So here's my story, for what's it's worth. Would LOVE to get some help or explanations, as I am beyond dumbfounded at my situation. First, why I am writing in - my husband and I just applied for a mortgage and, like many people I suppose, we were shocked to hear that our credit was not "excellent" (or even good, really). I had one score (Equifax Beacon) that was a dismal 646...transunion was at 710. I have a 3-score credit-monitoring service I've been paying for, for years, (which I check compulsively) which showed my lowest score to be in the 720+ range just last month....what gives?!?!??!?! My credit score, two years ago, was pushing 800..... What's driving me wonky is that I'm a physician / surgeon. I earn a very healthy, 6-figure income. My husband is active-duty, career, military for almost 19 years. His salary isn't as high as mine, but it is certainly steady and not exactly low-income. We've been married for 15 yrs and in 15 years we've missed exactly ONE payment, intentionally, last year. It was to our former mortgage company who refused to even talk to us about ANY options on selling our house after our transfer to the west coast in early 2010. Even on a physicians salary, trying to pay rent + mortgage, plus student loans, credit cards, etc, is a little trying. That being said, we sucked it up and kept paying... Again, ALL other payments to ALL creditors have been (and continue to be) current - for FIFTEEN-plus years. Our debt, while sizable due to student loans, has DECREASED by almost $400K in the past year (due to aggressive payoffs of credit cards and finally selling the house after 2.5 years). We have NO divorce, NO foreclosure, NO Judgements, NO liens, NO Bancruptcy. Nothing negative as far as payment history is concerned. What I can say we have, which I know can effect credit is: 1) multiple addresses - we're military. There is nothing we can do about this and frankly, it's insulting that our score decreases because of this. 2) credit inquiries - 2 in 2 years. One last year for insurance, one this year for the mortgage 3) high revolving credit - to be fair, I'll concede this one. I must first clarify, however, that we had several MORE cards 2-3 years ago PLUS the ones that we currently have. The 4 we have left have lower amounts than ever before....and again, have never been late. I make double and triple payments on these cards and they will likely all be paid off by Xmas. 4) the one missed mortgage payment - I know it dropped me 65 points instantly. Total bs that consumers must take such a drastic action just to get their mortgage company to even TALK to them about options. 5) Student loans - nice to know I'm being punished (more) for my extremely hard work and success.... 5) the deficiency loan I got from our former mortgage company to avoid forclosure / bancruptcy??? I took this loan out in good faith to avoid the hit of foreclosure and "do the right thing"....yet my score has dropped at least 30 points in the last 2 months since we sold. The mortgage is reported (righfully) as "Paid in Full". So bottom line, high, steady income, no late payments (save the one), yet both of us are showing Beacon scores in the mid 600s. It's all a total scam, if you ask me......my credit score was higher when I was making $15K a year and living out of rented apartments.
Welcome to Creditnet GirlyDoc! First, your post proves just how much credit-monitoring services that provide "FAKO" scores are worth- not that much at all. Since they don't track movement in your FICO scores, you just can't rely on them when you actually plan to apply for a mortgage, auto loan, etc. Also, you have to remember that income has absolutely nothing to do with FICO scores. Credit scores are an indicator of your risk as a borrower, based on payment history, credit utilization, etc., and they in no way reflect assets or how much income you have. Looking at that kind of information is an underwriters job when they review your application for credit. There are plenty of people who make a lot of money and have horrible credit scores due to poor payment histories, short sales, high credit utilization, etc. Anyway, after reviewing all the information you've given us, there appears to be just a few things that are really hurting your FICO scores. First, I'm not sure how high your credit utilization is, but if it's above 30% then that is definitely having a very negative effect on your scores. Apart from payment history, your CU ratio has the greatest overall effect on your scores (30%). Pay down those balances and your FICO scores will rise consistently throughout the year. Obviously, the late-pay on the mortgage is a real killer too. According to FICO, one 30-day late can drop your scores over 100 points if you have good credit in the first place. Correct me if I'm wrong, but did you complete a short sale on your home last year and then take out a deficiency loan to cover the difference? Unfortunately, it doesn't take much to hurt credit scores that can take years to build. Whether that's fair or not, it is was it is. The good news is that as you continue to build positive payment history, the older stuff has less and less of an effect on your overall scores. And since you already have one of your scores back in the low 700s, I would say you're already making some good progress.
