Things I learned about my credit score, Part 3

I continue to learn lessons the hard way with regard to how the credit bureaus work, and I will continue to share these lessons with you (all three of you) so you can learn from my mistakes.

Seeing as low as the interest rates are, my wonderful wife was doing some calculations on how much money we could save per month if we refinanced our mortgage at the current interest rates. I called our mortgage broker to start the process of getting an estimate and find out if it was feasible.

After the previous debacles with my credit score and getting our mortgage (you can go back and read Part 1 and Part 2 of this series if you missed them), I put a lot of effort into "fixing" my credit and getting my score back up where it should be. ...Or so I thought. More on that in a bit.

Remember when I took our HVAC company up on that 16-months same-as-cash financing?

Yyyyyeah, that turned out to be not such a good move.

However (comma) it didn't HAVE to be, and there's an important lesson learned here. If I knew then what I knew now, I could have had my cake HVAC system and ate it good credit score, too.

The big negative mark on my credit score that is preventing me from refinancing my house right now is because the BALANCE on my HVAC financing account is greater than 50% of the credit LIMIT on the account. Basically, they opened a credit account for me for the amount I needed for the new system and that was all.

In my current situation, the way forward for us is to just pay the balance down to less than 50% of the credit limit on the account and then wait for the credit bureaus to update a month or so from now. (Otherwise, the bank wants to charge us 1.5 points and 3/8% higher interest rate because my credit score is under 700 - but not by much).

If I had known this would be a big negative mark on my credit score, then I would have asked for them to set my credit limit at 2 x the value of the loan I was asking for so that my balance would be 50% of the limit. I tried calling the company to ask if they would just raise the credit limit for me, but they want all sorts of extra paperwork and it's just easier to pay the balance down.

Oh, so while I was on the phone with the mortgage broker guy, I was rather surprised at the advice he offered. He expressed downright remorse that I had just closed all sorts of credit accounts back in August. If you recall, when we were applying for our mortgage, our loan agent told us that the bank doesn't like for you to have lots of open credit accounts (even if they do have low or zero balance). I had several accounts open that I hadn't used in many years, so I closed them all.

THIS mortgage broker told me that it's important to keep REVOLVING credit accounts open for LONG periods of time (especially with low / zero balance) to show that you aren't one of those people who just spends and spends and maxes out your credit limits. I had a NEX credit card I opened in 1996 to buy a computer when I got back from my first deployment, and I thought the mortgage broker was gonna cry when he saw that I closed the account. He said now my "oldest" account is one that we opened in like 2005, so we have a much "shorter" credit history.

Aye caramba. Ever feel like you just can't win???

"For every expert opinion there is an equal and opposite expert opinion."
- I just made that up because it sure seems like it sometimes.

Bottom Line: While I wouldn't rule out taking advantage of same-as-cash financing deals, I would ask them to give you a credit limit that's twice what you actually want to spend so it doesn't show up as a negative mark on your credit report.

Credit Score Nightmares

Once again, I am counting my blessings.

Given the way the economy is going, it freaks me out that we might not have been able to buy our house if we had moved here so much as one month later than we actually did. You may recall my previous posts about my credit score during our mortgage shopping experience.

Friends of ours have had their house on the market for about six months. They just finally got an offer on the house and accepted the offer, but the deal fell through.

Wanna know why?

The buyers weren't approved for the loan.

The loan required a credit score of 740, and their credit score was only 737.

Um... they've got a significantly better credit score than I do!

Holy crap batman! Seriously, that stupid $70 late payment to Dominion Power and applying for a Best Buy card to buy a TV (the two things that drove my credit score down BELOW 700) would have prevented us from buying this house if we had moved here a month later!

It probably goes without saying that I had a new appreciation for protecting my credit score after the mortgage debacle, but this just really drives the point home. (No pun intended.)

Things I learned about my credit score - Ripple Effects

Okay, this is driving me nuts.

We're in the process of buying a house in Ashburn, Virginia. Keep in mind we lived in Ashburn during our last shore tour in the DC area, so we have "history" with the local utilities. Now, if you ask me, I would characterize it as GOOD history because we had 2 years and 9 months of paying our bill on time every month. However (comma), remember from the previous post that the big BLEMISH on my credit history is the fact that Dominion Power sent our final bill for a whopping $70 to a collection agency when we the bill took a while catching up to us on our PCS move to Hawaii.

Our realtor asked me to go ahead and call the utility companies and set up the services at the house in our name starting on our closing date.

Phone call #1...

I called Dominion Power to set up the service at our new house. They ask for my social security number. I give it to them. Dominion Power proceeds to inform me that because of my "history" with them, they want a

$450

security deposit to set up a new account under my name. You WHAT?!?!?! After TWO YEARS and NINE MONTHS of paying our bill on time every month, just because we were late in paying our final bill for a measley $70 while in transit to Hawaii, you want me to pay SIX TIMES as much as that one delinquent payment???

Phone call #2...

I called Washington Gas. They asked for my social security number. I gave it to them. The Washington Gas customer service representative on the phone proceeded to inform me that because of my "credit history" that he did not have sufficient authority to establish my new account and that I would have to talk to a supervisor. Um... okay... Then, he tells me that the supervisor will call me back.

...They never called.

Eventually, I got it all worked out. I spoke with a supervisor at Dominion and although a supervisor at Washington Gas never called me back, a supervisor reviewed the application and approved my new account. Still, it's just the fact that I have to jump through these extra hoops that's frustrating me.

