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I have been paying off my credit cards through a credit counseling agency for the past five years. Part of the agreement was they would be closed and I would no longer be able to use them. Easy enough. I was recently pre-approved for a mortgage of $ 230K and got a real blow! I got an alert saying that one of my cards had not been fully closed and my FICO dropped 8 points as a result. I checked things out thoroughly and come to find there is one more card that I paid off through them that hasnt been reported as closed which will knock another $ 6K off my ratio. My question is how could/will this affect my ability to get a mortgage. There were no balances on those cards so I am not adding any debt which I know is a no-no going through this process. On the bright side, I am not able to add any more debt so that looks good…I think? Assuming my FICO score doesnt fall below mortgage limits is there still a chance my loan will go through? I am going to try and get in contact with my broker but it is a holiday weekend, so any advice would be appreciated!
So for 5 years I had my cards in a counseling agency and paid them all off earlier this year. All the accounts were supposed to have been closed, but apparently a couple were left open and one just closed out on my credit report. They were paid off and had no balance. I am just concerned that my debt-credit ratio is going to be out of wack and send my fico score down. Which would then disqualify me from getting my loan approved. It is a USDA guaranteed loan.

3 Thoughts on FICO dropped after mortgage pre-approval?
  1. Reply
    someone
    February 5, 2014 at 11:20 am

    No since you had to resort to a credit counseling agency all lenders will deny you
    Pre approval is useless and has no bearing on being approved.

  2. Reply
    spalmer
    February 5, 2014 at 11:44 am

    8 points isn’t that big of a deal with a credit score… unless you’re right at the limit. However, closing credit accounts hurts your credit history and score… did you know that? Obviously, it’s better for you if you cannot avoid racking up more debt, but having credit available to you is a good thing for your scores. Plus, one of the largest things that makes up your credit score is length of accounts… if you close these, you lose this — not good!

    Pre-approval means little compared to the actual approval… so no one is really going to be able to let you know if you still have a good chance of being approved without all of your financial information (which you obviously shouldn’t give us).

  3. Reply
    mortgagequeen
    February 5, 2014 at 12:41 pm

    There’s not quite enough info here to answer your questions, but I will do my best.
    If you have a card that is showing a balance, but you don’t owe a balance, a simple credit update is done and that balance doesn’t affect your ratios.
    You said your FICO dropped 8 points — was that one bureau or all 3 bureaus? And was that another mortgage report that your lender pulled or just something that you obtained on your own? Credit score numbers that you are able to obtain vary greatly from a credit report that lenders pull. It is just never the same. So if you had a 700 score from a mortgage report and you just received an alert saying you had a 692, your lender may still have you at a 700.
    Most loan programs require that you have open tradelines that you have been paying on time for the last 12 months. It is never a good idea to close all of your accounts.
    Hope that helps!

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