I don't get it, evidently

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

Yeah, well, it certainly is frustrating after working for a couple of years to attain those 800+ scores to have them all but obliterated in a matter of a few weeks. 

Once the mortgage I've applied for is completed, I won't worry so much about it and can take my time to get the scores back up there where they belong. I'm just sweating bullets until I find out whether USDA underwriters are going to pull my scores again at some point prior to final approval. Like most people, I need the best interest rate I can get. 

Nothing to be toooo worried about, anything 780 and above is just fine. 

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Yeah, that's kind of the the whole point to this post. Because the 3 bureaus are dinging my scores both when I incur debt AND when I pay it down or off, my scores have dropped to BELOW 780! Another decrease will drop them to around 740! If the new charge on the bank card raises my score by the same number of ponts that dropped off when the balance went to zero, no worries. If not, I'm not going to be a happy camper. I had no late payments or any other kind of derrogatories, no BK, no nothing except all payments made on time. Then when the old car loan was paid off and again when the only cc carrying a balance was paid off, I was penalized more than 60 points in less than 2 months!!? The message that sends is that paying off debt is a bad thing and being in debt up to one's eyeballs (as long as you pay the bills on time) is a good thing...it's just not right in my opinion and is a false indicator of one's creditworthiness.

[SouthJamaica]

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@Anonymous wrote:

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@Anonymous wrote:

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@Anonymous wrote:

Yeah, well, it certainly is frustrating after working for a couple of years to attain those 800+ scores to have them all but obliterated in a matter of a few weeks. 

Once the mortgage I've applied for is completed, I won't worry so much about it and can take my time to get the scores back up there where they belong. I'm just sweating bullets until I find out whether USDA underwriters are going to pull my scores again at some point prior to final approval. Like most people, I need the best interest rate I can get. 

Nothing to be toooo worried about, anything 780 and above is just fine. 

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Yeah, that's kind of the the whole point to this post. Because the 3 bureaus are dinging my scores both when I incur debt AND when I pay it down or off, my scores have dropped to BELOW 780! Another decrease will drop them to around 740! If the new charge on the bank card raises my score by the same number of ponts that dropped off when the balance went to zero, no worries. If not, I'm not going to be a happy camper. I had no late payments or any other kind of derrogatories, no BK, no nothing except all payments made on time. Then when the old car loan was paid off and again when the only cc carrying a balance was paid off, I was penalized more than 60 points in less than 2 months!!? The message that sends is that paying off debt is a bad thing and being in debt up to one's eyeballs (as long as you pay the bills on time) is a good thing...it's just not right in my opinion and is a false indicator of one's creditworthiness.

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I'm not a fan of the algorithm's foolishness, either, but the message sent is not that you should be in debt up to your eyeballs.

The message is that you should have at least a tiny bit of debt.

The winning play is to have about 1% - 6% reported aggregate utilization of your revolving credit, and to owe 9% or less on your installment loans in the aggregate.

That is far from being in debt up to your eyeballs.

[Anonymous]

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@SouthJamaica wrote:

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@Anonymous wrote:

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@Anonymous wrote:

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@Anonymous wrote:

Yeah, well, it certainly is frustrating after working for a couple of years to attain those 800+ scores to have them all but obliterated in a matter of a few weeks. 

Once the mortgage I've applied for is completed, I won't worry so much about it and can take my time to get the scores back up there where they belong. I'm just sweating bullets until I find out whether USDA underwriters are going to pull my scores again at some point prior to final approval. Like most people, I need the best interest rate I can get. 

Nothing to be toooo worried about, anything 780 and above is just fine. 

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Yeah, that's kind of the the whole point to this post. Because the 3 bureaus are dinging my scores both when I incur debt AND when I pay it down or off, my scores have dropped to BELOW 780! Another decrease will drop them to around 740! If the new charge on the bank card raises my score by the same number of ponts that dropped off when the balance went to zero, no worries. If not, I'm not going to be a happy camper. I had no late payments or any other kind of derrogatories, no BK, no nothing except all payments made on time. Then when the old car loan was paid off and again when the only cc carrying a balance was paid off, I was penalized more than 60 points in less than 2 months!!? The message that sends is that paying off debt is a bad thing and being in debt up to one's eyeballs (as long as you pay the bills on time) is a good thing...it's just not right in my opinion and is a false indicator of one's creditworthiness.

