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I have a question about credit scores, and I don't know if this is even the appropriate forum, but here it goes:
I recently made a pretty big purchase on my credit card (dumb move I know), that put me over the 50% debt to credit available limit. Not too much though, I am now at 55% of debt to credit. It'll take me about a month or so to pay off my card to get back under 50%, but had some questions since I'm looking to buy a home soon.
I understand that when dealing with credit scores, 35% of your score is figured out by the same debt to credit available I mentioned earlier.
-Now if you're just slightly over (like for me, 55%), how much does that affect your score, compared to being 60%+. Is there a progression?
-I have my preapproval for my loan, when will the next time my LO pulls my credit? (I'm assuming at closing, when the underwriter does it)
-How fast does my credit score reflect that debt-credit #? If my debt-credit is only 55% for a month or 2, then I pay it so it goes under 50%, does it affect it that much?
I don't think its going to affect your score too much. It will affect the "other" branded scores but not so much your FICO score. You might go down 5-8 points (based on experience as I have credit monitoring).
The reporting of balances to the agencies varies depending on the lender.
You loan approval anyway is not based entirely on the credit score, there's your assets and your debt to income ratio so as long as you keep it the same you'd still be ok.
It's more important to know what your score was when they first ran it for the pre-approval. If you had good or excellent score to begin with, this isn't likely going to affect anything.
I guess I just wanted to add that I'll be using an FHA loan, where your credit doesn't need to be that stellar anyway. But I was reading somewhere that if your credit score is reasonably good (700+ range), it can decrease some of your monthly premiums (not sure if that's either MIP, other insurance, etc) by a small amount, and my score is in that range, for now at least.
your preapproval does not make you really qualify when it comes to actually getting the loan. the debt to income ratio is calculated by adding your new mortgage payment. So, if all your current debt payment and the mortgage payment together and it's over 50%, you'll have trouble finding a lender that'll give you a loan. I heard they are talking about lowering the DTI to like 46% now. I see you are in the bay area..where is your house hunting area?
Your credit report most likely will not be rerun as long as you close within 120 days of the first report being pulled.
Now let's say it does need to be rerun there is lag time between when you do something and it reports to the bureau's. For example let's say your billing cycle is from the 1st to the 31st with your bill due on the 15th of the following month. You use your card and pay it off each month. This creditor reports its accounts on the 5th of each month. You have a $1000 limit on this card. In a particular month you charge $750, the billing cycle closes on the 31st and generates a bill that you get on the 4th. On the 5th the creditor reports that you have an outstanding balance of $750 or 75% of your limit even thought it isn't due yet, but the report is 100% correct. In this example it would take a full month to show on credit report.
On the flip side of this if you pay on the 10th and they report to bureau's on the 16th- day after bills are due- you will always show the lowest possible balance.
It is not just the 50% plateau that causes your score to drop. You lose points at 30, 50, 70, and 90%. Obviouly the higher the percentage the larger the drop.
your preapproval does not make you really qualify when it comes to actually getting the loan. the debt to income ratio is calculated by adding your new mortgage payment. So, if all your current debt payment and the mortgage payment together and it's over 50%, you'll have trouble finding a lender that'll give you a loan. I heard they are talking about lowering the DTI to like 46% now. I see you are in the bay area..where is your house hunting area?
My debt to income ratio is fine, I was talking about my debt to available credit (my credit card balance and the credit limit).
I'm looking in the tri-city area (Fremont, Union City, Newark)
Quote:
Originally Posted by dad2jules
Your credit report most likely will not be rerun as long as you close within 120 days of the first report being pulled.
Now let's say it does need to be rerun there is lag time between when you do something and it reports to the bureau's. For example let's say your billing cycle is from the 1st to the 31st with your bill due on the 15th of the following month. You use your card and pay it off each month. This creditor reports its accounts on the 5th of each month. You have a $1000 limit on this card. In a particular month you charge $750, the billing cycle closes on the 31st and generates a bill that you get on the 4th. On the 5th the creditor reports that you have an outstanding balance of $750 or 75% of your limit even thought it isn't due yet, but the report is 100% correct. In this example it would take a full month to show on credit report.
On the flip side of this if you pay on the 10th and they report to bureau's on the 16th- day after bills are due- you will always show the lowest possible balance.
It is not just the 50% plateau that causes your score to drop. You lose points at 30, 50, 70, and 90%. Obviouly the higher the percentage the larger the drop.
check out Credit Karma, Free Credit Score & Free Credit Reports. No Credit Card Needed. They will give you your credit score for free, no sign up for any monitor service required. They also have some simulators to show what affect certain actions will have on your credit score, such as increasing your credit card balance.
An observation: I have found those that are anxious about their score, worry about pulls and balances are usually don't have an issue.
Think of your score as a constantly moving target. It's going to go up and down over time within a fairly narrow range, if there aren't any substantial changes in spending habits. It's when you are active with any of the known actions that move the scores that really impact your score.......increase balance, open new revolving account, close revolving account, 30 (or more) days late with your payment, etc. But even then, the further away in time from that action, the less impact of the action.
Unfortunately it's a sign of the times for creditors to slash credit limits. This has happened even to those with stellar credit......so we even saw 780 credit scores take a dip because an account or two was at or near limit. You know those little slips of wall of words the creditors put in the mail for you? Read them. Their's a reason they're sending them.
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