HELP! Need 30 points within two months, paying balances, score is going down. I'm very confused....

[Stripd]

Will be formally submitting my application for my mortgage in two months. Score is 707 and I need a 740. Where the confusion lies is that I'm paying the full balances on my card and my score is dropping. For example two weeks ago I paid all the balances on my cards and all my scores dropped 10-17 points. I have no idea what I'm doing wrong or how to correct this.

With the exception of 120 day late payments on school loans back from 2012 my credit is exceptional.

Any help is greatly appreciated.  I have no idea what to do.

Thanks!

[disdreamin]

Can you share where you are pulling your score from and if you know which score your mortgage lender will use (assuming you know who you are going with for your mortgage)? My FICO 8 scores and the ones pulled when I did my refi a few years back were significantly different, so I'm just trying to confirm the numbers. FWIW, the type of score the bank used for my mortgage is currently - no joke - almost 70 points lower than my FICO 8 or 9. Horrifyingly different, which is why I ask about the particulars of your situation.

Edited to add: It might be worthwhile to make sure one card reports a small balance on statement close. You can PIF after that, so you don't pay interest or carry a balance month to month, but having every card post with zero balance might be an issue. I'm hoping an expert will chime in on that!

[Thomas_Thumb]

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@Stripd wrote:

Will be formally submitting my application for my mortgage in two months. Score is 707 and I need a 740. Where the confusion lies is that I'm paying the full balances on my card and my score is dropping. For example two weeks ago I paid all the balances on my cards and all my scores dropped 10-17 points. I have no idea what I'm doing wrong or how to correct this.

With the exception of 120 day late payments on school loans back from 2012 my credit is exceptional.

Any help is greatly appreciated.  I have no idea what to do.

Thanks!

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Are you paying your balances before statements cut so your balances show as "0" on your statements - or are you allowing balances to report on the cards you use and then paying off those balances after they report? A few key points:

1) Fico mortgage scores include a factor that looks at how many cards report non zero balances. Depending on how many open CC accounts you have, your score may drop if more than 1 or 2 cards report a balance. If you have less than 5 cards, best to allow only one card to report a balance. 

2) If NO cards report a balance on monthly statements, score will take a hit - a 20 point drop is not unusual. Need to show some use of credit.

3) Maintain your aggregate CC utilization under 9%  => (total reported balances)/(total credit limit all cards combined)

 * Keep utilization on the card you do allow to report a balance under 30% [many posters say to keep it unde 9% but, my experience is unde 30% is fine as long as aggregate utilization is under 9%].

[Stripd]

So far it looks like Fico 8 has been affected but mortgage score hasnt.  I'm viewing the additional scores inside the reporting. 

I obviously need to get my middle score up to a 740 which is right now sitting at 715.

Currently I have six cards open, some dating back to 2004 (limit got decreased to $500 for lack of use on that one). Only utilizing two cards right now and paying them off after using. I guess I could stop and take an interest hit if it will be worth it.  The cost will be minimum on a 100.00 balance.

Also from what I've heard installment loans are better to keep standing, but if I can knock out more than half the balance down on one right now, would that significantly help?

[Thomas_Thumb]

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@Stripd wrote:

So far it looks like Fico 8 has been affected but mortgage score hasnt.  I'm viewing the additional scores inside the reporting. 

I obviously need to get my middle score up to a 740 which is right now sitting at 715.

Currently I have six cards open, some dating back to 2004 (limit got decreased to $500 for lack of use on that one). Only utilizing two cards right now and paying them off after using. I guess I could stop and take an interest hit if it will be worth it.  The cost will be minimum on a 100.00 balance.

Also from what I've heard installment loans are better to keep standing, but if I can knock out more than half the balance down on one right now, would that significantly help?

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Allowing a balance to "carry over" month to month does not help score. It only costs you money. What I would suggest is the following for maximizing points from a utilization and # cards reporting perspective. [this is unlikely to get your middle score above 740 but, might get you above 720, to say 725]. 

1) Pick one of the two cards you use regularly - preferrably the higher limit card and allow a small balance to report on the statement (say $50 to $100) assuming the card's limit is $1000 or more. If you charged more than that amount on the card, make a partial payment before the statement cuts to bring the balance under $100.

2) If you plan on continuing to use the 2nd card, pay off all charges you put on the card 2 or 3 days before the statement cuts. Then don't use this card again until at least 3 days after the normal cut date. This way your statement will show a zero balance.

Note 1: The above strategy will result in only one card showing a balance on your credit reports, the card that reports the balance will show a low utilization (under 10%) and you aggregate utilization will be quite low (probably under 2%). All these things should help your score..

However, the 120 day late will continue to hold down your score.

Note 2: Fico 04 mortgage scores do not benefit from the share secured loan trick. If you were concerned about Fico 08 scores and had no open installment loans on file, getting a small loan and paying the balance to loan ratio down to under 9% could potentially boost score. Again, this tactic won't help your EQ and TU Fico 04 mortgage scores.

[Stripd]

Thanks for the info! I do however have installment loan, which I could pay down to 9%. Would that help me out? Also the 120 day late payments are three years 10 months old. Is it possible that two months they will fall off?

[Thomas_Thumb]

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@Stripd wrote:
Thanks for the info! I do however have installment loan, which I could pay down to 9%. Would that help me out? Also the 120 day late payments are three years 10 months old. Is it possible that two months they will fall off?

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Paying down your installment loan to under 9% could boost your Experian mortgage score 20 points depending on the current score. Why? Because the EX score is based on the Fico 98 model. As mentioned before, it will not benefit EQ or TU. If EX is your middle or low score, pay down the loan down to just under 9% - but don't pay it off.

Unfortunately, the 120 day lates will impact your score for 7 years and they won't fall off anytime soon. The impact on score may taper off a bit but, you may already be realizing a benefit from that.

[SouthJamaica]

1. Let all but one of your credit cards report at zero, with one reporting a sub-9% balance.

2. Pay your installment loan down to 9%.

This should optimize your scores within the framework of your current scorecard.

I don't know if it will pick up 33 points, but it might.

[RonM21]

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@SouthJamaica wrote:

1. Let all but one of your credit cards report at zero, with one reporting a sub-9% balance.

2. Pay your installment loan down to 9%.

This should optimize your scores within the framework of your current scorecard.

I don't know if it will pick up 33 points, but it might.

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+1

This is what I'd recommend, at least to start.  I know it should at least get you some points.

[Anonymous]

OP, there is only 1 thing I can think if that's a sure fire bet to get your score up to 740+ in the next 2 months, and it has nothing to do with utilization, amount of cards reporting, etc. that's been discussed above already... all of which is useful information BTW.

The 120 day "lates" that you referenced are the problem.  First of all, how many are there?  Have you attempted to obtain a GW adjustment from your loan provider?

If you could get your most recent 120 day late removed, or even halved to a 60 day late (which only impacts score for 2 years and you are past that at 3+) I'm confident your score would increase quite a bit.  It also depends how many 120 day lates we are talking and how old the other one(s) are after the one that's 3+ years old.  Whether or not you've tried to obtain a GW adjustment yet, I'd start firing off some letters every could of weeks between now and when it's mortgage time.  The odds aren't great that you'll have success, but they are certainly greater than the 0% odds you have by not attempting anything.