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Am I overthinking this?

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Am I overthinking this?

So just a quick back story and my credit history. I am currently 23 years old. I got a car loan in september 2011, then paid off January 2015 (early). I got a BofA student platnum with a $600 limit  when i was 17. In march of 2014 I applied for and recieved a chase freedom card with a $2500 limit (now has $3500 limit). I got a dirt bike loan thorugh my credit union in October 2014 for $5500. 

 

Now to my question. When i applied for that dirt bike loan, i asked what my score was who they used. She said it was transunion and it was 825. I thought that was awesom. about 5-6 months later, i decided to apply for a credit line increase on my student card, seeing how i wasnt ging to close it. I got approved and it is now $2600. When I recieved the letter from BofA telling me all about the credit line increase, it said my transunion score they used was 777. I imagine for it to drop a few percentage points is normal for it to drop 48 in just 6 months seems odd. I pulled my free annual credit report just to make sure there werent any mistakes and there wasnt. Im no expert but is this normal?

 

Just today i signed up on here to check my current scores as i am thinking about applying for a car loan soon. Currently my Fico 9 scores are Equifax-770 Transunion-772 Experian-784. (not sure if i should be using the Fico 9?) Im not really complaining about these scores but i expected these to be higher. All my accounts are in good standing. Zero balance on the BofA card and $400 currently on the chase. Plus i still owe about 3k on the loan. Never late on anything. I wonder if its because my credit history is still pretty short?   

 

I appreciate any input. I wonding if im worring about this to much? Thanks again.

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3 REPLIES
Established Contributor

Re: Am I overthinking this?

Your current scores are actually excellent for the amount of time you have had a credit file.  The score the credit union gave you of 825 was probably not a clasic FICO score  on a scale of 850.  There are lots of different versions of FICO scores and the CU may have been using a version that goes up to 900.  Or it may not have even been a FICO score and may have been an internal score of some kind created by the bank.  Anyway, you are doing great with your credit.

Message 2 of 4
Community Leader
Senior Contributor

Re: Am I overthinking this?

Great response by ManyQ.

 

Here's another guess as to what might have happened.  Based on your initial post, at the time that you were quoted an 825 credit score (Oct 2014) you had an open car loan which was (I am guessing) mostly paid off.  For example, the car loan might have been for 23k and you owed (say) 2k at the time.  Having open installment debt that is mostly paid off is considered a strong plus by FICO, so you got a big scoring boost for it.

 

The way that calculation works is this.  FICO took the total amount currently owed on your open installment debt (2k) and divided that by the amount that the loans were originally for (23k).  Which gave 8.7%.  A small percent looks very good to FICO.

 

In Jan 2015 (two months later) you paid off your car loan.  It therefore ceased being an open loan, and so FICO reperformed that calculation.  (Remember it does this only on your existing OPEN loans.)  Now, instead of one open car loan, you have exactly one dirt bike loan.  Your score was pulled again in March 2015 for the BOA credit line increase.  The amount owed at the time for the dirt bike was probably $5000 from a $5500 loan (say).  Your installment loan ratio was therefore 5000/5500 = 90.9%.  This is a much higher number and therefore your score took a hit -- FICO likes it when your open debt is mostly paid off, not when you still owe most of the original loan.

 

Further hits to your score occured when you requested the BOA credit limit increase (the way you describe it sounds like a hard pull) and the addition of a new account (the dirt bike loan) which lowered your average age of accounts.

 

None of this is bad stuff.  It's just the normal stuff associated with adding new loans, paying them off, getting new credit line increases, etc.  Keep paying your bills on time, keep your CC debt low, and you will be fine.  You will find that your score will go up as the amount owed on the dirt bike goes down.  When you buy your new car later this year, the installment ratio calculation will be recaculated yet again, once the car loan hits your reports. 

 

Note that the FICO 9 scores you quote at the end of your post use a different model than the model that was used for your dirt bike loan.  You should expect that they might give very different values from either of your previous two score pulls.  The most likely scores that lenders might use for your upcoming car loan would be FIC0 8 Auto Enhanced or FICO 8 Classic -- FICO 9 scores are being used by few lenders yet.

 

If you want some advice on how to optimize your score in prep for the auto loan, people here will be glad to help you out.

Message 3 of 4
Senior Contributor

Re: Am I overthinking this?


drave199 wrote:

Now to my question. When i applied for that dirt bike loan, i asked what my score was who they used. She said it was transunion and it was 825. I thought that was awesom. about 5-6 months later, i decided to apply for a credit line increase on my student card, seeing how i wasnt ging to close it. I got approved and it is now $2600. When I recieved the letter from BofA telling me all about the credit line increase, it said my transunion score they used was 777. I imagine for it to drop a few percentage points is normal for it to drop 48 in just 6 months seems odd. I pulled my free annual credit report just to make sure there werent any mistakes and there wasnt. Im no expert but is this normal?

 


Not enough info on your specific situation but probably yes.  There isn't just one scoring model used by creditors.  It's not just the CRA that matters but the model as well.  Even FICO doesn't have just one model -- see also the Understanding FICO Scoring subforum and its stickies.  Odds are that your bike loan and your CLI did not use the same FICO model.  On top of that, there were certainly data changes between one score and the other.

 

Make sure you always consider the specific model when referencing scores and do not assume different models to be equivalent.  It's not just that their scoring ranges can differ but they evalaute report data differently.  Consider the new thread on the FICO 9 model in this subforum and how people are finding that their scores differ from FICO 8 as just one example of how models can differ.

 

Even without knowing the models you can't just assume what should be based on time.  In 6 months one's scores could significantly improve, see little to no change or significantly decrease.  It all depends on one's credit profile and how the various factors

http://www.myfico.com/crediteducation/whatsinyourscore.aspx

add up and how the specific model evaluates the report data.  Everyone's profle isn't the same.  Those with thin profiles and/or profiles with issues may see bigger impact from some changes than those with thicker profiles in good standing.

 


drave199 wrote:

 

Just today i signed up on here to check my current scores as i am thinking about applying for a car loan soon. Currently my Fico 9 scores are Equifax-770 Transunion-772 Experian-784. (not sure if i should be using the Fico 9?)


You should consider any scoring model's relevance to a given creditor/product.  In other words, if a creditor/product uses a TU FICO 8 then you can only reference a TU FICO 8.  An EX FICO 8 Bankcard is not relevant to that creditor/product nor would any score based on a CRA other than TU and based on a model other than FICO 8.

 

AFAIK no creditor has adopted FICO 9 just yet.

 


drave199 wrote:

Im not really complaining about these scores but i expected these to be higher.


On what basis?  Educate yourself on how credit is assessed before setting expectations.  If you're not aware of the different scoring models then you're probabyl not quite where you need to be in order to say what your scores should be.  The models are assessing your report data as they should.  It's your understanding of them that isn't in line with the models.  Those are good scores.

 


drave199 wrote:

I wonder if its because my credit history is still pretty short?    


That definitely plays a part.  Keep in mind that building credit is a long, slow process.  You're still just starting out.  Get yourself in the right mindset and be prepared to be in this for the long haul.  The popular saying is that it's a marathon, not a sprint.

 


drave199 wrote:

 

Am I overthinking this?

No, just not aware of the details that are known.  We don't know all the specifics of any of the scoring models or underwriting criteria for specific creditors/products, however, there is still a bit of information out there that would help you understand better.  Don't overlook the subforums,. the stickies and even other discussions as resources.  Topics like scores are very common.

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