Improving My Fico Score - Help Out An Expat!

[Anonymous]

Hey all,

I've now been in the US for 2 years (next month). I'm here on a work visa but currently adjusting status to green card.

With that in mind I decided its time to get a mortgage, having talked to friends however I got some terrible advice prior to moving here. Get credit cards, max them out, they like to see usage to get a credit file up. I did this, it hasnt played out well for my numbers. I have however never missed a payment but I have a number of inquiries. Around the 20 mark - these will drop to 6 in the last 12 months by the time we hit october. I'm looking to apply for a mortgage around October, but I'm not sure this will be enough time to see the difference in FICO score that I need.

Heres my current situation:

Util: 99%

Cards:

AMEX: $4990 of a $5000 credit limit

Capital One: $590 of a $600 credit limit

Capital One: $490 of a $500 credit limit

Discover: $490 of a $500 credit limit

BofA: $590 of a $600 credit limit

Paying them off is not a problem. Infact I intend to clear the balances today but I was wondering should I pay them all to $0 or leave a little on each? What is the best strategy here? and what sort of improvement can I expect to see on my FICO mortgage score. I'd like to think I can reach the 700 mark come October but that might be unrealistic:

Mortgage FICO Score Currently:

Equifax: 596

Transunion: 614

Experian: 624

Thanks so much in advance!

[iv]

99% util. Wow.

That, all by itself, is the single biggest thing hurting your scores right now.

The good thing is that it's easy to fix, and will show results quickly, as the payoffs are reported.

First - if you are paying interest on those balances (rather than paying in full monthly but letting the high balance report), pay them ALL off to zero.  And let a statement from each cut with the trailing interest and pay that, to get out of the interest charge loop. (Or slightly over-pay by the expected interest amount, to cut a month off the process...)

THEN... let just one of the cards report a fairly small balance each month, and keep the others reporting zero. (You can use them, just make sure they are paid to zero prior to when they report.)

That change, all by itself, will have an amazing (positive) impact on your scores.  (So will the inquiries hitting 12 months, and your accounts aging... but that's minor compared to correcting 99% util!)

700+ on the mortgage scores by October looks entirely realistic.

[Anonymous]

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@iv

700+ on the mortgage scores by October looks entirely realistic.

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700+ on the mortgage scores by May looks realistic to me.  All the OP needs to do is take his utilization from 99% down to 1% and he's there.  No bubbles, no troubles.  He said he has the means to pay off his debt today, so there's no reason for him not to.  From there he can see where his scores stand and if they're high enough to get what he wants.  If not, he's got 5-6 months to allow them to grow a bit.

[Anonymous]

Thanks everyone I very much appreciate the assistance.

I've paid off the full amount so I can get rid of the recurring interest and from there I will start to use a very small amount on just 1 card with minimal interest each month.

Regarding pulling my report, my understanding is that the score won't update until the next pull unlike the typical FICO 8 Score. I will be paying in advance as curiosity will simply get the better of me. How long would you suggest waiting before I can expect the update to the Mortgage FICO score.

My final question if anyone knows, will mortgage lenders only be concerned with my current FICO score or do they look back at your historical scores as well?

Thanks!

[JBJBJB1]

Hi: 

You should see an instant shoot up due to your new low credit utilization on your next pull, as this recovers immediatley.   They will only pull your current FICO.  Note that while you will be stellar on payment history and debt ratio, that equals only 65% of your score.  You still have 1. A short credit history of 2 years? 15% 2. Credit Mix of only Credit Cards? 10% and 3. New inquiries 10%. 

If you do not have 700, all is not lost, for mortgage, they use your middle score and you should have no problem at 680 (while 700 is better it is not required), however, you can get a mortgage with a lower score especially if you have 20% down.  FHA loans go as low as 580.  You can refi out of your FHA loan into a traditional when your score improves.  Note also that FHA loans have caps on the price of the home.    

Also, agree with others in keeping a small balance (under 7%) on one card and the rest at zero.  Your credit will dip if all are zero. 

[Anonymous]

Thanks for the response,

Once we hit October I will only have 5 inquiries at that point.

Regarding length of credit history. When would this hit let's say average, I'm not sure what the next tier is behind poor. I was wondering how long that part would haunt me. October will be roughly 2years6months.

Thanks so much everyone!