I Don't Get Credit Scoring

[Julie Moriarty]

When I sold my house my credit score was pretty decent. I then paid off all the credit cards. I owe nothing now. I applied for a home loan about a month later. All credit card usage since then has been paid in full as soon as I get the bill.

My credit score is now 60 POINTS LOWER than before I sold the house and paid off all the debts. :confused:

[Dick Strauss]

You might want to pull your credit score to see what has changed. Hopefully some scammer didn't get your info and open cards in your name, etc.

Is the financial institution making false excuses so they can justify locking you into a higher rate?

[Greg R Bradley]

First, make sure you are looking at the correct credit score. If you are applying for a mortgage, virtually all lenders will use the lowest score of FICO 04 version from each of the 3 CRAs. Let's just say ALL lenders as the only ones that could use something else are few.

If you applied and they gave you a score, you may be comparing it to some other score you had before.

As far as the amounts showing on your CC accounts, they report the last statement balance. So if you get a statement from the CCC, that is the amount reported. Paying it in full does not hurt your score.

You didn't CLOSE any accounts other than the mortgage you paid off, right?

[Dan Hintz]

Pre-pay your credit cards. If you know your next bill will be roughly $2k, when the next bill arrives, pay it + $2k. Your reported balance at the end of each month will be very close to zero. This can have a huge effect on your score if you tend to charge a lot (regardless of whether or not you pay it off every month).

I'm currently 10 points shy of max after purchasing the house last year, and the highest I've been is 3 points shy of max.

[Wade Lippman]

Supposedly my suboptimal score was because I never had any debt. I financed a car and my credit score went down. Paid off the car loan and it went down again. Go figure.

[Matt Schrum]

I've found using CreditKarma.com (and they have an app-- services completely free) seems to give me a pretty good feel for my current credit score. I don't have too much advice you don't already know regarding your score-- however CreditKarma is great for keeping tabs on it.

[Greg R Bradley]

Pre Paying a CC lowers the amount that lender reports to the CRAs. That is not necessarily good. It depends on what you need. Reporting zero is almost universally bad. If you mean max to be 850, the scores used for a mortgage cannot be 10 points or 3 points shy of max. The algorithms used by FICO vary slightly between the three CRAs and but none of them have any path through the algorithm that will give you those scores. Here is the exact info for FICO used for mortgage:

EQ for mortgage is Beacon 5 - possible range 334-818.

TU for mortgage is FICO Risk Score, Classic 04 -possible range 309-839.

EX for mortgage is Fair Issac v2 FICO - possible range 320-844.

CreditKarma will give you info from your credit report from Equifax and Transunion but no score that is useful for anything other than general info. About like trying to figure out what clothes to wear in FL by checking the weather in CA. Both tend to be warm in summer.

General consensus is that any FICO 04 score above 810 is all the same as they become silly and don't really work properly above that. Unless you are trying to get a second on a ultra high end house from an investment bank like Schwab, you can consider anything above 760 to be perfect, whatever that really means.

[roger wiegand]

Didn't you just move? That will drop your score quite a bit. It should go back up after you've been in a new address for a year or so.

[Dan Hintz]

Pre Paying a CC lowers the amount that lender reports to the CRAs. That is not necessarily good. It depends on what you need. Reporting zero is almost universally bad.

How would reporting less be a problem? If the creditor shows a possible line of credit that's only used for 1-2% of its max, I can't see how that would harm you, only help. The score is based (in part) upon the total credit available to you, as well as the percentage of that credit that is actively used.

[Julie Moriarty]

Didn't you just move? That will drop your score quite a bit. It should go back up after you've been in a new address for a year or so.
We are in a vacation rental waiting for a title defect to clear. The lender told me today the rate lock expired and now the best we can do is the locked rate but if the rate goes up we get stuck with the higher rate. She also said we will have to get an appraisal update and go through the loan approval process again. I'm guessing that means they will pull the credit score, which is now lower than I have ever seen it.

