To Get Higher Score – Keep Credit Cards Open- But Don’t Use Them?

Transunion started using a different “Black Box” model in January, and now Experian and Equifax are making technical adjustments too.Although they will not allow us to know the exact formula for calculating the score – we know SOME of the changes!

Some of the changes are

  • Collections that start under $100 will not have an impact on your score. These are 3rd party collection accounts.  However!  You will get “no love” for paying down that $500 collection to $75.

  • Maxed out credit cards will hurt MORE

  • An approximate 15% shift in points towards credit use.  This will help your score if you carry little debt on your credit cards BUT it will definitely hurt you if you are maxed out

  • A single 30 day late will not hurt as bad on one rough spot BUT a pattern of 30 day late payments will hurt more

  • Authorized User accounts will still be scored, BUT there is going to be some sort of “reality test” that FICO isn’t sharing with us.  The guess is if the consumer has a 2 year credit history and there is a 20 year old authorized user account on that consumers credit they won’t be receiving the “points” for that account.  In other words does that account make any sense in the consumers credit profile. This is actually GOOD news for folks who are trying to re-established credit and can get a family member(s) to add them as authorized users!  We had been told that User Accounts, or Co-signed Accounts would TOTALLY go away!

Remember that if you are applying for a USDA Home Loan, and you meet the NCHFA program guidelines, you need two credit scores over 600.  If you are applying for a USDA Home Loan without the NCHFA program, you will need two credit scores over 640.  The determining factor is generally gross household income, and it varies county to county.

If you have questions about your credit score, and how it will affect your ability to purchase a home – and obtain a mortgage – please call Steve and Eleanor Thorne, a Mortgage Lender in Cary , at 919-649-5058.

Originally posted at NCFHAExpert


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