Hi Joshua, Thanks for the quick reply. Yes, CU is high, I suppose...at least the balances are (approx 45K on 4 cards). What is confusing me is that the balances, while admittedly high, are significantly lower than they have been...ie: I've been aggressively paying them down for months and I'm only a few months from paying them completely off. What I'm wondering is whether it's "looking" worse now that I actually HAVE paid off 2-3 other cards completely in the last few months. (I started with 7-8, all with close to the limit balances, and have been rolling through the highest interest rates first, eliminating each one in turn) Over time, this has resulted in having only 4 cards left (one of which will be paid off in a few days) with 3 of the 4 at 50-75% of max balance. Again, while the balances are "high" they are still well lower than they were last year. We only use one, and only very rarely, and if we DO use it, we pay off the amount used in full that billing cycle PLUS a double payment....so the net usage is still zero (if that makes any sense). The late mortgage payment was a hit I "had" to take. Unfortunately, I tried everything else. It dropped me 65 points instantly. That one, I can live with because I did it to myself trying to get their attention. Many more months of that double mortgage situation and I would have been filling for bankruptcy anyway. It's been a year and a half since that one missed payment. The house was sold for less than the mortgage so, technically, a short sale...but because I made the effort to salvage it and took out a deficiency loan (ie: a gigantic 60K signature loan) the sale has been reported as "paid in full", and NOT a foreclosure (I have verified this, because it was a stipulation to me signing that deficiency loan paperwork...no point in paying 60K if they're gonna trash the credit anyway). That being said, my score has mysteriously dropped another 20-30 points since the mortgage closed out at the end of March. Mostly I'm just venting because I feel like my husband and I have worked very, very hard to be "responsible". Our debt load was incurred due, mostly, to my very long training (15+ yrs). It just stinks to "do everything right" and still be made to feel like you're some irresponsible teenager just because of some arbitrary score. More importantly, it's insulting on a personal & professional level to be though of as a "risky" or irresponsible in any way shape or form. The whole situation is ridiculous, imho
Vent away! We're here for that too, and certainly none of us are passing any sort of judgment here. Regarding the CU ratio, you need to get that down under 30% if you want to see real improvement in your FICO scores. 10% or less is ideal. What's probably been happening is that even though you've been paying down your balances, you've been paying off and closing cards at the same time, which means you've been losing total available credit. As you lose available credit, that obviously has a negative effect on your CU ratio too. If possible, try to keep these last credit cards open as you pay down the balances. You want to hold onto as much of your available credit as possible. I'm glad to hear you were able to negotiate a "paid in full" status for the mortgage. Nice work. The mysterious 20-30 point drop may be in part due to the fact that now you have no open mortgage reporting on your credit reports. Your credit mix accounts for 10% of your FICO scores, so when you lose something like a mortgage it can possibly have a negative effect on your overall scores. The drop could be completely unrelated though. There are just too many other factors at play to know for sure. I know you're upset with the whole situation, but I think you can see some great progress in your FICO scores just by focusing on improving your overall CU ratio. You've only got one negative item on your credit reports, which is already over a year old, so that will have less and less of an effect on your scores as you build more positive payment history and improve your credit utilization ratios. Good luck, and keep us updated on your progress please