The credit score may have taken two hits from the lender. We had a contract on a house that turned up with a structural defect so we cancelled. The next house ended up with a title defect. I'm batting 0.000 on the new house choices.

I have zero debt, a 100% on-time payment record and a crummy credit score. How does this make sense?

[Allan Dozier]

Yes, it is weird. I charge a lot on credit cards each month for my business. They are always, always paid in full. Some have very large credit limits so my score stays in the 7 hundreds because I have a lot of AVAILABLE credit. At this point in my life I basically have no debt but just the fact that I could borrow on these I guess scares someone.

[Malcolm McLeod]

How would reporting less be a problem? If the creditor shows a possible line of credit that's only used for 1-2% of its max, I can't see how that would harm you, only help. The score is based (in part) upon the total credit available to you, as well as the percentage of that credit that is actively used.

I don't know the exact equation, but have been told its complicated. If it was simple, the lenders might think the serfs could get restless (and we can't have THAT!).

In addition to LOC limits and total debt load, I have also always been told that a significant portion of your score is based on your timed repayment of any debt obligations. So, paying everything off doesn't build any such history.

So my assumption is that paying off a $500/mo CC (no carry-over balance), although good, doesn't yield any info about your ability to repay a larger debt over time (i.e. a mortgage).

[Brian Henderson]

How would reporting less be a problem? If the creditor shows a possible line of credit that's only used for 1-2% of its max, I can't see how that would harm you, only help. The score is based (in part) upon the total credit available to you, as well as the percentage of that credit that is actively used.

From what I understand, they are looking at worst case scenario, if you have a lot of credit available to you, whether you are currently using it or not, they assume that you will use it, or at least can use it, in their credit decisions. The best thing you can do is close down cards that you don't use. This becomes a problem because a lot of credit cards will just automatically increase your credit regularly. We actually fought JC Penney a while back because they kept giving my wife more and more and more credit when we pretty much never used the card. They wanted to encourage us to do it, they kept sending her bigger and better cards, I think she had like $30k credit on the card at one point, with maybe $150 used. I think the most we've ever used at one time was maybe $500. But that counts against us because we can go and spend $30k if we want to. We just don't want to. I'm not sure what they have at JCP that we'd want to spend that much money on, period. We told them that we didn't want to keep increasing the limit unless we asked them to and they fought us on it. I gave them the option between doing what we wanted and cancelling the card and we'd take our business elsewhere. They finally listened.

[Julie Moriarty]

In addition to LOC limits and total debt load, I have also always been told that a significant portion of your score is based on your timed repayment of any debt obligations. So, paying everything off doesn't build any such history.

So my assumption is that paying off a $500/mo CC (no carry-over balance), although good, doesn't yield any info about your ability to repay a larger debt over time (i.e. a mortgage).
In a way, I guess that makes sense. But if you use CCs every month and pay them off on time, wouldn't that show the ability to pay as well as repsonsibility?

Before we sold the house, we charged a lot of the home improvements on CCs. But we never went over 50% of the credit line. The lender told me that was good and as long as you pay on time, the amount of debt isn't as much an issue as going over that 50% mark. I think she mentioned it showed self control.

[Rich Riddle]

After a couple bouts of identity theft, I learned a lot about credit and credit scores. In your case:

Paying off accounts ALWAYS lowers your scores. Seems counter-intuitive but it's the way it works. The more accounts you pay off, the more negative impact that will have on your score.

Revolving credit works on two principles. One relates to the amount of credit cards with a balance on them. If it equals or exceeds 50% of your cards with balances, that is a negative impact. For instance you have two cards with $10 each on them. You have one card with nothing on it. Negative impact even if each card has a high limit. The second relates to the balance you have on them as a percentage. Ideally you should keep the total balance around 6%. You go over 50% and they notice and it gives a negative impact.

To resolve the first and second problem, always pay your bill in full BEFORE they send the statement.

