Article By: Jim Porter – August 8, 2015
Did you know that the balance you owe on your Victoria’s Secret credit card can have an impact on your home purchase?
I always get very confused at Christmastime over the years when I enter this awesome store looking at gifts for my wife. Luckily, the great staff at Victoria’s Secret always seems to step up and help when they see a man like me walk in to the store who looks like a deer in the headlights.
Many consumers get confused about credit scores and how they can change from month to month.
Credit scores can impact a mortgage application because mortgage bankers make credit decisions and determine interest rates based on these scores. Timing and luck can play a huge roll in your score because one of the key factors that determine a score is a consumer’s credit card balance as it relates to the credit limit.
I recently experienced this myself when my credit score dropped from 786 in February down to 739 in May. I was initially a little bit frustrated and even a tiny bit angry because I did not have any late payments over those three months. It really made me understand how my clients feel when we show them their credit scores and they are lower than they expected.
The mystery was solved when my credit union told me that one of my Visa card balances was $9,000 and my limit was $10,000. I informed them that the card was paid off the previous week, however this had not been reported yet to the bureaus.
This is what I mean when I say luck and timing can have an impact on your scores.
The scoring system nailed me for a 20- to 30-point deduction because my balance was 90 percent of my limit. In other words, the artificial intelligence system thought I was close to being maxed out on my credit card even though I had paid off the balance a week earlier.
Creditors report to the big credit bureaus once or twice per month so timing is everything. So guys, next time you go into Victoria’s Secret and charge up $900 worth of lingerie for your wife or girlfriend on your credit limit of $1,000 remember this story and get it paid off as soon as possible.
Jim Porter, NMLS No. 276412, is the branch manager of Solano Mortgage, NMLS No. 1515497, a division of American Pacific Mortgage Corporation, NMLS No. 1850, licensed in California by the Department of Financial Protection and Innovation under the CRMLA / Equal Housing Opportunity. Jim can be reached at 707-449-4777.
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