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My FICO Update

As I mentioned last week, I’m in the midst of one more refinance.
Today, the appraiser came, and looked around. Given that the loan to value is less than 35% on my guestimated value, I’m not too concerned. On the other hand, I’m always curious how accurate sites like Zillow are.  I don’t care so much what the house is worth. When we move, it’s all relative, if we move into a like neighborhood, the transition would be lateral, sort of a trade. If we trade down, we’ll pocket some money, but that’s not in the plan.

I also just got my credit scores in the mail. There is a bankruptcy score, I scored 476 on a scale of 1 to 600. Never heard of that before. Don’t know if it’s good or bad. Then the actual credit score, drumroll, 800. I trust this to be a FICO score, maybe it’s not. Credit Karma is not quite the same, but close. It had me at 784 the past few months, but dropped me to 782 for the fact that I had this “hard inquiry” in submitting this application. I’d be higher except I have “Too many open accounts with outstanding balances.” Interesting. I pay in full every month and have been using 3 cards. An Amex Open that gives 5% at office supply stores and 3% for gas, and 2 cards from Citibank both giving miles on American Airlines, one an Amex, one a Mastercard. Citibank runs promotions that vary for each card. Also, some stores (like Costco) only take Amex. I suppose after I close on this new loan, purely for research, I can experiment by paying these cards before the statement is cut. The float has little value to me as rates are so low, and it would just be a data point to add to my understanding of how these thing impact the scores. Also I should check my AnnualCredit Report and see if any accounts show open that I meant to close. I had opened a WaMu (Washington Mutual) account as they provided an actual FICO score, but that deal is gone with Chase taking them over. Time to cancel that one.

When it comes to your credit score, some things are counter-intuitive. Refinance to a lower rate, and cancel a bunch of credit cards, grabbing one new one that has no fee and low interest and then max it out consolidating all the high interest debt, and you may very well trash your credit score. It’s all relative though, I can take a hit and easily recover from it. It’s more a science project for me than anything else.

For more reading on this topic, check out The Military Wallet’s article Credit score needed to refinance a VA Loan and Wealth Pilgrim’s 5 Ways to Improve Your Credit Score Fast.

Joe

(By the way, today is the 33rd anniversary of the release of the original Star Wars, I can still recite the opening introduction word-scroll)

  • James May 25, 2010, 11:42 am

    how many open accounts is best? i have 2 it sounds like that might be the number… if you have 3 and got penalized why don’t you drop it back to two and just increase the amount on each card?

  • JOE May 25, 2010, 11:55 am

    Great question. While I have three I use regularly, I have others with no activity. Admittedly, I am a deal chaser. Was using a card that gave 2% to daughter’s 529 account. As I got closer to my one million miles on American Airlines, I saw a promo, get their card and get 30K bonus miles. So that turned into the two Citibank AA cards we’ve used. I’m now at that million, so will go back to 529 card. My score is fine, I an intrigued by the way it’s impacted by routine decisions. Of course, I understand FICO is a piece of software, it can’t know my motives. Nor does it know my income. Bill Gate’s would get dinged same as me if he charged his cards up and had a high utilization, even if he paid in full.

  • SallieMae May 25, 2010, 6:08 pm

    Joe,

    GREAT credit score! Mine is pretty badly zinged because I have a lot of credit cards, which I also pay down each month. I think it is less of a problem if you pay it a couple of weeks before it is due, or maybe they check it on a certain day of every month. It is getting harder for us to get loans approved quickly because the underwriters are getting so picky – even for a 55% loan to value HELOC with no other debt on property!

    Debt to income is one of the other big factors.

    Bank of America has a “portfolio” feature that I checked out yesterday. Ever see it? I didn’t sign up for it since I don’t even have a BoA account, but it looks like you can have all your accounts entered in your portfolio – checking, savings, credit cards, mortgages, etc even if they are from different institutions, and they get put into their own files, i.e. loans, savings, credit cards, etc. Way better than United First’s Money Merge Account (though it doesn’t have the action plan) because if you set your own plan to pay x amount of dollars from this account to that account – you can actually do the transaction through BoA’s portfolio!

    I thought that was pretty nifty! And it is free!

    Thanks for your info and sharing Joe. May the Force be with you!

  • Cheapskate Sandy May 26, 2010, 1:49 pm

    This is an awesome post. You seem to have everything lined up as far as your credit is concerned. I always say that I’m not so concerned with my credit because I’m not making huge purchases, looking for car insurance, or trying to change jobs, but a score like yours make me envious. Also, welcome fellow Yakezie!

  • JOE May 26, 2010, 1:54 pm

    I appreciate the kind words, thanks for visiting.

  • sibel May 26, 2010, 9:04 pm

    very interesting and easy to follow post. Sometimes when I try to make my way in this finance world with mortgage, refinancing, funds, stock market … I am so lost I feel that it is all together another language I have to learn. I have been working on my credit score. It is only 2 years now. Before I had not credit score I only had a debit card to worry to get into deb. I find out that it is not a good thing to not have debs…:} or credit card. now I have only one card my score is ok but not as awesome as your yet. How long do you think it is going to take to have a score in 725 from 620? should I have more then one credit card? I have no debt and own nothing but my car.

  • Roshawn @ Watson Inc May 26, 2010, 9:28 pm

    When it comes to your credit score, some things are counter-intuitive. Refinance to a lower rate, and cancel a bunch of credit cards, grabbing one new one that has no fee and low interest and then max it out consolidating all the high interest debt, and you may very well trash your credit score.

    I get what you are saying, but I’m getting to the point that I just don’t care. My credit score is very good like yours, but I find the credit score to be an obnoxious and inaccurate way of assessing someone’s financial situation. What ever happened to measures that weren’t solely determined by debt?

  • JOE May 27, 2010, 7:16 am

    Agreed, Roshawn. Funny, I had two different sets of tenants, great FICOs. But a divorce never goes well for a landlord. In both cases, one spouse moved out, and the other stopped paying. Next rental, I told the agent not to bother pulling a report, to let me interview. That tenant lasted 10 years.

  • JOE May 27, 2010, 7:17 am

    Tough to say, really, having a few cards (3) that you use, but don’t carry month to month, looks like it will boost your score. Just be sure never to miss a payment. That’s a big one.

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