Many folks confuse credit with worth. They are correlated but not the same. To have good credit you must have OPEN accounts in good standing and a variety of accounts, such as mortgage, car loans, credit cards, student debt, etc. That shows you can pay on diversified types of debt. Cash is sub-prime; use it for almost everything and it won't build your credit. Go figure.

The Catch 22 is most people who need credit don't have the best credit, and those with the best credit don't need it.

[Garth Almgren]

From what I understand, they are looking at worst case scenario, if you have a lot of credit available to you, whether you are currently using it or not, they assume that you will use it, or at least can use it, in their credit decisions. The best thing you can do is close down cards that you don't use. This becomes a problem because a lot of credit cards will just automatically increase your credit regularly. We actually fought JC Penney a while back because they kept giving my wife more and more and more credit when we pretty much never used the card. They wanted to encourage us to do it, they kept sending her bigger and better cards, I think she had like $30k credit on the card at one point, with maybe $150 used. I think the most we've ever used at one time was maybe $500. But that counts against us because we can go and spend $30k if we want to. We just don't want to. I'm not sure what they have at JCP that we'd want to spend that much money on, period. We told them that we didn't want to keep increasing the limit unless we asked them to and they fought us on it. I gave them the option between doing what we wanted and cancelling the card and we'd take our business elsewhere. They finally listened.
From what I understand of credit scores, closing down unused accounts counts against you, and having a really high limit with low usage is a good thing, reflecting a really low overall debt load. If you're only carrying $150 on a $30k card, that's using 0.5% of your capacity, which the card companies seem to like (probably because it generates some interest for them). On the flip side and counterintuitively, paying off your card in full every month and having zero debt is seen as a bad thing and makes your score go down - no idea why. <shrugs>

[Brian Henderson]

From what I understand of credit scores, closing down unused accounts counts against you, and having a really high limit with low usage is a good thing, reflecting a really low overall debt load. If you're only carrying $150 on a $30k card, that's using 0.5% of your capacity, which the card companies seem to like (probably because it generates some interest for them). On the flip side and counterintuitively, paying off your card in full every month and having zero debt is seen as a bad thing and makes your score go down - no idea why. <shrugs>

We were told by the mortgage company last time we bought a house to close out any unused credit cards because it would bump up our FICO a couple of points. They might as well be rolling dice.

[Greg R Bradley]

How would reporting less be a problem? If the creditor shows a possible line of credit that's only used for 1-2% of its max, I can't see how that would harm you, only help. The score is based (in part) upon the total credit available to you, as well as the percentage of that credit that is actively used.
2-5% of the limit on an account is usually optimal. It is zero that can cause a problem. That is zero for each category. If you have 5 credit cards, then optimal could be a small balance reporting on one with zero on the rest. It is very likely that you could have little or no change up to 40% on that one card as long as the other ones report zero. The same amount of debt as a percentage of credit limits spread across two cards is likely to have no change. Spread that across 3 of the 5 and it might change. Spread on 4 it is likely to go down and the same debt will almost certainly cause a drop.

The major categories are Mortgage, Installment, and revolving debt. Having a zero balance on all categories will hurt your score.

The models track problems and people's debt history before that problem. If you really want you can do a lot of work to make some improvements but strange behavior usually hurts you.

[Greg R Bradley]

We were told by the mortgage company last time we bought a house to close out any unused credit cards because it would bump up our FICO a couple of points. They might as well be rolling dice.
They aren't rolling dice, they are giving you horrible advice that will certainly hurt your score. They are completely wrong, which is VERY typical. The mortgage lenders know about as much about credit scoring as a car salesman knows about the cars he sells.

Don't ever close an account! NEVER, NEVER, NEVER. It won't ever help and will usually hurt. If the account is older, it can seriously affect your AAoA, Average Age of Accounts.

There are certain circumstances where you have already qualified for a loan and at the final stage of the process the lender will want you to close some accounts to limit your ability to owe someone else a bunch of money and then BK. This is rare and will generally only happen on someone that barely qualified and has little history.

