Increasing credit scores

[Anonymous]

Thanks Triton.  I'll respond late this afternoon or early this evening.

[Anonymous]

Hi Triton.

So to summarize.

You feel like being an AU on someone else's card isn't the right solution for you.  So that's out.

We don't know for sure what your credit card utilization is.  You indicated (I think) that you have exactly one CC with a $1100 credit limit.  You probably have learned from the forum that you will get the most FICO points related to CC balances if you can keep your reported utilization very low.  Aim for 1-5% right now.  Keep it like that for a few months and see what that does for your score..  Ordinarily the folks here would recomend that you have at least three credit cards (two at $0 and one with a small balance) for optimum FICO points for your CC balances.  But the improvements you seek are ones you want to make in the next 90 days -- adding more cards would be more counterproductive than helpful in that time. 

As far as your installment loans go, FICO makes a calculation on these that is quite a bit like your CC utilization.  For lack of a better term we'll call it your "installment utilization."  Like CC util it is a %.  First, you look at your open installment loans (ignore your closed loans).  In your case that is your student loan and your auto loan.  You add up the total amount you owe on the loans.  That's Amount Owed.  Then you add up the total amount that the loans were originally for.  Call that Total Original  Then you divide Amount Owed by Total Original.  Right this moment, your installment utilization is:

         (1632 + 2300)  /  (16000 + 6000) = 3932 / 22000 = 17.9%

I think you mentioned that the last payment on the car loan will be made in a few months.  At that point you will have only one open loan, so your installment utilization will be something like:

         2200 / 6000 = 36.7%

FICO likes it best when you have at least one open installment loan, but your open loans are mostly paid off.  That means an installment utilization < 8.99%.  When your installment utilization goes up, it's actually possible to LOSE points.  As you can see, your utilization will actually go up when the car loan is paid off.

So something you should look into is to talk to the company that is servicing your student loan and see if they will let you pay down the principal on the loan.  Ideally you want to find a way to pay down the principal enough so that your Amount Owed on the loan is $539.  That will give you an installment utilization of 8.99%.  But when you talk to them, you want to make sure that the loan will still stay open for at least a few years.

The other commenters have explained that getting rid of as many derogs as you can from your reports will help you most.  The best people to advise you with that are the people in the Rebuilding sub-forum on this site.

Aside from controlling your CC and installment utilization, and possibly getting some of your derogs removed, there is nothing you can do in the next six months to improve your score.

The biggest standout for me is that the thing that appears to be driving your strong perceived need for a higher FICO score is this:

      (a) The place I am renting right now is terrible

      (b) Therefore I need to buy a house in a few months  (and for which I need a higher score)

I am sure that the first is true!  But I am not sure that (b) follows.  Unless I am missing something, you should be able to find a much nice and cheaper one bedroom apartment somewhere.  You could sign a 1-year lease and while you are living there work on your credit scores.  Then buy the house a year from now.

[Anonymous]

First : thank you for all of this information and for your time in providing it.  I am sure than I can pay down the student loan an still keep it open for years.  Are you saying that I will see an improvement in my sores by doing that?  a little improvement? A lot, somewhere in between?

I have 3 derogs on my reports with one being Cap 1 and they are not bodging.. letters, emails, phone calls, etc.. the other 2 I am working on still but not super confident that I will suceed.

I have 4 pets.  And it is next to impossible to find any place that will take one or 2 pets let alone 4.  The pets are family.  They are not going to be dumped or given up.  One is a very large dog.  So getting a one bedroom apartment is not in the plan.  

I could pay down that Student loan and of course i would make sure that it would stay open and so i will wait for an answer as to how that , if that would improve my socres

Thank you so very much for your help.

[Anonymous]

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Triton1 wrote:

First : thank you for all of this information and for your time in providing it.  I am sure than I can pay down the student loan an still keep it open for years.  Are you saying that I will see an improvement in my sores by doing that?  a little improvement? A lot, somewhere in between?

