Improving Mortgage Scores

[armywifelong03]

Hello all! We are trying to get our scores to 720 to qualify for a lower down payment on our construction loan. I would love any and all advice on the quickest way to do this!

Remaining CC debt and scores below!
NFCU $22,000/$27,000
NFCU $10,000/$14,000
USAA AMEX $9,000/$11,000

Hello all! We are trying to get our scores to 720 to qualify for a lower down payment on our construction loan. I would love any and all advice on the quickest way reach this goal. Thank you!

Me: 716, 718, 718

Him: 716. 723,721

[Anonymous]

Pay down your debt (utilization).  $40k in revolving debt is a lot for someone to be carrying into a mortgage app.  Do you have the ability to pay it off quickly?  If not, perhaps taking on even greater debt with the addition of a mortgage isn't be best thing to pull the trigger on right now.

[armywifelong03]

Thanks for the reply. We do have the means to pay off half in the next two months or so. Our DTI is actually very low, 23% at this moment with our current mortgage. We have enough residual income to take care of at least half of this by June 1st and was just looking at the best way to tackle it.

[SouthJamaica]

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@armywifelong03 wrote:
Thanks for the reply. We do have the means to pay off half in the next two months or so. Our DTI is actually very low, 23% at this moment with our current mortgage. We have enough residual income to take care of at least half of this by June 1st and was just looking at the best way to tackle it.

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The best thing you could do for your mortgage scores, then, would be to pay the 2 smaller cards down to zero, and apply the rest of your money to the other card. Mortgage scores love zero balances.

[armywifelong03]

Thank you!

[Anonymous]

If you go with SouthJ's approach, will the remaining card with the positive balance be at under 48%?   (Utilization of that card considered by itself)

If the remaining card cannot be gotten that low, then the bonus you get for having two zero accounts will likely not offset the penalty for having a card at > 49.001%. 

If you can get the remaining card under 48% and keep it constantly there (even when monthly interest is taken into account) then I think SouthJ's advice is perfect.  Naturally if you can lower it even more that's better, but not necessary.

[Anonymous]

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@Anonymous wrote:

If the remaining card cannot be gotten that low, then the bonus you get for having two zero accounts will likely not offset the penalty for having a card at > 49.001%. 

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In taking his two lower balance cards to $0 though, he'd be crossing the 68.9% and 48.9% aggregate utilization thresholds.  That coupled with bringing 2 accounts with balances to $0 I'm quite sure would more than squash the penalty associated with a single card over 48.9%.  I'm not saying this is the best approach here (it isn't) but just thought it was worth pointing out the potential shift in aggregate utilization as well, since after all it is King to individual card utilization.

[SouthJamaica]

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@Anonymous wrote:

If you go with SouthJ's approach, will the remaining card with the positive balance be at under 48%?   (Utilization of that card considered by itself)

If the remaining card cannot be gotten that low, then the bonus you get for having two zero accounts will likely not offset the penalty for having a card at > 49.001%. 

If you can get the remaining card under 48% and keep it constantly there (even when monthly interest is taken into account) then I think SouthJ's advice is perfect.  Naturally if you can lower it even more that's better, but not necessary.

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I disagree. From what I have been observing, the mortgage scores are much more responsive to 'number of accounts reporting balance' than they are to individual card or aggregate card utilization percentages in dollars.

You may recall this striking example:

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Mortgage-score-amp-number-of-accts-reporting-balance/m-p/5449614#M148685

And this example from your own stockpile of data points:

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Mortgage-score-amp-number-of-accts-reporting-balance/m-p/5490216#M150667

[Anonymous]

Not all three mortage scores are sensitive to the same degree to Number of Accounts Reporting a Balance.  The EQ score is by far the most sensitive, I am told.  My own case was the EQ score, and Thomas Thumb believes that the "number of accounts" penalty is made much worse if you have recent inquiries, which I had on EQ.  

What we are trying to guess is whether having one less account reporting a balance (but with one card at 52%) will benefit a person's middle mortgage score more than having all cards at < 48.9%.  What I am fully willing to acknowledge is that it's close, with some profiles benefitting more from one strategy and others benefitting more from the other.  Unless we had a ton of detailed test data (watching what happens on all three mortgage scores simultaneously and with very detailed info on total number of open accounts and how many are reporting balances and utilization data -- all provided by reliable testers from a variety of profiles) I think it would be hard to know for sure.

But I am willing to pull back and say that I am not sure which strategy is best.

[SouthJamaica]

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@Anonymous wrote:

Not all three mortage scores are sensitive to the same degree to Number of Accounts Reporting a Balance.  The EQ score is by far the most sensitive, I am told.  My own case was the EQ score, and Thomas Thumb believes that the "number of accounts" penalty is made much worse if you have recent inquiries, which I had on EQ.  

What we are trying to guess is whether having one less account reporting a balance (but with one card at 52%) will benefit a person's middle mortgage score more than having all cards at < 48.9%.  What I am fully willing to acknowledge is that it's close, with some profiles benefitting more from one strategy and others benefitting more from the other.  Unless we had a ton of detailed test data (watching what happens on all three mortgage scores simultaneously and with very detailed info on total number of open accounts and how many are reporting balances and utilization data -- all provided by reliable testers from a variety of profiles) I think it would be hard to know for sure.

But I am willing to pull back and say that I am not sure which strategy is best.

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Well that we have in common; neither of us knows which is best. We just guess a lot.

But since we're talking mortgage scores, my money is on getting all but one down to zero as being the strongest play.