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Paid debt and mortgage qualification


rs1129
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I recently relocated and sold my old house for a nice profit. I've been pre-qualified by 2 different lenders with the requirement that I pay down debt, which I did at the end of May. As it stands now my only debt is student loans which had one late about 10 yrs ago.

 

My credit score which was hovering at the 700 mark has just taken a dive of about 30pts on myfico.

 

Please tell me that the mortgage companies will not rescind the preapproval based on the lack of debt (that they asked for) and the resulting decreased score?

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If the cause of the score drop is because all of your credit card accounts are reporting a zero balance, that's very easy to fix. Just let a small balance report on one card.

 

Your middle mortgage FICO score is the one that matters. Are you looking at the mortgage FICOs on MF?

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I'm looking at just the mortgage scores:

EQ Fico5 654

TU Fico4 672

EX Fico2 687

 

Prior to paying down the debt I had 670, 701 and 721.

 

Is there a percentage of the avail on the card that will help? I'm assuming charging $50 won't be enough to bounce me back over 700?

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I'm looking at just the mortgage scores:

EQ Fico5 654

TU Fico4 672

EX Fico2 687

 

Prior to paying down the debt I had 670, 701 and 721.

 

Is there a percentage of the avail on the card that will help? I'm assuming charging $50 won't be enough to bounce me back over 700?

 

All you need is a small balance. We usually recommend $3 on one card when the statement closes because some cards forgive smaller balances when the statements close, leaving you back at $0.

 

Couple of caveats in case they apply:

 

A small number of banks, most notably US Bank, report your balance as of last day of the month instead of the statement date. Also, if you have a Chase card with a balance that reports, paying it to $0 will cause Chase to update your balance to $0 mid-cycle, which will negate the benefit of the balance reporting.

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Thanks. I have only one card and it's a crap1 card which actually has a negative balance at this point. I paid it off, and they still took the auto payment which baffles me but whatever. The crap1 rep told me it would report today or tomorrow so I'm about to hit Amazon up for a couple of items.

 

I know I need more cards to boost my credit, but I was waiting until after the mortgage was approved.

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Thanks. I have only one card and it's a crap1 card which actually has a negative balance at this point. I paid it off, and they still took the auto payment which baffles me but whatever. The crap1 rep told me it would report today or tomorrow so I'm about to hit Amazon up for a couple of items.

 

I know I need more cards to boost my credit, but I was waiting until after the mortgage was approved.

 

Do you know what the score cutoff is to get the most favorable rates? A friend of mine who's in the 680s (mainly due to high utilization) recently got a fantastic deal on her refi.

 

Long-term you definitely want more cards to optimize your scores.

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I'm looking at just the mortgage scores:

EQ Fico5 654

TU Fico4 672

EX Fico2 687

 

Prior to paying down the debt I had 670, 701 and 721.

 

Is there a percentage of the avail on the card that will help? I'm assuming charging $50 won't be enough to bounce me back over 700?

All you need is a small balance. We usually recommend $3 on one card when the statement closes because some cards forgive smaller balances when the statements close, leaving you back at $0.

 

Couple of caveats in case they apply:

 

A small number of banks, most notably US Bank, report your balance as of last day of the month instead of the statement date. Also, if you have a Chase card with a balance that reports, paying it to $0 will cause Chase to update your balance to $0 mid-cycle, which will negate the benefit of the balance reporting.

This is excellent advice for anyone with credit cards. I really wish we could implant this idea into the heads and habits of the rest of our citizens.

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Mortgage scores are pretty sensitive to zero balances on all cards but also

 

a late from 10 years ago would not report.

what else is keeping your scores down?

Yeah, it looks like something is reporting negatively.

 

OTOH, mortgage scores (older FICO models) are pretty sensitive to zero balances and thin files. I had the older (mortgage) FICO go from 690 to over 740 by adding one MC card that reported immediately with zero balance. In that case it was because all my other cards had a small balance and total util was around 10% and my oldest account was < 4y.

 

You will see an instant score increase by adding another credit card. Perhaps 30 to 40 points if your report is clean. Have one report a small balance and the other a zero balance.

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a late from 10 years ago would not report.

 

what else is keeping your scores down?

It would've been high utilization. That's been fixed as well. One was a revolving line for 3k thats been paid off, and the crapone for 7k which now has an $80 balance.

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Mortgage scores are pretty sensitive to zero balances on all cards but also

 

a late from 10 years ago would not report.

 

what else is keeping your scores down?

Yeah, it looks like something is reporting negatively.

 

OTOH, mortgage scores (older FICO models) are pretty sensitive to zero balances and thin files. I had the older (mortgage) FICO go from 690 to over 740 by adding one MC card that reported immediately with zero balance. In that case it was because all my other cards had a small balance and total util was around 10% and my oldest account was < 4y.

 

You will see an instant score increase by adding another credit card. Perhaps 30 to 40 points if your report is clean. Have one report a small balance and the other a zero balance.

High utilization which has been fixed was a problem. Also seems to be 14 inquiries, which ticks me off because it was all from 3 mortgage people pinging my reports before and after the payoffs.

 

Do you know of any card that will report when they approve? ...and will another inquiry kill me?

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You don't want to apply for anything while you are trying to get a mortgage.

 

The problem is you have bad timing.

 

You should have been building new accounts and such gradually over time. So that the INQ's and new account stings wore off.

 

Did you have a mortgage on your house that you sold that is also now reporting paid off?

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You don't want to apply for anything while you are trying to get a mortgage.

 

The problem is you have bad timing.

 

You should have been building new accounts and such gradually over time. So that the INQ's and new account stings wore off.

 

Did you have a mortgage on your house that you sold that is also now reporting paid off?

 

Normally, it's good advice not to add a credit card when getting a mortgage. This is near universal advice because a new cc account typically dings your credit just because it's new and the lower AAOA drops scores and the associated inq may be a slight ding as well.

 

However, the OP inferred he only has one credit card, which he paid off. Adding a second card allows one to report a small balance and the other a zero balance and will almost always, not lower, but increase credit scores. Adding a second, and often third CC has been repeatedly shown to improve credit scores. But after you have more, new accounts do more damage than good.

 

Now a new account, or any CC account, may concern an underwriter because there are a few folks that run up huge bills which haven't shown up on the CRA reports but it's easy enough to get current balance reports on all bank and credit accounts prior to closing.

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You don't want to apply for anything while you are trying to get a mortgage.

 

The problem is you have bad timing.

 

You should have been building new accounts and such gradually over time. So that the INQ's and new account stings wore off.

 

Did you have a mortgage on your house that you sold that is also now reporting paid off?

Yes, I had a mortgage on the house that was sold and it's reporting paid across all 3.

 

Current:

Mortgage 209k, bal: $0

Car: 23k; bal $0

Car: 17k; bal $0

HELOC: 3000; bal $0

Cap1: 7k; bal $80.00

Edited by rs1129
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rs1129,

 

Could you list when your accounts were opened (year and month)? Include all accounts on your report including closed accounts.

 

Is there anything listed as a negative or potential negative like 30 day lates on anything?

 

What you have stated so far doesn't normally add up to a FICO score under 700.

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