[Greg R Bradley]

I have zero debt, a 100% on-time payment record and a crummy credit score. How does this make sense?
It depends. It is mostly backed up by experience in people's credit history. A slight wrinkle is that due to government regulations, the Mortgage industry is stuck with slightly out of date scoring models. The '04 in the name means they were developed a few years before 2004 with the intent to standardize on them in 2004.

You need ACTUAL FACTS about your score and the reasons WHY it is what it is. If you have not compared the information from all three CRAs and know it is correct, go to annualcreditreport.com and pull your report from all three CRAs. You can do that once a year for free. If you want to get EQ and TU, you can do that at creditkarma.com. Just ignore the score. Then go to MyFICO.com and get an actual credit report with a useful score.
If you know the info is the same on all 3 CRAs then only pay for one CRA at $19.95 instead of all three for $59.85. If you have used your free credit reports in the last year, then get the reports from creditkarma.com on EQ and TU and pay for a FICO at MyFICO.com for EX. Or just bite the bullet and get the whole picture on all three from MyFICO.com.

If you want some help you are welcome to contact me privately. I know lots about credit and scoring but very little about mortgages.

[glenn bradley]

How would reporting less be a problem? If the creditor shows a possible line of credit that's only used for 1-2% of its max, I can't see how that would harm you, only help. The score is based (in part) upon the total credit available to you, as well as the percentage of that credit that is actively used.

"If the creditor shows a possible line of credit that's only used for 1-2% of its max, I can't see how that would harm you, only help."

Yes, the error here is applying common sense to an algorithm designed for a specific task. What you could borrow, what you can borrow, what you do borrow and what your payment history on it all is factored in. This is then applied in some magical way that is multiplied by unicorns and then divided by hen's teeth.

For more info: http://www.myfico.com/crediteducation/whatsinyourscore.aspx

[Brian Elfert]

I currently have in excess of $75,000 in available credit across a number of credit cards. It doesn't seem to hurt my credit score as I am above 750. My score is high enough to get the best rates for credit. Never a late payment. I believe just one payment over 30 days is a major hit to the credit score.

The biggest joke with credit scores is the person who chooses to live on a cash basis with zero debt and has a decent savings account probably wouldn't be able to get credit if necessary.

[Rollie Meyers]

No credit & bad credit are about the same, according to my CC company my FICO score is 822, owe them $142.00 & owe on my truck, when I bought my first & only new truck in 1993, made a $9.000 down payment & Ford Credit charged me 15% on the loan, because of no prior credit, made 9 payments and refinanced it at a credit union for a little over 7%, payment went down & continued making the original payment amount to pay it off quicker.

[Chuck Wintle]

call me old fashioned but if one pays their bills on time, have not missed mortgage or car payments, little or no balance on credit cards then this is the best credit rating one can have. FICO ratings seem arbitrary and perhaps a little useless since it does not give the entire story of a person credit history.

[Dan Hintz]

Paying off accounts ALWAYS lowers your scores. Seems counter-intuitive but it's the way it works. The more accounts you pay off, the more negative impact that will have on your score.

I'm assuming you mean non-revolving credit... revolving credit (i.e., credit cards) has no such issues (else you'd kill your score every time you paid your monthly bill).




I'm simply not seeing what you guys are seeing, and I have no explanation (and like you, no access to the scoring algorithm). Although all three agencies scored me similarly, I usually use only one to keep monthly track (TransUnion, I believe). For more years than I can remember, I have been in the 820-830+ range. After the house was purchased last year, my score dropped to the high-10's to low-20s, but within a few months I had rebounded again to the 830's. Last month's report shows me at 847.

I pay off my cards every month, and if I know a big purchase is coming soon, I add extra to my current payment to cover it. Some months, I have a negative balance (they owe me) on a card because I overestimated the purchase. I must be doing something correctly...

[Mike Cutler]

When I sold my house my credit score was pretty decent. I then paid off all the credit cards. I owe nothing now. I applied for a home loan about a month later. All credit card usage since then has been paid in full as soon as I get the bill.

