year later and I paid off my car not 2 years early and lost another 40 on all 3. Want good credit? Pile the debt on and watch the FICO score soar. Paying the debts off is the kiss of death with FICO. After all, the algirithm rationalizes - if you stop paying (even if the reason is you don't owe anything) you will never again start paying.

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I think you're being a little dramatic here.  First of all, I'd gladly welcome a 60 point drop to my FICO scores across the board if it mean my mortage would be paid off tomorrow, 7 years early, or whatever.  Why?  Because significant debt would be gone.  And, as has been mentioned many times before, utilizing the SSL technique would give you all of those points back within 1-2 cycles.  Problem solved.  Piling on debt does not cause your FICO scores to soar. 

The only two work arounds to helping your score are to use the SSL technique and letting 1 small balance report on 1 card.  These two things combined hardly cost anything, take little time and effort, yet yield scores about 50 points higher than if you didn't do them.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

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For God's sake don't pay anything off. I made that mistake with my mortgage - paid it off 7 years early and lost 60 points on all 3 Bureaus the very next month. A year later and I paid off my car not 2 years early and lost another 40 on all 3. Want good credit? Pile the debt on and watch the FICO score soar. Paying the debts off is the kiss of death with FICO. After all, the algirithm rationalizes - if you stop paying (even if the reason is you don't owe anything) you will never again start paying.

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I think you're being a little dramatic here.  First of all, I'd gladly welcome a 60 point drop to my FICO scores across the board if it mean my mortage would be paid off tomorrow, 7 years early, or whatever.  Why?  Because significant debt would be gone.  And, as has been mentioned many times before, utilizing the SSL technique would give you all of those points back within 1-2 cycles.  Problem solved.  Piling on debt does not cause your FICO scores to soar. 

The only two work arounds to helping your score are to use the SSL technique and letting 1 small balance report on 1 card.  These two things combined hardly cost anything, take little time and effort, yet yield scores about 50 points higher than if you didn't do them.

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While I understand what you are saying, in practice it simply does not work that way. When I took oput the car loan (December 2015)  I took a 15 point hit for the new account. I got back 2-3 points a month as payments were made and the balance went down. All the points I got while making the payments were lost when I paid the debt off completely. Paid the loan off and took a 40 point hit. FICO exists to keep you in debt. Get out of Debt and you get thrown off the ride. That was my experience. $5 debt = good. $0 debt = bad.

[Anonymous]

We're playing the long game though. By following the advice of people in the "Understanding FICO Scoring" section of the forum, I properly positioned myself for a mortgage in 4 short months! I was strict, I was disciplined, I nailed it! I'm going to wring every FICO point I can out of this in the next 4 months prior to buying. These guys know what they're talking about. I gladly took small hits to gain large increases and I am NOT currently in debt, nor do I plan to be. 

[SouthJamaica]

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@Anonymous wrote:

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@Anonymous wrote:

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@Anonymous wrote:

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For God's sake don't pay anything off. I made that mistake with my mortgage - paid it off 7 years early and lost 60 points on all 3 Bureaus the very next month. A year later and I paid off my car not 2 years early and lost another 40 on all 3. Want good credit? Pile the debt on and watch the FICO score soar. Paying the debts off is the kiss of death with FICO. After all, the algirithm rationalizes - if you stop paying (even if the reason is you don't owe anything) you will never again start paying.

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I think you're being a little dramatic here.  First of all, I'd gladly welcome a 60 point drop to my FICO scores across the board if it mean my mortage would be paid off tomorrow, 7 years early, or whatever.  Why?  Because significant debt would be gone.  And, as has been mentioned many times before, utilizing the SSL technique would give you all of those points back within 1-2 cycles.  Problem solved.  Piling on debt does not cause your FICO scores to soar. 

The only two work arounds to helping your score are to use the SSL technique and letting 1 small balance report on 1 card.  These two things combined hardly cost anything, take little time and effort, yet yield scores about 50 points higher than if you didn't do them.

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While I understand what you are saying, in practice it simply does not work that way. When I took oput the car loan (December 2015)  I took a 15 point hit for the new account. I got back 2-3 points a month as payments were made and the balance went down. All the points I got while making the payments were lost when I paid the debt off completely. Paid the loan off and took a 40 point hit. FICO exists to keep you in debt. Get out of Debt and you get thrown off the ride. That was my experience. $5 debt = good. $0 debt = bad.

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I agree.

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

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@Anonymous wrote:

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For God's sake don't pay anything off. I made that mistake with my mortgage - paid it off 7 years early and lost 60 points on all 3 Bureaus the very next month. A year later and I paid off my car not 2 years early and lost another 40 on all 3. Want good credit? Pile the debt on and watch the FICO score soar. Paying the debts off is the kiss of death with FICO. After all, the algirithm rationalizes - if you stop paying (even if the reason is you don't owe anything) you will never again start paying.

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I think you're being a little dramatic here.  First of all, I'd gladly welcome a 60 point drop to my FICO scores across the board if it mean my mortage would be paid off tomorrow, 7 years early, or whatever.  Why?  Because significant debt would be gone.  And, as has been mentioned many times before, utilizing the SSL technique would give you all of those points back within 1-2 cycles.  Problem solved.  Piling on debt does not cause your FICO scores to soar. 

The only two work arounds to helping your score are to use the SSL technique and letting 1 small balance report on 1 card.  These two things combined hardly cost anything, take little time and effort, yet yield scores about 50 points higher than if you didn't do them.

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While I understand what you are saying, in practice it simply does not work that way. When I took oput the car loan (December 2015)  I took a 15 point hit for the new account. I got back 2-3 points a month as payments were made and the balance went down. All the points I got while making the payments were lost when I paid the debt off completely. Paid the loan off and took a 40 point hit. FICO exists to keep you in debt. Get out of Debt and you get thrown off the ride. That was my experience. $5 debt = good. $0 debt = bad.

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I understand your frustration with how Fico work. However, I think that frustration is blinding you from seeing real easy solutions to the problem.

Like you, I was stunned to discover that my Fico score dropped a huge # of points when I paid my car off.  But I was so happy to learn that the SSL remedied that situation. See my starting fico scores in my siggy line?  See where my fico scores are now?  These scores were achieved by letting go of my personal feelings of how I felt the system should work, and implementing the things I learned on this forum.  

It's awesome that you paid off your mortgage!  In a year, I hope to purchase a home and will be paying it off as quickly as possible as well.  As a result of the mortgage loan being reported at 100%, I fully expect my fico score to drop some 30-40 points.  But I also fully expect my scores to rise as I pay down the loan.  AND... I fully expect to loose 30-40 points when the loan is paid off IF no other installment is already in place before that mortgage loan is PIF.  I will have another SSL in place to avoid losing those points. An easy fix. No?  And I'm willing to bet, my scores will be 30-40 points higher (not lower) than now when it's all said and done.

Knowledge is power only if you use it.

I do hope you implement some of the things that will help your score.  It would be ashame to have accomplished so much (paid off mortgage, paid off car etc) and not see the fruit of that labor fico score-wise.

I wish you all the best.