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I'm not a fan of the algorithm's foolishness, either, but the message sent is not that you should be in debt up to your eyeballs.

The message is that you should have at least a tiny bit of debt.

The winning play is to have about 1% - 6% reported aggregate utilization of your revolving credit, and to owe 9% or less on your installment loans in the aggregate.

That is far from being in debt up to your eyeballs.

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Okay, so I exaggerated a bit. But even so, when I owed over $15k on my car loan, which was just under 50% paid off, my scores were in the 800s. Paid off all that debt and lost between 20 and 30 points just because I no longer had an installment loan. Paid off a measly $14 balance on a credit card and wham!, lost another 36 points because I didn't have a revolving account balance. Within the next few days, I'll be able to see the result of adding both types of debt back to my report. My gut tells me that because the new car loan will show 100% utilization, even though the amount will be the same as it was before, I'll suffer another drop. That winning play may work to give the best scores but that scenario still says being in debt is better than not being in debt, regardless of the magic percentage. I understand what you're saying and I know that it's true but that doesn't make it right nor does it give a truthful picture of a person's creditworthiness. Believe me when I say that I'll be very careful to carry a small balance on that one bank card from now on. I don't think I'll ever need to apply for a car loan again unless something unforseen happens to my current car but I'll still be paying on it for a few years and if the mortgage goes through, that debt will be hanging over my head for the rest of my life. Of course, then I'll have to wonder how long those other revolving accounts will be allowed to remain open with zero balances. My past experience is that creditors want you to carry a balance, at least periodically. If you don't, they figure you don't need the credit and they close the accounts. Maybe someday, some brilliant mind will come up with a way to provide a well-rounded and more accurate way of determining risk. Until then, we have no choice but to play the credit game because most of us will never be wealthy enough not to need it.

[909]

Anniebee5, what you're describing is true: credit score changes are sometimes arbitrary and capricious. While plenty of people will defend the algorithm, no human on the planet will agree that you became double-digits more of a risk because you paid off a small balance...which just happened to be your last remaining balance. Snapshots in time based on imprecise rules result in bad information. If there's a saving grace, it's that you werenkt at 750 dropping to 710 or worse. Good job keeping your scores in the 800s so you can reasonably weather these capricious drops.

[SouthJamaica]

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@Anonymous wrote:

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@SouthJamaica wrote:

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@Anonymous wrote:

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@Anonymous wrote:

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@Anonymous wrote:

Yeah, well, it certainly is frustrating after working for a couple of years to attain those 800+ scores to have them all but obliterated in a matter of a few weeks. 

Once the mortgage I've applied for is completed, I won't worry so much about it and can take my time to get the scores back up there where they belong. I'm just sweating bullets until I find out whether USDA underwriters are going to pull my scores again at some point prior to final approval. Like most people, I need the best interest rate I can get. 

Nothing to be toooo worried about, anything 780 and above is just fine. 

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Yeah, that's kind of the the whole point to this post. Because the 3 bureaus are dinging my scores both when I incur debt AND when I pay it down or off, my scores have dropped to BELOW 780! Another decrease will drop them to around 740! If the new charge on the bank card raises my score by the same number of ponts that dropped off when the balance went to zero, no worries. If not, I'm not going to be a happy camper. I had no late payments or any other kind of derrogatories, no BK, no nothing except all payments made on time. Then when the old car loan was paid off and again when the only cc carrying a balance was paid off, I was penalized more than 60 points in less than 2 months!!? The message that sends is that paying off debt is a bad thing and being in debt up to one's eyeballs (as long as you pay the bills on time) is a good thing...it's just not right in my opinion and is a false indicator of one's creditworthiness.

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I'm not a fan of the algorithm's foolishness, either, but the message sent is not that you should be in debt up to your eyeballs.

The message is that you should have at least a tiny bit of debt.

The winning play is to have about 1% - 6% reported aggregate utilization of your revolving credit, and to owe 9% or less on your installment loans in the aggregate.

That is far from being in debt up to your eyeballs.