My credit score is now 60 POINTS LOWER than before I sold the house and paid off all the debts. :confused:


I don't think we're supposed to get it. My FICO moves between 810-830, but I've seen it as low as 780 with zero change in finances, in or out. Same bills, month to month, and the score can swing 50 points.
I learned a long time ago that if you have no debt, it's hard to get credit. I got turned down for a check cashing card at Stop & Shop. I owed not one dime to anyone, and made a very good wage at the time. I walked into my bank the next day, and told the manager, " I have a problem". ;)

[glenn bradley]

call me old fashioned but if one pays their bills on time, have not missed mortgage or car payments, little or no balance on credit cards then this is the best credit rating one can have. FICO ratings seem arbitrary and perhaps a little useless since it does not give the entire story of a person credit history.

I hear ya. Many of us are caught in a world of what is versus what makes common sense.

[Greg R Bradley]

Brian,
The more credit available available on CCs the better the score you will have. If you have a good score with $75K available it will be better with $175K available. Mostly doesn't matter as there is not much benefit to a score above 750 as long as that is a FICO score in the Classic or standard version - the ones with a range of 300-850.

Rollie,
Some CCC are reporting actual FICO scores with your statement. Discover started doing it a few years ago and Amex started last month. Amex will also let you opt back for a Plus Score, which is not used by any lender for anything. That's more typical of the scores most of the others were giving out for free.
Amex score is FICO 8 for Experian. They also go an extra step and tell you what it was a month before.
I'm pretty sure the Discover FICO is also version 8 and based on your Transunion report. I can't recall if it is a standard FICO or Enhanced for Credit Card applications.

Chuck,
Nothing old fashioned about "pays their bills on time, have not missed mortgage or car payments, little of no balance on credit cards". ALL of those are correct for generally increasing your FICO score.
It isn't arbitrary at all, mostly because it was never intended to be "the entire story of a person's credit history".

FICO scores and other scores used by lenders are properly called a Risk Score, not a Credit Score. They are specifically sold to potential lenders as a rating of the risk that person will have of having problems with that new loan at that time. Most of them even specify a certain percentage of risk of that new loan going 60+ days late within the next 24 months - just an example of the terminology used. Here is a sample of the claimed improvements in EQ Beacon 9 Mortgage Score that they are trying to get implemented. That score is two entire generations later and specifically enhances for a mortgage application. Government meddling is stopping improvements like this:
324339
The general overview from one of the credit providers is 20 pages describing the 51 scores they offer lenders.

Another thing that is important is that all the Risk Scores are designed to qualify a person at the bottom end of acceptance for THAT loan at that rate. NOT designed to tell someone that they have reached near perfect credit.

Step one is make sure all the information is correct with all three CRAs. Then look at the info and you can answer a few questions here: http://www.scoreinfo.org/fico-scores-estimator/

That will give you a general idea of a real score range. Seems to be based upon the latest FICO standard score. This is very basic but the questions will give you good info on the basics for the highest scores:
1. More than 5 open CC.
1a. Got your first CC 20+ years ago.
2. Got your first installment loan 20+ years ago.
3. Not applied for any loans in the last year.
4. No new loans in the last 6-12 months.
5. Not too many loans with balances. Most open CC should be zero reporting but not ALL.
6. Very low balance on loans other than a mortgage.
7. Never missed a payment (actually lates drop off around 8 years so no lates on your reports)
8. No loans past due (goes along with no lates but this is additional info for people with lates)
9. Low amount owed on CC as compared to limits.
10. No BK, Liens, Foreclosure, Repo, Collections.

Edited to add: Several of these should make it obvious why it is always, well almost always, a mistake to close unused accounts or ask to have your limits lowered. Asking a lender to lower your limit is totally wrong. The exceptions are very few. One example is that older obsolete Scores, like the ones used for mortgage thanks to our goverment, treat a CC with a limit above $50K strangely. They don't count that limit in your available credit. If you have a CC with a limit above $50K and your debt is high, you can benefit on THAT score by having them lower that limit below $50K. Of course it hurts you for any more modern score.