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Can't say for sure.  There was a team of people who pioneered some research into this whole question of "installment utilization" during 2015 (led by a contributor named Revelate).  And it seemed like they felt reasonably confident (based on their testing) that there was a "breakpoint" around 8.99%.  In other words, if somebody's installment U was 28% say and gradually decreasing (27, 26, 25, ...) there was no score benefit.  But when they crossed 9.0 they got some extra points.   I believe they identified a breakpoint at maybe 80% (?) and perhaps one or two more between 80% and 9%.

Thus their research seemed to suggest that a person might well get a benefit to going under 9%. 

But you need to bear in mind that FICO places people in 12 different scorecards depending on what their overall credit profile looks like.  No one knows for sure what those scorecards are.  But it is quite possible that the breakpoints for the scorecard you are in could be different from the breakpoints for another scorecard.

So the answer is:

     (a) We don't know for sure it will help

     (b) But it certainly wouldn't hurt your score.

What is known for certain is that you will get maximum points for your credit card utilization if you keep that at 1-5%.  (1-9% may be fine too.)

So for sure keep your credit card reporting a balance but keep it small.  And then, if you like, see if you can pay down your student loan (which is installment utilization, a different factor about which less is known for sure).

[bdhu2001]

Is your student loan just one loan or multiple loans with one payment?  The reason I ask is because my friends and family had multiple loans even though it was one payment. If it's multiple loans, the utilization is calculated separately on each one.

[Anonymous]

single loan

[Anonymous]

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@Anonymous wrote:

single loan

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Do you know your FICO scores?

What ages are the derog's and what type, 30-90 days late?, collections??

Seems to me the most significant factor is the three derog's on your credit reports. You will need to keep working on those. I know its exhausting and feels fruitless. But if your serious, consider paying a lawyer to write some strong letters to the creditors, with the goal of having them all removed. You have some extenuating circumstances, so there may be a play there. It wouldn't hurt to speak to a lawyer and get there take and price.

Lets assume your score 640-659 so mortgage on a $150,000 home in Virginia is 4.554% at $755 a month.

With no derog's your at 700-759 so a mortgage on a $150,000 home in Virginia is 3.262% at $684 a month.

Yearly savings $852.

If a lawyer cost you $1500, and he resolved all of those derog's, he paid for himself in less than two years, plus you qualified for a better rate. So its a gift that keeps on giving. This is a conservative estimate, your results could be better or worse. There is always a a risk. Just throwing out the option for your consideration.

[Anonymous]

Fico mtg scores

tu 618

eq. 680

ex. 694

derogs.  Chase student loan. Two,   30 day lates w last one just one year ago.   Still working on this big time. Ive tried good will and dispute

              Nelnet.   A now paid in full Parent Plus loan.  Inaccurate reports 5 months in a row in 2014. Ive done a whole lot of work on this one including disputes. Emails to officials at dept of education and filed dispute with imbudsman

capitol 1.  Paid in full after charge off.  I have written 3 good will snail mail letters. 4 emails and have spoken to ceo's office etc.   they are not budging

at this point if i can get fha i am going for it

my rent is 1300 a month.  The electrical has serious issues and often all the lights flicker and fuses blow.  There are holes in foundation where i can see outside,  the gutters have fallen off and the roof leaks.  Landlord is non respondant and only does a very little of somethng once i hold rent in escrow

Finding another rental has not produced anything because i have pets and because in the 3 years i have rented here the area rent average has increased like crazy

i want to stay near my adult children and nesr my place of employment

I have up to $50,000.00 for downpayment and $20,000.00 to hold in reserves

i realize waiting a good year might make a difference but i am not willing to wait that long to get out of this house

[Anonymous]

They will use your middle mortgage score 680.

You should qualify, but it would be nice to be in the 700 range. 20 points away.

The biggest impact would be getting the most recent derog removed. Whatever you can really as they appear to be all within the last couple of years.

Seems like you are doing all you can. Continue the battle, be patient, sometimes its just a war of attrition.