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Okay, so I exaggerated a bit. But even so, when I owed over $15k on my car loan, which was just under 50% paid off, my scores were in the 800s. Paid off all that debt and lost between 20 and 30 points just because I no longer had an installment loan. Paid off a measly $14 balance on a credit card and wham!, lost another 36 points because I didn't have a revolving account balance. Within the next few days, I'll be able to see the result of adding both types of debt back to my report. My gut tells me that because the new car loan will show 100% utilization, even though the amount will be the same as it was before, I'll suffer another drop. That winning play may work to give the best scores but that scenario still says being in debt is better than not being in debt, regardless of the magic percentage. I understand what you're saying and I know that it's true but that doesn't make it right nor does it give a truthful picture of a person's creditworthiness. Believe me when I say that I'll be very careful to carry a small balance on that one bank card from now on. I don't think I'll ever need to apply for a car loan again unless something unforseen happens to my current car but I'll still be paying on it for a few years and if the mortgage goes through, that debt will be hanging over my head for the rest of my life. Of course, then I'll have to wonder how long those other revolving accounts will be allowed to remain open with zero balances. My past experience is that creditors want you to carry a balance, at least periodically. If you don't, they figure you don't need the credit and they close the accounts. Maybe someday, some brilliant mind will come up with a way to provide a well-rounded and more accurate way of determining risk. Until then, we have no choice but to play the credit game because most of us will never be wealthy enough not to need it.

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True dat

[Anonymous]

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@Anonymous wrote:

My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances.  If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.

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@Anonymous okay first off you haven't given us any profile statistics to guess your scorecard. Sounds like you may be in a thin scorecard. 

Anyway let me try to ease your mind a little bit. You looking at the fluctuations of version 8, based on changes in aggregate installment utilization. You get a bonus when you have a loan paid down to about 65% and then a bigger bonus when you have one paid down to 9% and then when it's paid off you lose that bonus.

The same principle, you get a bonus when you're using your revolving credit, in other words when you have a balance more than zero on a card. Now, when you start to use too much your start to incur penalties. That's they way they look at it anyway.

Back to easing your mind, this is not having the same effect on your mortgage scores. These bonuses on score 8 for instalment utilisation are not very prevalent on the mortgage scores. 

So overall any hit you take when it reports is gonna be from average age, which should not be too big on any version, even if it crosses a threshold. 

So stop stressing, your mortgage scores aren't fluctuating like your version 8 scores, I promise. But you need a balance on one revolver, one National bankcard on any version.

And it is gonna lower your DTI without affecting your mortgage score very much. In this case I think the LO was on point. Either that or something else happened on your report. 

[Anonymous]

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@Anonymous wrote:

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@Anonymous wrote:

My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances.  If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.

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@Anonymous okay first off you haven't given us any profile statistics to guess your scorecard. Sounds like you may be in a thin scorecard. 

Anyway let me try to ease your mind a little bit. You looking at the fluctuations of version 8, based on changes in aggregate installment utilization. You get a bonus when you have a loan paid down to about 65% and then a bigger bonus when you have one paid down to 9% and then when it's paid off you lose that bonus.

The same principle, you get a bonus when you're using your revolving credit, in other words when you have a balance more than zero on a card. Now, when you start to use too much your start to incur penalties. That's they way they look at it anyway.

Back to easing your mind, this is not having the same effect on your mortgage scores. These bonuses on score 8 for instalment utilisation are not very prevalent on the mortgage scores. 

So overall any hit you take when it reports is gonna be from average age, which should not be too big on any version, even if it crosses a threshold. 

So stop stressing, your mortgage scores aren't fluctuating like your version 8 scores, I promise. But you need a balance on one revolver, one National bankcard on any version.

And it is gonna lower your DTI without affecting your mortgage score very much. In this case I think the LO was on point. Either that or something else happened on your report. 

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Okay, so I'm not sure what information you would want exactly but here's a snapshot:

Revolving accounts: 3

2 bank cards issued by Chase, one with a zero balance on a $3500 limit and the other with a $66 balance on a $5500 limit (this second one is the one that temporarily dropped to a zero balance before I remembered to make a new purchase).

1 store card issued by Synchrony Bank with a zero balance on a $2500 limit.

Installment loans: 1

I recently refinanced my car at the suggestion of my USDA Direct loan specialist. The original loan was not quite 50% paid off when I did the refi. Balance is $15,823 with 1st pmt of $246 being auto-drafted tomorrow so should start reporting maybe next week. 

