How best to pay down credit card balances to improve a FICO mortgage scores

[Anonymous]

To close the loop on this story:

I paid down my credit cards, trying to get them all to 69% or better utilization, and  then paid down total credit util down further.

The first $15k paydown resulted in this change.  Even though I have no late payments ever, and no derogatory marks, the utilization of credit lowers the scores.
 
Equifax      +6 674--> 680
 
Transunion +1 683--> 684
 
Experian     +4 678--> 682
 
I then directed an additional $27,000 towards paying down the other balances, roughly in the way CreditGuyinDixie and others recomended. 
I reduced the balances to be below 69%, and paid off two more all the way so there are now 6 accounts at 0% utilization, 1 at 56%, 4 at 65%, 1 at 89%  They were all at ~97% before.
 
Total revolving credit utilization is now at 65%, down from 97% This was in June 2017

By July 2017 it looked like this:

FICO Score 8

Equifax  713

Transunion  705

Experian  721

And when the bank ran the FICO mortgage Score for a HELOC refi in July, it was at 705.

In the end, after looking at the numbers, instead of a HELOC refi, I chose to pursue a full refi of all debt into one big 30 year first mortgage.

That effort was successful, and now with al credit card debt paid off, the MY FICO similator predicts my scores will all be above 800 in a couple months. We will see.

It took until early Oct 2017 for all this to play out.

Due to hard credit pulls for the refi's my scores looked like this in September, with the same Credit utilization as in July.  The lower scores appear to be exclusively due to 4 different hard credit pulls from the 2 banks I was working with.

FICO 8 Sep/Oct 2017

Equifax 699

TransUnion 694

Experian 698

Interestingly, at the same time, the FICO morgage score hard pulled for the succsessful first mortgage refi on mid September was 720, from Equifax.

So in conclusion, all this moving of money around and paying off debt stratetigcally did lead to a good outcome, a refi of expensive credit card debt into a 3.825% first mortgage, and about a $3000/ month cash flow improvement as well as about a $1500/month interest expense savings.

And, MyFICO simulator predicts all agency scores will rise to 820-830 within several months till now, and if that is so, I will utilize the score to get a small HELOC done at a very good rate, for a rainy day, and probably apply for various rewards cards that suit my needs after that.

Thanks again to the forum participants for the advice earlier in the summer, it was effective in the end.

[Kree]

Amazing success story, thank you for sharing. 

[jamie123]

You are a smart man with a great story!

I'm in a similar situation right now. I bought a house and then received 2 new credit cards with 0% APRs for at least 14 months. Used the cards to furnish the house so that I could leave my money invested in stocks which have been doing great! My stocks are up 25% since February when I received the cards but my FICO scores were hammered down because of high UTI. I don't need high scores right now but it really bothers me that my scores are low. I'm persevering knowing that I'm doing the right thing financially but I cring everytime I look at my scores.

[Thomas_Thumb]

---

@jamie123 wrote:

You are a smart man with a great story!

I'm in a similar situation right now. I bought a house and then received 2 new credit cards with 0% APRs for at least 14 months. Used the cards to furnish the house so that I could leave my money invested in stocks which have been doing great! My stocks are up 25% since February when I received the cards but my FICO scores were hammered down because of high UTI. I don't need high scores right now but it really bothers me that my scores are low. I'm persevering knowing that I'm doing the right thing financially but I cring everytime I look at my scores.

---

Now might be a good time to sell some equities and pay down cards - expect a market correction.

[Anonymous]

---

@Anonymous wrote:

And, MyFICO simulator predicts all agency scores will rise to 820-830 within several months till now
 

---

Simulators aren't at all accurate, so definitely don't trust what they say.  I'll tell you right now that if your scores are in the low 700's, they aren't going to go up 100 points in a couple of months like the simulator is telling you.  No one is going from 725 to 825 in a couple of months unless a final baddie comes off, or if utilization is extremely high and comes down to a single digit number. 

[Anonymous]

The MyFico similator was accurate so far, it predicted the scores I have now back in April 2017

I too am skeptical the scores will go up 100 points but we will see.  I have no late payments in the last 20 years, no deregotory items, oldest card is 27 years with 14 year average age, good credit mix. The only thing keeping the score down was high credit utilization of 97%, which then went down to 67% as I followed this forum's advice on how best to pay down cards to get the score up enough to qualify for the refi I wanted- which worked, as I said. It needed to be at least 700  on the mortgage score but made it to 720 from a low of 678, which was right after another first mortgage refi(a HARP) last year

Now the new large refi has paid off the 1st mortgage, the HELOC and all credit cards, so credit card utilization is now at 0% and the only debt is one first morgtage, payment is $2500/mo vs about $5500/mo before for everything.  No credit card accounts were closed, they are just all sitting at 0% and so there is about $85,000 in open accounts unused credit now.

So no 'baddie's" as you put it, left.  

I will report back to this thread what actually happens.  Also, my FICO 3B report is out of date so the similator could be wrong because of that. When I run the 3B report again later in November, it will have all the new data from these payoffs, and I will publish those scores to this thread too, and mention what the new prediction is.