Well, here's the update. We were declined, despite being pre-approved (ie: credit pulled) over DOUBLE the amount of the loan requested . We've been with this credit union for 15+ years and have financed 4 cars through them, and they've seen us buy and sell 4 other houses without issue. They've seen 15+ years of steady, direct-deposit income, and we were going to utilize husband's VA benefits meaning they essentially had 0 liability to worry about anyway. Unbelievable. We've just got off the phone with the loan officer who says he's never seen an underwriter turn down an application like ours in the 20 years he's been doing business, and that she won't divulge "why" we've been declined. The letter from the underwriter is on the way to us, apparently. He mentioned something about the underwriter being concerned that we didn't have enough money in savings compared to our combined income. REALLY?? wtf? I'm actively paying off debt, have been paying 2 mortgages for 2.5 years (well, rent + mortgage), 2 cars, fully funding a 401K, and STILL had money for a downpayment....not a big one, but still. He also said he has a file on his desk from a couple who had a foreclosure 2 years ago and they have 1) a better credit score and 2) an approved loan. I know this sounds absurd and that I "must" be lying to you about something in our history, income, etc....but I promise you it's true. Otherwise I'd be like everyone else and looking for ways to "repair" my bad credit. One of my favorite sayings is "if it ain't broke, don't fix it!" Other than paying off the final 25K of credit card debt (it was almost 75K last year, if that gives you an idea...) I don't know what else to do. The loan officer said "I KNOW you can get this to go through at another bank. Don't give up." Screw that. I'll pay off the damn credit cards, and cars, over the next 6 months and see what happens then. I'm sure they'll be falling on themselves to give us the FULL amount of the loan we originally qualified for. Joshua, thank you for your sage advice. I was already well into paying everything off, but I'll now keep the cards open instead of closing them down. Hard to believe you get penalized for removing temptation and/or bad rates from your portfolio. All a scram, I tell you.....
I believe you...underwriters are extremely unpredictable these days, and I know how frustrating it can be to try to get an explanation out of them about anything. I've been through it myself! All you can really do is move on to someone else and hope for a better outcome. In the meantime, continue getting rid of the remaining credit card balances and saving even more cash for a down payment. You're on the right track, and I think you should really start to see an improvement in your FICO scores as you focus on improving your overall credit utilization. Good luck, and I hope to see you around the forum from time to time.
I'm not really an expert but I heard that completely paying off your credit card balances can hurt your credit score. You may bebetter off keeping the balances low enough to just improve your CU. Any truth to this anyone?
There's no truth to that- it's an age-old credit myth that just won't die for some reason. Leaving small balances on your credit cards does nothing to improve FICO scores.
Well then let me ask a followup. Does paying them and closing the account completely hurt or improve your score, or it impossible to tell without looking at the whole credit report.
I'm going to have to say it hurts you, based on my current circumstances. Like I said, I've paid of (and closed) about 4 credit cards over the past couple of years. Have two more that are closed, with balances, and two open, with balances. I think one of the "mistakes" I've made (thinking I was doing EXACTLY the right thing) is that I closed & paid all the crappy cards first....ones with higher interest rates, questionable business practices, or poor customer service (that doesn't leave many CC companines left, tbh). I also transferred, quite some time ago, balances off those crappier cards to my good cards, so I could pay them down even faster. The end result is that I HAVE saved myself thousands in interest, but at the expense of my score, apparently. Now the "good" cards have a relatively high balance, and great payment history, but (as explained to me above) closing those accounts now makes it look like I have excessive use....instead of having more cards with small balances, I have fewer cards with higher balances (even though the overall balances compared to a couple years ago is WAY lower). On the advice of my Realtor, I'm going to sit down face-to-face with a loan officer from Chase on Friday. She seems quite confident that we will be able to get our loan, with reasonable and appropriate rates, through them. So very disappointed in our credit union. Been with them for 15 years.....
It will most likely hurt your credit scores due to losing the available credit, which generally drives people's credit utilization ratio higher. You have to look at the entire credit profile though, as there are so many other variables to consider too. GirlyDoc- good luck working on your loan with Chase! Let us know how it goes.