THE POINT:

Don't let this happen to you! Save yourself the hassle! Be proactive, seek out your final amount due on your utility bills when you transfer and pay them.

Things I learned about my credit score...

As far back as I can remember, I've had really good credit. I can't remember ever having issues with my credit score. ...Until I recently applied for a mortgage to buy a house in Virginia. I discovered a couple of problems on my credit report of which I was previously unaware. I thought I would share these lessons I have learned the hard way to maybe help you avoid a couple of pitfalls I have unexpectedly encountered.

Problem #1: Beware PCS Moves! Be proactive in paying your final bills in your old duty station.


When I left for the training pipeline in Groton, I had orders to a boomer out of Bangor. While I was in the training pipeline, I got an ORDMOD (Orders Modification) sending me to a fast attack homeported out of Norfolk but on deployment and changing homeports to Pearl Harbor. When we sold our house and left the DC area, we provided a forwarding address for our final bills, but the final bill took a while to catch up with us in Hawaii at the end of the whole PCS move. As soon as we got the bill out here in Hawaii, we immediately paid it. Unfortunately, in the meantime, Dominion Power sent our final bill to a collection agency for the whopping $70 that we owed them.

The credit bureaus don't care so much what the reasoning was. All they care about is that you had an account that was sent to a collection agency. So the first two negative remarks on the credit report that surprised me were the "Negative Information - Collection" and the "Time since negative information too short." Ouch.

My advice to you is this: When you do your next PCS transfer, don't wait for your final utility bills to catch up with you in the snail mail to pay them. Proactively contact the utility companies and pay them over the internet or phone or whatever means necessary.
Disclaimer: This is NOT a complaint about LW. She worked her butt off selling our house and doing the HHG packout without me. I certainly wouldn't have done any better a job than she did. I'm just saying that we both learned we need to be more careful about this in the future.

Problem #2: Don't open a new account every time you want to make a big purchase.


If you've been reading my blog for a while, then you might remember the big TV debacle. That was when I tried to buy a new TV - first from Best Buy, then from Circuit City, then from the NEX. Why didn't we just get it from the NEX in the first place? Because Best Buy was offering 90-days same-as-cash financing, and the price was a lot less than what they were charging at the NEX. (We eventually bought the TV through the NEX's price matching program, but we paid it all at once instead of three monthly payments).

It's been a while since the big TV debacle, so in case you don't remember or you have recently started reading my blog, here's a quick recap:
- Applied for Best Buy credit card online. The online program said in order to confirm my identity, it had to ask me some questions. The questions it asked were totally bizarre and had no connection with my past at all (see the blog post for details). So I said to myself, "Self, just go down to the Best Buy store, SHOW them your ID card so they KNOW who you are, and get the credit card."
- Applied for Best Buy credit card in store. Denied. The letter that came in the mail later informed me that I was denied because I already had a credit application OPEN on the Best Buy website. I'm sorry that just makes no sense to me - I'm STANDING there IN the store SHOWING you my ID card... sorry, I'll get off my soap box before I get into a long diatribe about this.
- Applied for Circuit City credit card because they had the same TV for the same price and offered the same 90-day same as cash financing. Denied. The letter that came in the mail later informed me that I was denied because I already had a Circuit City credit account from when we bought our washer and dryer in Monterey back in 1999. Again, why didn't they just say, "Oh, you already HAVE an account with us, what would you like to buy today?" Again, getting off my soap box now before I spend too much time expressing my frustration with them.

Okay, so back to the story at hand: my credit report.

Yyyyyeah, each time you apply for a credit card, they run a credit check. It turns out that credit check shows up on your credit report as sort of a, "Hey, this guy wants to open a Best Buy account, so we're running a credit check" blurb. It turns out that having a whole bunch of credit checks on your account in the recent past is looked on UNfavorably by the credit bureaus and lowers your credit score.

I discovered I had a big misunderstanding about credit through this experience. I always thought it was no big deal to have a lot of credit accounts open with zero balance. I figured that was GOOD. I mean, that tells people that a lot of different businesses trust you, right???

Wrong.

In the credit companies' eyes, if you have ten credit accounts open with $10,000 credit limits, you could theoretically go out and max out all of your credit cards and suddenly be in $100,000 of debt, and you might feel more compelled to pay THEM than to pay your mortgage. That doesn't give the mortgage lender a warm and fussy feeling inside. In order to boost their confidence that YOU will pay THEM, they would rather you had as few credit accounts open as possible. Having credit HISTORY (of establishing debts and paying the debts off on time) is GOOD, but having a dozen different retail store accounts open and not being used (even if they have zero balance) is NOT good.

My advice to you is this:

1) Obviously, my three credit applications all at once in the pursuit of a TV were a huge mistake. The credit bureaus don't care about the extenuating circumstances. All they know is that you tried to open three credit accounts. Be cautious about opening new accounts or allowing businesses to run a credit check on you. It is now much clearer to me why companies ASK if they can run a credit check on you, because simply by them doing the credit check - it's going to leave a mark on your credit history.

2) Close old accounts. If you bought something under some promotion, that's great. Did you pay it off? Good. Now close the account. I was surprised to see I had a couple of accounts on there that I hadn't used since like 1996, but the account was still open. I closed all of those extra accounts, but I doubt it will update in my credit report soon enough to help my credit score for this mortgage.

Like I said, I hope reading this will help you avoid these pitfalls.