Applying for mortgage through USDA Direct but as it has not gone through underwriting as yet, I don't have a clue what the terms might be. I am waiting for the final numbers and contract to be drawn up/submitted to USDA. I was pre-approved in April and have been looking since then.

2 recent hard pulls: one for the mortgage and the other on the car refi.

No derrogatories, bankruptcies, foreclosures or student loans of any kind within the past 4 or 5 years, at least. I am 68 years old so I have ample history; just not a lot of current debt to report. Prior to the auto refi, all three bureaus' version 8 scores were over 800 and my mid mortgage score was 796. Not sure what it is right now.

I have been itching to run an updated 3-bureau report but I have been holding off until the new car loan and balance on the one bank card are reported so I can see what effect those will have on my scores and I don't want to have to pay for an extra report. I do realize that mortgage scores are not the same as version 8 scores but I wasn't sure how much they would be effected. I do appreciate your insight on this as I do everyone who responded to my query.  I can rest easier for now and hopefully even more after I pull the next report update.

[RadioRob]

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@Anonymous wrote:

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@Anonymous wrote:

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@Anonymous wrote:

My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances.  If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.

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@Anonymous okay first off you haven't given us any profile statistics to guess your scorecard. Sounds like you may be in a thin scorecard. 

Anyway let me try to ease your mind a little bit. You looking at the fluctuations of version 8, based on changes in aggregate installment utilization. You get a bonus when you have a loan paid down to about 65% and then a bigger bonus when you have one paid down to 9% and then when it's paid off you lose that bonus.

The same principle, you get a bonus when you're using your revolving credit, in other words when you have a balance more than zero on a card. Now, when you start to use too much your start to incur penalties. That's they way they look at it anyway.

Back to easing your mind, this is not having the same effect on your mortgage scores. These bonuses on score 8 for instalment utilisation are not very prevalent on the mortgage scores. 

So overall any hit you take when it reports is gonna be from average age, which should not be too big on any version, even if it crosses a threshold. 

So stop stressing, your mortgage scores aren't fluctuating like your version 8 scores, I promise. But you need a balance on one revolver, one National bankcard on any version.

And it is gonna lower your DTI without affecting your mortgage score very much. In this case I think the LO was on point. Either that or something else happened on your report. 

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Okay, so I'm not sure what information you would want exactly but here's a snapshot:

Revolving accounts: 3

2 bank cards issued by Chase, one with a zero balance on a $3500 limit and the other with a $66 balance on a $5500 limit (this second one is the one that temporarily dropped to a zero balance before I remembered to make a new purchase).

1 store card issued by Synchrony Bank with a zero balance on a $2500 limit.

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You can't let a Chase account be the account that reports a small balance when doing AZEO.

Meaning if the account you let report a small balance is a Chase card, the minute it reports and then you pay it off, Chase will report the zero balance off cycle.  That will end up with you having all revolving accounts reporting $0.  So you will only be AZEO for just day or so between the statement date and when they report the updated 0 balance.  

[Anonymous]

I know what you're saying, however I don't have a card with any other bank... just the Synchrony card for Ashley Furniture. The problem I had was that I had pre-scheduled the payment and since the total balance was less than the minimum amount due, I had to pay the full balance. Normally, I would charge a small purchase just before or on the same day the payment is scheduled to post to prevent the balance from going to zero. I'd open a new bank card with a different bank but I can't do that until after the mortgage process is completed. Another hard pull at this time will cause more harm than good. 

[Anonymous]

@Anonymous when that car loan reports closed, you're gonna see a drop. Again don't stress, it's not mirroring the other versions. And it is gonna lower your DTI.

One piece of good news is this: Whenever the first inquiry was pulled for either the mortgage or the car, any other instalment loan inquiries in the following 45 days are all be counted as one scorewise.

So at least you weren't penalized twice for those two and, depending on your timeline, you may be able to accomplish the mortgage inside the 45 day window still?

Either way, the ding doesn't affect your score until 30 days after the first installment inquiry anyway. 

Yeah don't waste your money until after you have everything reported and you are at AZEO. Glad your mind is more at ease. I knew you had a thinner profile!