[Rich Engelhardt]

My credit score is now 60 POINTS LOWER than before I sold the house and paid off all the debts. :confused:
Which score?
FICO or Vantage?

FICO is the oldest tha't been around for decades.
Vantage is the new kid on the block and the one that most people see when they order or get a credit report.

They aren't the same and the actualnumeric values aren't the same.
A 760 with one can be the same basic score as an 830 from the other.


FWIW - we (my wife and I )just had our credit get hammered the last few months.
We jumped all over those "free money" deals from the credit card companies, the ones that pay you a hundred or two hundred to get a card and charge $1000 on it within the first three billing cycles.
Since we bough a new rental house and have been spending money left and right on the place, it was super easy to meet the requirement.
The other part is, they offer zero percent for up to 15 months on these cards.
As a result, we've run up a bundle, paid the minimum payments, and haven't used our older cards.

All of that's counted against us pretty heavy.

[Julie Moriarty]

Greg, thank you for that very detailed explanation! I'm beginning to understand some of this. To your 10 points:

1. More than 5 open CC. - Check
1a. Got your first CC 20+ years ago. - Check
2. Got your first installment loan 20+ years ago. - Check
3. Not applied for any loans in the last year. I only applied for a recent mortgage loan which is in limbo now
4. No new loans in the last 6-12 months. - Check
5. Not too many loans with balances. Most open CC should be zero reporting but not ALL. Right now all CCs are only reporting whatever I charged since the last payment in full was made
6. Very low balance on loans other than a mortgage. - Check
7. Never missed a payment (actually lates drop off around 8 years so no lates on your reports) I've got one late mortgage payment from 6-1/2 years ago the lender said I got dinged on. And a few late CC payments that slipped through the cracks which were paid as soon as I found I missed it.
8. No loans past due (goes along with no lates but this is additional info for people with lates) Not in the last 12 months or so, maybe longer.
9. Low amount owed on CC as compared to limits. - Check
10. No BK, Liens, Foreclosure, Repo, Collections. - Check

FWIW, the credit info I'm using comes from Discover. It showed me at 739 just around the time I sold the house. After I sold the house, I paid off everything. Then I applied for a new mortgage. Now it's 679. Seems a bit harsh to me.

[Ian Moone]

Just the act of inquiring about a loan lowers your credit score!.
The number of institutions & how recently they checked on your credit worthiness affects your score to lower it!.
So the act of "shopping loans" can and does, drastically lower your score - even tho you took out no loans.
Mine stays at 801 - never moves, coz I don't shop for loans and don't take out credit - have pretty much zero debts, and own all assets including the house, truck, car, m/bike, and boat etc.
In the past I have borrowed large amounts (property development - land re-zonings & sub divisions etc) and paid them all back within 1 - 2 years at completion of the project.
So these institutions send me letters thanking me for my past business and suggesting that if I'd ever like more loans to just contact them and it won't be an issue!.
These days I make a point of not doing that!
What they REALLY want is to get their hands on the title deed to my property under mortgage again - which I will never do again as long as I live!
Yes interest rates are at world historical lows, BUT - the flip side is the world economy's are about to also collapse!.
Here in oz - the 4 major banks (All of whom have recently reported massive multi billion annual profits) just raised interest rates 25 basis points @ the same time that the federal reserve kept rates the same as they have been now for a couple years! The Fed is taking about dropping the prime rate 25 basis points!
The banks put there mortgage rates up .25% because due to the poor economy the Feds increased their provisions for bad debt holdings, so they each have to raise more capital in a hurry, since their lendings are all way over leveraged and the economy's about to tank.
I remember the interest rate hikes of the early 1980's (they went to 13% plus here back then). Then I remember the Interest Rate hikes of the late 1990's when they went to 22%
Bin there, done that, & got the T shirt and stubby holder to prove it & ain't in any great hurry to go back!.
Our economy's tanking and fast -no job security left in anything!
People just aren't game to borrow in a climate like this.
House auction clearance rates are down. Median House price has dropped 4% this year & the previous one!
Rental vacany rates are large & growing thus rental returns are dropping ans people move to secure lower rents in better property's.
The low rental returns combined with negative capital gains, and the low return on invested capital - along with the high risks..& next to no negative gearing fo the difference between interest and rental return for tax purposes, all mean that negative gearing opportunities have all but evaporated!.
When all you can get out of an investment property is capital loss and a little depreciation annually on fixtures and fittings (5%) as a tax break its just not worth investing in property at the moment.
Here the media house price (4bed x 2bath) is around $~450K
The rental return will cover a $300K mortgage!
So with no tax breaks and negative capital gain... when buying that $450K investment property - all your doing is subsidizing your tenants lifestyle to the tune of $150... i.e. investing in a property that's going backwards in value & collecting enough rent to service 2/3rds of the mortgage!
All of our property boom was resources industry backed... and China's stopped buying our natural resources!
So the artificial demand for property as a negative gearing tax break for the Fly In Fly Out Miners on $220K a year + salaries has collapsed.
Many of them are out of work and upside down in their loans on their investment property's & facing foreclosure on their own home and their investment property.
So they put the investment rental on the market while prices are falling and no ones buying! The tenants get sick and tired of "moving out for the day" for the realtor to bring prospective purchasers (i.e. sticky beaks and possible would be thieves) thru, (to case the joint) & run "home open inspections" on weekends, so the tenant doesn't renew the lease and finds a more stable property to rent, leaving the unemployed investor now upside down in both loans and with zero rental income.. which is just speeding up the bank fore-closure rates.

