topic Re: Trans Union scoring system flawed in Understanding FICO® Scoring

Trans Union scoring system flawed

Jstic — Mon, 24 Oct 2011 12:29:39 GMT

My TU score is 754, Equifax 782. I have a mortgage, HELOC, truck loan and about 10-15 credit cards. Only CC balance is less than $500 on one card. Never missed payment, never late, history is 17 years. TU says that my "ratio of revolving balances" is 7% and this is "too high" . The only way they can get the 7% is to include a $5900 balance on my HELOC as part of credit useage. I have over $125,000 availabe to me on credit cards with a balance of $462. This is no where near 7%. Both scores are from myfico.com.

The weird thing is that the HELOC is listed as a "real estate loan".

Not really a big deal in my case, but I could see where someone else in the same situation who is borderline between good and fair credit rating could get burned by this flawed system of scoring. It could actually affect my loan rate as if a lender pulls TU instead of EQ, I would not fall into the top tier, missing by 6 points. Using EQ scoring model for the HELOC, my TU score would no doubt be over 760.

Re: Trans Union scoring system flawed

haulingthescoreup — Mon, 24 Oct 2011 13:39:47 GMT

What's the CL on the HELOC? If it isn't high enough, it's treated like a CC and included in revolving, although this is usually more of a problem with Experian.

Re: Trans Union scoring system flawed

GregB — Mon, 24 Oct 2011 14:31:03 GMT

A HELOC is usually considered to be much more of a Revolving account than a Real Estate account. They key is that it is a Line of Credit account with money available to be drawn and repaid without a fixed payment schedule. The fact that it is secured is usually considered secondary to it being Revolving. When the amount is very large, then it can be considered "more" of a Real Estate loan. It never becomes the same as a Mortgage.

EX will most likely consider the account in "Revolving".

In the above scenario, EQ is probably the one that is different. If that is true, perhaps they have "fixed" the problem with a later scoring system.

Re: Trans Union scoring system flawed

RobertEG — Mon, 24 Oct 2011 22:57:38 GMT

I would not conclude that the TU scoring is flawed. I would only conclude that it takes a different risk perspective.

Even if all scores are based on a contracted FICO scoring model run against a CRA's database, each CRA chooses to license its own FICO flavor.

Risk analysis is a subjective determination, so even the same general scoring methodology can choose to emphasize different factors at different weightings.

Being such a hybrid animal, it is not suprising to me that different scoring models would analyze the risk of HELOC balances differently. They are by broad definition revolving lines of credit, but are secured, and arguably, being attached to the consumer's real property, would be less likely to become delinquent should tough times come about than, for example, a credit card payment due.

Re: Trans Union scoring system flawed

haulingthescoreup — Tue, 25 Oct 2011 20:54:01 GMT

GregB wrote:
A HELOC is usually considered to be much more of a Revolving account than a Real Estate account. They key is that it is a Line of Credit account with money available to be drawn and repaid without a fixed payment schedule. The fact that it is secured is usually considered secondary to it being Revolving. When the amount is very large, then it can be considered "more" of a Real Estate loan. It never becomes the same as a Mortgage.

EX will most likely consider the account in "Revolving".

In the above scenario, EQ is probably the one that is different. If that is true, perhaps they have "fixed" the problem with a later scoring system.

~~It's the credit limit, pure and simple.~~ In many ways, it's a function of the credit limit, but combined with the account type.

Just as credit cards with CL's above a certain figure are ignored for calculating util, so are HELOC's in some scoring systems, most notably Experian 2.0, which seems to use a $25K cut-off figure.

We've had members here whose HELOC's were ignored by the other scores, but they got hit by EX (back when we could pull EX scores and reports), because their CL was only $20K or something.

EQ set aside HELOC's long ago. EX 2.0 still includes them if they're under a certain CL (raging debate about that figure.) And I don't know where TU is, except that they did not include my $50K HELOC. But on some level or another, they do regard it as revolving credit, because on the sim, it reports my HELOC balance in revolving debt, even though it's not scored against me. Weird.

eta: I apologize to everyone; I didn't realize how snippy that looked. I'm at home, sick, and obviously my brain and sense of tact weren't working very well. :P Sorry about that!

Re: Trans Union scoring system flawed

Jstic — Tue, 25 Oct 2011 20:36:05 GMT

The CL on the HELOC is only $10K. So if what is said here is true, they are definitely looking at it as more of a credit card type risk. No matter how TU scores it, the HELOC is a secured loan and far less risky than any unsecured CC. My dispute with the way it is scored is two fold, first being that it is a secured real estate loan, and should be treated identically to a mortgage. Second is the fact that Equifax obviously treats it as a real estate loan and not like a CC which is a large part of the reason why my scores vary by nearly 30 points. There are instances where this could make a difference of many thousands of dollars to a consumer like me if I were to fail to get prime lending rates because TU treats a HELOC like a CC. Maybe I am missing something here, but at the end of the day, 59% useage on a HELOC which is secured by my home is not the same as 59% useage of an unsecured CC. For a CRA to treat them as one in the same is flawed IMHO.

Re: Trans Union scoring system flawed

haulingthescoreup — Tue, 25 Oct 2011 20:54:20 GMT

One thing to ponder is that possibly (I honestly don't know) TU04 treats it in the same way that EQ does. If so, it doesn't have the same negative impact for most lenders because they've moved on to 04. Unfortunately, they can't get TU to switch the score available here (and from their site, if they're still selling a FICO from their site) from TU98 to TU04.

In other words, you might be OK, but it's hard to know unless you are able to find out your TU score as pulled by a lender.

(I edited my reply up above, too.)

Re: Trans Union scoring system flawed

Jstic — Wed, 26 Oct 2011 14:34:32 GMT

I plan to pay off the HELOC in the next few months, so it will be very interesting to see what happens to my TU score. I will post back here when I have paid it off and

the CRA's have had enough time to figure my score based on a HELOC balance of $0. If my guess is right, my EQ score will go up 5-10 points, but my TU score should go

up 30+ points.

BTW, thanks for all who responded and shed some more light on this for me.

Re: Trans Union scoring system flawed

geronimo2008 — Thu, 27 Oct 2011 00:10:18 GMT

When my HELO had a balance TU kept trating it differently. Some months it seemed to be scored as a mortage, other times as a revolving or even an installment loan. To me it really does not matter much how it is SUPPPOSED to be scored because the actual behavor was so erratic.

Re: Trans Union scoring system flawed

GregB — Thu, 27 Oct 2011 00:10:58 GMT

I am going to guess that your EQ score will see very little or no change. I would be shocked if you gain 5 points.

I am going to guess that your TU score will get very close to your EQ Score.

Where do we bet on the pool? I want 782/782 for my position.

Re: Trans Union scoring system flawed

Jstic — Thu, 27 Oct 2011 12:10:40 GMT

Put me down for 780/788.

Re: Trans Union scoring system flawed

Jstic — Thu, 24 Jan 2013 18:12:00 GMT

Finally paid off the HELOC in full in November, 2012. As expected, my TU score shot up to nearly equal the EQ score. TU is now 793, EQ is now 801.

Greg, you were correct, they are nearly equal now, instead of the 30 point dispairty from the way the HELOC was scored. It should be noted that I paid off more than half of my truck loan in this time period also, which certainly increased both scores by a small amount. Other than that, everything has remained the same as far as my credit accounts.

So this in effect proves my original point which is that if you have a HELOC, TU will treat it must like a credit card(unsecured credit) and Equifax treats it like a real estate loan(secured loan backed by home).

It had no effect on me, but as I stated previously, I can see where someone could get dinged big time by this scoring differential.