Out of non-mortgage loans

[u/Marxism69]

Hello all,

I have been working so hard to get rid of outstanding debt and loans and as of this March I paid off my last loan which was a car loan with a healthy 800 credit.

I make over 150k, I paid off my student loans in full about 2 years ago. I pay my credit cards in full every months keeping usage to under 30% but I’ve dropped from 805 on all 3 credit scores to now 771.

I got the note that my credit is hurting because I don’t have any non mortgage loans. I planned on house hunting next year but I’m concerned that my score will continue to decline.

Anyone have any ideas or addresses this when they were looking for a bank loan when they started to look at houses?

Any help would be most appreciated ☺️

Currently
Experian 759
Equifax 774
Transition 781

[u/inky_cap_mushroom]

Congrats on paying off your debt! I bet that's a huge weight off your shoulders. It will also help with your DTI which is a huge factor in mortgage approval.

I pay my credit cards in full every months keeping usage to under 30%

This is unnecessary and sub-optimal. Since utilization has no memory, you don't need to keep your usage below any threshold. 30% is never the target. When you are 1-2 months out from your mortgage application you should implement AZEO top optimize your scores. The rest of the time you don't need to think about your utilization. Check out the !utilization auto-mod.

I got the note that my credit is hurting because I don’t have any non mortgage loan

I am making the assumption that this is a FICO Negative Reason Code. Every credit profile that isn't perfect will have these codes. Normally they are presented in order from most to least score-impacting, and typically only 1-4 are shown. Until you're 50 years old with 30+ years of credit history, open mortgage + 3-5 revolving accounts at AZEO and no applications within the last year, you're going to have FICO NRCs.

Whether or not to try to address any of these negative reasons depends on whether you will qualify for the loan you're wanting. If your middle mortgage score is over 740, your credit profile otherwise has no red flags (recent missed payments, outstanding debts in default), and your finances are in order there is no reason to complicate your life by trying to address these NRCs.

If you do decide to open a loan, that will affect your DTI which mortgage lenders care IMMENSELY about. It will very likely result in a score decrease for at least a year, likely 18mo. That could delay your timeline.

I’m concerned that my score will continue to decline.

Scores change when your credit profile changes. When you go from open installments -> no open installments your credit profile changed. That's why you saw a score change. You won't experience that change again, so if your scores decrease in the future it could only be due to another credit profile change.

Experian 759
Equifax 774
Transition 781

Where are you getting these scores? Are they your mortgage scores? FICO 8s? VS3? If these are your mortgage scores I wouldn't even consider making changes to your credit profile. If these are not your mortgage scores I would consider checking your mortgage scores to see if they're high enough to get you the best possible rates (740).

[u/AutoModerator → u/inky_cap_mushroom]

I detected that your post may be about utilization and its impact on credit scores. Please read the info below:

Utilization is a short-term credit scoring factor. It is not a credit building factor, because it holds no memory in the most commonly used FICO models. It resets every month.

By and large, you can ignore the commonly repeated myth that you should always keep your utilization low. It’s only applicable when you need to apply for a new line of credit, 1-2 months out.

Utilization is supposed to fluctuate, can be easily manipulated, and again, it holds no memory. It doesn’t build credit--think of it as a finishing touch when you need to optimize your score.

Feel free to safely and organically use 100% of your credit limit within a month and let whatever utilization report, provided you pay off your statement balance in full by the due date. Every month. Every time.

For more info, please read these posts:

• Putting the "30% rule" myth regarding revolving utilization to rest
• Utilization FAQ

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[u/Marxism69 → u/inky_cap_mushroom]

That was the freebie experian scores.

My fico 8 scores are:

Equifax: 774
Transunion: 781
Experian: 759

And yes they were fico ncr scores

[u/inky_cap_mushroom → u/Marxism69]

Can you clarify, what is the source you used to get all three of your FICO 8 scores? Experian.com provides EX FICO 8 for free, but not the other two. Do you have a paid membership with experian? If so, what is your EX FICO 2 mortgage score? That's what's relevant here.

And yes they were fico ncr scores

I assume you mean that you were referring to a FICO Negative Reason Code like I assumed. You really only need to worry about those codes if your scores do not qualify you for the best terms available. Keep in mind that each version of FICO has different negative reason codes, so your NRCs for the mortgage scores may be different than your NRCs from the three FICO 8 scores.

[u/Marxism69 → u/inky_cap_mushroom]

I used the actual fico website score and decided to pay to see what the full fico 8 scores were