My situation seems to be a fairly rare case study on going from super high credit card utilization to 0% in short order, and maybe the data I gather will allow you guys to reverse engineer something useful out or this all that will help someone else in similar situation.

I should mention as a warning to anyone thinking of trying this, that it was a perilous journey. I fly small planes, ride motorcycles, scuba dive, skydive and generally have a high tolerence for risk to my actual life, so financial risk doesnt seem to be that big a deal to me, I'm sure I'll be sad if I go bankrupt someday but I don't feel stress from it all and am doing pretty good now.

But I also have no family to take care of just a sister and niece, and parents that take care of themselves.  If I did, I don't think I'd expose those I cared about to this level of risk, or to the lean times when credit card payments meant I had no spending money some months. its only ok because its just me.

And I admit  my prediction and spreadsheet modeling of all this back in 2004 when I started this plan to bridge the time before my house increased in value enough to refi all this was wrong. The financial crash happened and instead of taking 4-5 years as I thought, it took 8. There were some lean years in there.  Also my house is in Seattle, the hottest real estate market in the nation, and I have a steady IT industry income, but any of those things could have failed and then I would have been in trouble.

What I paid for with all that debt were investments that worked out, and are now worth much more than all the debt(on paper), real estate that also appreciated, and 5 years off work "retired" in my late 30's, where I traveled the world, flew planes in cool places, took motocycle trips, and had a girlfriend in europe.  So it worked, but sometimes I during the payoff period I had to buy groceries with the same tiny bit of credit on some card I had just paid a minimum payment on.  And all my 0% and 2.9% promotional rates expired and so for the last 3 years, I was paying as much as 20% on some cards, with and average over all the cards of 16.9%.  Not good.

But, I couldn't have done it any other way, and what price freedom in my late 30's? Life is short.

I'll report back what acutally happens with the scores, and if I can get a good deal small HELOC as I plan.

One question I have for the forum, is after I get that HELOC (which at least intially will have nothing on it 0% util)  is, how many open credit cards can I have, at 9% or below utilization before it hurts my scores?  For a while they will all be at 0% actually Is there any limit?  Or is it only bad if your utilization precentage is too high and many many open accounts don't hurt?  If I got some of the other rewards cards I have my eye on, I might end up with open accounts totally $120,000, up from $85,000 now, and at 0% utilization.  

I won't do that of course until I get the new HELOC secured, but once I do, what do you think the effect will be to have so much open credit availale but low utilization?

[Kree]

I gained 50 points by bringing my uti from 95% below 80%.  I expect another bump when my below 60% is reported.  considering that utilization counts for about 300 total points, a 100+ point jump doesn't seem unreasonable.

[Anonymous]

---

@Kree wrote:

I gained 50 points by bringing my uti from 95% below 80%.  I expect another bump when my below 60% is reported.  considering that utilization counts for about 300 total points, a 100+ point jump doesn't seem unreasonable.

---

Utilization does not count for about 300 total points.  Considering a point range of 300-850, there are 550 total points from worst case to best case.  Utilization makes up 30% of these points, which would be 165 points.

Also, the next threshold you may cross could be at 69%.  As far as I know, the one after that would be crossing 49%, so getting below 60% (or 59%) may not result in any score gain.  Just something to keep in mind.

[Kree]

---

@Anonymous wrote:

---

@Kree wrote:

I gained 50 points by bringing my uti from 95% below 80%.  I expect another bump when my below 60% is reported.  considering that utilization counts for about 300 total points, a 100+ point jump doesn't seem unreasonable.

---

Utilization does not count for about 300 total points.  Considering a point range of 300-850, there are 550 total points from worst case to best case.  Utilization makes up 30% of these points, which would be 165 points.

Also, the next threshold you may cross could be at 69%.  As far as I know, the one after that would be crossing 49%, so getting below 60% (or 59%) may not result in any score gain.  Just something to keep in mind.

---

Reporting range is 300-850. From everything I've read, actual point range is wider. IE a 200 score counts as 300, and a 900 score counts as 850. My 300 point estimate might be a bit high, but I would be suprised if it is less than 200 points. 

Also going from 80% to 60% does cross the 69% threshold, so I should see a score gain if it does exist. 

EDIT: I've tried rewritting this three times to sound less gruff and argumentative.  I am not trying to sound gruff or argumentative. So I added some smiley faces. 

[Anonymous]

Have you ever seen anyone with a 300 score?  I haven't.  Yes, buffers do exist, but if a 300 score is a near impossibility, what would that say about a 200 score that's expressed as a 300?  It would be a unicorn.  Also, I have not heard of anyone suggesting the buffer above 850 going anything higher than maybe 860-870. 

Anyway, if you want to stretch the 165 points to say utilization may count for up to 200 points to include unicorn outliers, that's fine... but it's definitely not worth 300 points which is what I was originally commenting on.  For the full amount of points to be realized it would have to be on the perfect profile BTW, as all profiles are different and it would have to be going from maxed out utilization to single-digit utilization (or vice versa).