I talked with a member a couple days ago that was totally frustrated with the credit bureaus and the whole credit scoring process. Hmmmm…sound familiar?
Jack’s situation was that he had paid off several bills with a bonus check from work about 10 days ago. He had called the three credit card companies involved and verified he had indeed posted the payoffs which totaled almost $6000. He then had his mortgage broker pull a new credit report thinking he would have the increase in credit score that he thought the payoffs would give. He only needed about 17 points to qualify for this loan but was told that his scores had actually gone down 2 points from a month prior.
Well this is what prompted Jack’s call. He was confused and upset that he had read something I wrote previously about how FICO computes credit scores. He thought that by freeing up his credit lines and paying down the debt would help his credit scores. Was he right?
Upon review of Jacks credit report it did look like he would benefit from a score increase by paying down the $6000 of the $9000 worth of credit lines to cut his outstanding credit line usage from 67% overall to 0%. so why didn’t he get any boost in his credit score?
Well. the answer to this in one of the myths regarding credit reporting. Credit Scores are computed only on a snapshot of a credit report at the exact time the report is requested.
The problem is that most creditors only report to the credit bureaus one time per month. Credit Bureaus are NOT real time so if you make a payment or payoff an account as in Jack’s case it might be days or weeks before the creditor reports it to the credit bureau and thus any FICO credit score change taken into account.
After Jack realized what was happening he was relieved that the bump he hoped for in credit score was most likely just a couple weeks away. But Jack did ask a very good question…This process seems screwed up, most everything else we deal with is in real time, why aren’t the credit bureaus?
It is 2011 almost, right?
Getting the best rate possible on your mortgage sometimes depends on working on your credit.
We can qualify you with the standard, traditional paper credit report that most lenders use, or we can qualify you using an Intelligent Credit Report. The Intelligent Credit Report interprets tradelines, detects data errors, predicts Fannie Mae/Freddie Mac underwriting conditions and even suggests ways you can legitimately strengthen your scores in 72 hours.
The Intelligent Credit Report uses built in software to give you the best chance to qualify. Use it to see what the underwriting conditions will be – before we submit your file! Use it to see if there are errors or other issues in the file that may be wrongfully lowering your score – and how many more points you can add.
If you are presently qualified using only a paper credit report you’re not seeing the whole credit picture, and you may be missing out on opportunities to better your rate.
Yes, it is amazing that a 3 digit number controls our financial life! I certainly hope that the powers that be come up with a more equitable system for us all!
Most creditors only report to the credit bureaus one time per month it is the main problem atfirst. In the min time if you make a payment creditor reports it to the credit bureau and thus any FICO credit score change taken into account.