We had an inquiry from a member a few days ago. He 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 called the three credit card companies involved and verified he had indeed posted the payoffs which totaled almost $6000. He then had his mortgage lender 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 is one of the myths regarding credit reporting. Credit Scores are computed only as 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. The credit reporting agencies 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?
Things that make you go Hmmmm….
If you would like to get a Free Credit Consultation that will show you what your credit report means and what it will take to get it fixed, then call for a consultation today… 801-769-9443
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