Today in this video, we’re going to be talking about why your credit score is not increasing despite your best efforts. Check it out.
Credit Score Not Increasing
Hi, I’m Rhonda Burgess and I’m a real estate broker and mortgage underwriter here in the Nashville Tennessee area. And my firm is Southern living Realty partners. Okay. Today, I want to talk about a question I keep getting from a lot of you all about your credit score, not increasing, you know, there are certain things that you can do to increase your credit score.
I did a video in 20 talking about what I did to increase my credit score. You know, increase it like 70 points, and I’m going to put a link down in the description below. One of the main questions I get is I just paid off my, my car. I don’t have a car payment anymore. My car notes paid for, and my credit score did not increase well. That’s because that’s an installment debt. You’re going to see very little movement.
Installment Loans Don’t Move Your Score
If any, when you pay off your car note, because it is an installment loan, you know, the score model is looking at how you handle your revolving credit. Don’t get me wrong. Like if you went late on that, on that installment loan on that car note, if you, if it got repoed, stuff like that, yes, your credit score will be highly impacted. But when you pay off installment loan debt, your score is not going to move.
At least not for the first month or two, it may take a while longer for it to be reported that it’s been paid off. And even then it may not move as much as you think that it should, because that’s just how the scoring models are. So just because you paid off your car loan, that’s a good thing. It’s a good thing. You’re bringing your debt to income down.
It’s a wonderful thing, but your credit score may not move that much when you pay off installment loans is the scoring model likes to see revolving credit, like your credit cards, your store cards, your gas cards. It is more geared toward looking at your revolving credit as opposed to your installment debt.
Adding Too Many Accounts Too Quickly
The second reason why I see a lot of people’s credit score, not improving is you’re adding too many accounts too quick, meaning I know everybody wants to grow their credit, get that credit score up. So you’re, you’re, you’re, you’re doing your research on the internet. You’re searching here on YouTube and you’re seeing other people say, you know, this card is easy to get. That card is easy to get in. This card is easy to get. Okay, cool.
But the problem is you’re letting every one of them doing do a hard pool on your credit. That’s not going to work. If you have too many inquiries, real close together, it’s just going to, you know, within the same like 30 day period, your score is liable to decrease. It’s not going to increase because your credit seeking the scoring model knows, Oh, they’re, they’re trying to get this car.
They’re trying to get an American express. They’re trying to get a visa over here. They’re they’re going to capital one. They’re going to chase. They’re going to this one. They’re going to that one. And the problem is it recognizes that you are searching for additional credit as I’ve told y’all before.
And I tell you a lot of times when I do talk to y’all in person, when you are, are shopping for your mortgage, do all your credit pools within the same week, the same week or two weeks, because the credit scoring model assumes it looks at it and it says, Oh, they’re shopping for a mortgage. Okay? So each one of those credit inquiries on your credit is not going to hurt you when you’re doing them in a, in a grouping like that. Like when you’re looking for a mortgage, like you may check out one or two different mortgage companies.
Cause you want to see, you know, if there’s a difference in the rate or the program that they can offer you. So the scoring model is not going to ding you when you’re, you’re grouping them together. Like you’re searching, you’re doing all these mortgage inquiries within two weeks.
But a lot of you, I see you’re, you’re deciding, okay, today I’m going to get some new credit. Okay? And so you’re letting two different companies pull your credit two unrelated companies. So they each have to do a hard inquiry. So you’re doing that. Then you wait another two, three weeks and then you try somebody else.
And then you wait another week or two. And you’re trying somebody else. If you have too many inquiries on your credit report, your score will not increase. Even though you may, let’s say you get approved. Let’s say you apply five places. You get approved four out of five.
Initially your, your credit score won’t move because you got all these inquiries on there. Even though you may have gotten approved. And so your utilization went up, went down because your credit limits went up.
