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Question By
Rokkman

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Credit score low despite at least decent stats, what gives?
My vitals are found below:

Utilization: 20%
Payment History: 100%
Derogatory Marks: 0
Age of Credit History: 1 Year 10 Mos / 2 Years 0 Mos
Total Accounts: 8 / 12
Credit Inquiries: 7 / 8

My question is this.. Does the items being marked as "low importance" really keep my score from going up by that much? I'm at just below 650 with the above stats, I would be thinking somewhere closer to maybe 700. Would allowing the inquiries to fall off and just letting my accounts mature make up an entire 50 points? What can I do? Why is my score so weak when my stats seem to be (for the most part) pretty good?

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Lenders often look at the total number of accounts in relation to the average age of your lines. Their concern of course is that with a low average age of credit history and mulitple accounts a borrower may get in over their head. Also, you have a fairly high number of inquiries.

Wait a year and keep making payments on time and when those inquiries start dropping off you will see a drastic improvment provided you keep your utilization low.

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Thanks! 

Not really looking for anything right now.. Want to pay off my car in the next two years and at the same time save a little more.. At that point I will be ready to purchase my house. I just don't want to go walking in to get a home loan with a 650 score, I have a feeling my interest rate would be outrageous and their generocity in maximum approval would be quite low. 

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EricHanson

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Well it sounds like you will be in a good position 2 years from now. With a home loan my priorities would be:

1. Clean credit (which it looks like you have).

2. Initial deposit. The more you are putting down, the more likely you will get a favorable rate. Also, if you can get over 20% down not only will you get a good rate but you won’t have to carry PMI which will save you some money.

3. Debt to income ratio. Try to have your utilization as low as possible at the time you are applying for the loan.

Good luck. You seem to be doing the right things. 

Reply by
Rokkman

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Awesome info EricHanson thanks!

I had no idea that if I saved 21%+ for down payment it would save me the PMI monthly. 

Question about that though, now that I have that info.. If I have say... 15% down payment would I need PMI indefinitely over the 30 year mortgage, or only until I have paid back the initial 6% principal that would have equaled a 21%+ down payment? 

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A few points.  your inquiries are quiet high.  You need to get those down before appling to a home mortgage, although a few factors may make that statement not true, such as if 4 of them came from a car loan and were done within a week for shopping for rates.

20% is the magic number, and getting PMI removed

"To remove PMI, or private mortgage insurance, you must have at least 20% equity in the home. You may ask the lender to cancel PMI when you have paid down the mortgage balance to 80% of the home's original appraised value. When the balance drops to 78%, the mortgage servicer is required to eliminate PMI."

Also you can refi at a later date and if the home is worth more then you can get conventional mortgage.  One thing to be aware of is your credit factor, in order to qualify for a conventional mortgage they have more strick credit standards.

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