It's a tough time to get housing loans, the 4 big banks here are seeking 30% deposits (which on median $~450K homes) is a big chunk of change for first home owners to find!.

First home owners (even with a govt $10k grant) can't pay rent & save enough to get into the market place!

Investors are OUT of the market.
First Home Owners are OUT of the market!
The ONLY buyers IN THE MARKET (which is a buyers market if your game) are overseas Chinese buyers mostly now!.
There's not enough of them due to the danger of exchange rate variations on foreign loans - so the markets "correcting" back to levels we haven't seen since the great depression of the late 1920's and early 1930's.
Its conditions not seen in the market place in basically ~100 years!
That's the reality of the new fiscal paradigm!
$18 trillion in un-servicable US foreign debt, has the whole world spooked.
There has to come a day of reckoning and most (wise) people are positioning themselves for that - hedging their bets & retiring debt, and trying to be liquid for when the crash hits and there are legitimate bargains to be had!.
There's plenty more to worry about, than just your credit score.
The more you show the bank you don't need or want their $ - the more they will want to lend to you!.
The more desperate you are for their loan, the less they want to loan it to you - they only want to loan to people who don't need it at the moment!.
All the rules have changed, these are conditions your great grand parents knew how to deal with, during the great depression, they buried their silver dollars and gold before the gold confiscation act was introduced (by FDR?).
They had a saying 100 years ago.
"Neither a borrower nor a lender be".
Probably time to bone up on some history.
YMMV (Your mileage may vary).

[Rich Riddle]

Ian,

In the United States, it's different than Australia apparently. If you simply "inquire" about a loan it has not bearing on your credit. If you apply for one, they perform a "hard pull" that does impact credit at a low level (about two points). If you are shopping for mortgages and apply for more than one mortgage like you do when dealing with a mortgage broker, all those "hard pulls" or "hard inquiries" are bundled into one.

Our prices are much more reasonable than yours for homes. For conventional loans, we typically have to put up 20% on a mortgage but a few programs exist to lower that number. Most of those programs exist through the government, such as VA and VHA. One problem we had with the mortgage crisis was that folks with little equity walked away from homes. If you look at the data, few people who put down 20% or more on their houses walked away from them. The tougher regulations here are a pain, without a doubt; but they will likely have fewer defaults. We close in about 35 minutes. The paperwork is unbelievable.