But the problem is still going to be, you had all these inquiries, right from all these different companies at the same time. And that makes creditors, that makes the score model nervous. Cause it looks like, Oh, maybe this person is getting ready to run up, wants to run up some debt. You know, maybe they know something bad is coming down the pipe. Like maybe they know that you’re ready to file a bankruptcy or they’re getting ready to be laid off or whatever.
Don’t do that. If you have too many inquiries in you know, and too many different inquiries in the same amount of time, your credit score is not going to increase.
Even though you have added yeah. New accounts now on that same tip of adding new accounts. When you add new trade lines to your credit report, whatever trade line it is, especially on the revolving tips. So your credit cards, your visa, your MasterCard, your American express, your gas cards, your store cards, yo you know, your store cards like Macy’s or Belk or wherever you shop at whatever you’re doing.
Use Your Credit Monthly
Use it at least occasionally. So many of you have added trade lines and then never used it. So you may have gotten an initial boost from when you added that trade line, because let’s say you added a $5,000 trade line. Okay. So now on your previous credit, let’s say you only had $2,000 available. So now you have a $7,000 available in credit. Okay. That’s wonderful. That’s good. But still the credit scoring model wants to see you use that card.
Use that trade line because you can just let it sit and sit and sit and sit. And it’s not going to do anything for you. Or you may let it sit so long. They may come back and close your account or tell you, you know, this is a dormant. They may start charging you dormant account fees because you haven’t used it. They may just start charging you so much per month just to have that card.
Whereas if you would just use it, just use it. I like I tell you, go get some gas, put some gas in your car. Then when the bill come pay it, you’re using it. I didn’t say you have to run it up and carry a lot of a big old balance and pay interest on it. But you need to use your card or it’s not going to work.
Your score is not going to increase by simply adding trade lines and then not using them because you look, you’ve already incurred the hit for the, for the credit pool. You might as well use it and get all that you can out of this trade line. Please consider subscribing to the channel. If you find this information helpful and share the video with someone and it may help them to thank you.
One other thing that I see you all are waiting till the day it is due to pay it. And then your credit, you say your credit score is not increasing that’s because when that credit line reports is still reporting that balance, cause you waiting until the day or the day after or whatever to pay it. It’s due on the 15th. You paying it on the 15th. No, if it’s due on the 15th, pay it on the first, pay it on the fifth so that it, so that the company has the time to update that balance.
Okay. So then when they report to the credit Bureau is going to report your zero balance as opposed to whatever balance you had beforehand. Don’t sit up there and wait until the due date to pay it because you’re not getting ahead that way. Okay? Yes, they may. If you pay it in full on the due date, yes. They may not be hitting you for any interest because you’re paying it in full, but you’re not getting credit.
You’re not getting full credit for it on the credit report because some, some companies report way behind meaning it’s like today’s May 1st. They may just now at the 1st of May be reporting the stuff for March or April. Some of them, it just depends on how they bill and how they report. So if, when it rolls over on the first and you got this big balance, that that’s what they’re going to report is that balance, even though you pay it in full on the 15th when it’s due, but when it’s reported, they’re still showing your balance, pay it.
Look as soon as you get the bill, pay it. If you got it, pay it, if not pay it as early ahead of the due date that you can. Cause that’s the only way you’re going to get, you got to work against the scoring model. You’ve got to work against it so that you wanted to report that zero balance or that low balance or something instead of that full balance.
But that’s, what’s going to be reported if you wait until the due date to pay it the due date or after that’s not going to work. And then, you know, when you pay after you going to get hit with those late payment fees, get ahead of it ahead of time and just pay it as early as possible.
Again, my name is Rhonda Burgess and I’m a real estate broker and mortgage underwriter here in the Nashville Tennessee area. If you need help with finding or buying a house here in Nashville, don’t be a tough road, but we’d be glad to help you. You can reach out to me. Anytime.
My cell phone number is (615) 554-0832. Thank you. And as always have a blessed day.
