“If I Pay Off My Credit Card(s), How Much Will My Scores Go Up?”
People tell me all the time. “I’ve just paid off my credit card(s) so I’m in good shape!”
Wrong! This will drop your score. The Algorithms or credit scoring models will give you more points if you keep a small balance on your credit cards! This shows “activity AND increases the history” on your accounts!
I got a call from a client that I have been working with for over a year. When we started working together his credit scores were in the mid 500’s. A month ago his mid score was 621.
He called yesterday, saying that he was ready to buy a house and wanted me to update his credit to make sure we were now good to go. When I updated his report, his mid score was a 602. I almost didn’t want to tell him, as he has been working so hard to do all the right things, well not so much.
I could immediately see the problem, he paid all three of his credit cards down to zero, as he was not using them at all. So I called and explained the problem, told him how to correct the issues.
It will take about 60 days to get back to where we needed to be, so that I can handle the preapproval for him.
image: stuart miles/freedigitalphotos.net