[Rich Engelhardt]

All the rules have changed, these are conditions your great grand parents knew how to deal with, during the great depression, they buried their silver dollars and gold before the gold confiscation act was introduced (by FDR?)Yep - it was FDR.

[Greg R Bradley]

Greg, thank you for that very detailed explanation! I'm beginning to understand some of this. To your 10 points:

1. More than 5 open CC. - Check
1a. Got your first CC 20+ years ago. - Check
2. Got your first installment loan 20+ years ago. - Check
3. Not applied for any loans in the last year. I only applied for a recent mortgage loan which is in limbo now
4. No new loans in the last 6-12 months. - Check
5. Not too many loans with balances. Most open CC should be zero reporting but not ALL. Right now all CCs are only reporting whatever I charged since the last payment in full was made
6. Very low balance on loans other than a mortgage. - Check
7. Never missed a payment (actually lates drop off around 8 years so no lates on your reports) I've got one late mortgage payment from 6-1/2 years ago the lender said I got dinged on. And a few late CC payments that slipped through the cracks which were paid as soon as I found I missed it.
8. No loans past due (goes along with no lates but this is additional info for people with lates) Not in the last 12 months or so, maybe longer.
9. Low amount owed on CC as compared to limits. - Check
10. No BK, Liens, Foreclosure, Repo, Collections. - Check

FWIW, the credit info I'm using comes from Discover. It showed me at 739 just around the time I sold the house. After I sold the house, I paid off everything. Then I applied for a new mortgage. Now it's 679. Seems a bit harsh to me.




Re:
#5 A CCC generates a statement and reports THAT amount to the CRAs promptly, generally the next day. The CRAs update their reports, Experian in minutes, Equifax and Transunion in 2-5 days.

#7 A 6.5 year late I'm assuming means a 30 day late. That means you didn't pay the payment on time, a new statement was generated showing the late and a late charge and then THAT statement was not paid by the due date. That payment would be two months payment, the late charge, and any additional interest they were allowed to charge. That is the minimum "late" where they are allowed to report it to the CRA as "late". That would have had a large effect when new but now should have almost no effect now.

CC have the same rules so you have to be late, get charged a late charge and then not pay it until the NEXT due date. To avoid anything that hits your credit report you would only have to pay the old minimum, the late, and the current minimum by the due date. A 60-day late means it went the next monthly cycle without paying the three minimums and the two late charges. It takes a HUGE step up in damage if it goes another month and shows 90-day late. It gets worse again at 120-days late. From your description, it sounds unlikely that any went late enough to show on your report.

#8 means a loan that is currently past due. Loans that WERE past due appear in the "Lates" section. A loan that is currently overdue is severly damaging.

The 739 from Discover is a FICO 8 score from ONE CRA. I think it is TU, which is usually my highest score. The 679 for a Mortgage is from a Tri-Merge report that includes a separate report and score from each of the three CRAs. It is FICO 04 and is the lowest of the three scores. It would be very easy to believe that one could be 739 and the other 679 at the same time with the same information. I'm pulling from memory but I think I recall that FICO 8 completely ignores ONE small derogatory from certain categories. I think it even ignores a collection if it is under $100 and that would be devastating to earlier FICO versions.

It has been a few years since I dealt with this regularly and kept up. I think the current reports from MyFICO.com show your scores for a variety of different FICO scores.

Edit to add: I think it might help to add on to the info from Rich just above.

Multiple Hard Inquiries of the same type during a short period will show as separate Inquiries but be counted as ONE. The period varies according to which FICO version. I recall they vary from 30-90 days. Additionally, it is important to know that you get a slight hit on your score going from 0 Inq to 1 or 2 Inq. The next step is 3-4 Inq, and the next is more than 4. They can only hurt so much and don't hurt a lot after a couple months. They show for 2 years but only affect you score for 1. The biggest effect is going from 0 to 1 or 2.

So don't worry about applying with 5 different mortgage companies for the same mortgage. It sounds like you might have a delay but if that only takes you from 1 to 2 it still shouldn't matter.