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Regular Contributor
hateAshbury
Posts: 131
Registered: ‎11-14-2011
0

FICO bias against renters?

From what I read, it generally is advantageous to have what usually is termed a "healthy mix" of credit products, all being responsibly managed. Such a mix might include revolving accounts, car loans, student loans, store cards, home mortgages and HELOCs.

 

Renters, by definition, will not have mortgages et cetera.

 

I suspect there is something of a renter's penalty in the scoring matrix that penalizes renters. And this penalty would doubly felt for persons living in dense urban areas (e.g. Manhattan, San Francisco) who for obvious reasons choose renting over buying and forego owning a car.

 

My guess is that it would be difficult for someone without a mortgage or car loan history to get a really high credit score (800+).


Starting Score: 653 (11/1/2011 TransUnion)
Current Score: 719 (5/3/2012 TransUnion) 572 (3/21/2012 Equifax) 762 (4/14/12 VantageScore)
Goal Score: 700


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Moderator Emeritus
llecs
Posts: 32,881
Registered: ‎08-04-2007
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Re: FICO bias against renters?

I disagree....I've seen quite a few posters in here with solid-800s with no loans whatsoever.

Established Contributor
namvet
Posts: 866
Registered: ‎09-22-2011
0

Re: FICO bias against renters?


llecs wrote:

I disagree....I've seen quite a few posters in here with solid-800s with no loans whatsoever.


  +1  Saw many high fico scores including 800+ scores on renters credit reports during many years in the mortgage business.  No penalty!

Moderator
Revelate
Posts: 9,485
Registered: ‎12-30-2011
0

Re: FICO bias against renters?


namvet wrote:

llecs wrote:

I disagree....I've seen quite a few posters in here with solid-800s with no loans whatsoever.


  +1  Saw many high fico scores including 800+ scores on renters credit reports during many years in the mortgage business.  No penalty!



800 sure, 825ish not certain.  Granted, changes in scores at that strata are completely irrelevant north of 760 in today's credit market; however, it does beg the question as to whether it's easier to acheive a high FICO score with a mortgage than without.

 

This is from 13 years ago so it may no longer be relevant: a mortgage at least used to warrant it's own separate bucketing scheme: either you had one or you didn't.  It also, to use the Michelin star system, was the 5 star creme-de-la-creme of the credit world.  Whether it still is or not I don't know, but I suspect that having a mortgage is in all ways better for your FICO (assuming no derogs on it here) than not having one.

 

Renting when they designed the original FICO algorithm was supposed to be a temporary spot in life: owning a home is part of the American dream after all (or at least was) and "demonstrated stability" before the recent bubble at any rate.  These days near permanent renters are more common, myself included for various reasons.  FICO penalty, probably, but realistically speaking, it doesn't impact things that much as a quality score is still readily achievable without one.  

 

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


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Mega Contributor
RobertEG
Posts: 17,728
Registered: ‎03-19-2007
0

Re: FICO bias against renters?

Regardless of how FICO might view rentors, the fact is that most landlords dont make regular, monthly reporting to CRAs.

It is just not data that is routinely available.

What is not there cannot be scored.

Valued Contributor
crunching_numbers
Posts: 1,093
Registered: ‎02-15-2012
0

Re: FICO bias against renters?

I think the key lies in mix of credit, and student loans as well as other installment loans (furniture, etc.) will count to create that "installment" type of credit. FICO might bucket mortgage holders differently, but will count those other installment loans for the purposes of credit mix.

 

So:

Bank CC (V/MC) + Store CC + installment loan= good mix

 


Starting Score: 693 TU FICO, 679 EQ FICO
Current Score: 748 TU(12/12), 783 TU98 , 813 TU08 FICO, 744 EQ FICO , 735 EX(9/12), 794 EX08 FICO, 809 EX08 bankcard FICO
Goal Score: 750+, but shooting for the 800's
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Moderator
Revelate
Posts: 9,485
Registered: ‎12-30-2011
0

Re: FICO bias against renters?


crunching_numbers wrote:

I think the key lies in mix of credit, and student loans as well as other installment loans (furniture, etc.) will count to create that "installment" type of credit. FICO might bucket mortgage holders differently, but will count those other installment loans for the purposes of credit mix.

 

So:

Bank CC (V/MC) + Store CC + installment loan= good mix

 


I won't completely argue your point except to state there's no guaruntee that mortgages and auto-loans aren't broken out for credit mix either.  Store cards are also bunk if you have national bank cards AFAIK.

 

 

Starting Score: EQ 561, TU 567, EX 599* (12/30/11, EX lender pull 12/29/11)
Current Score: EQ 04 673, EQ 8 707, TU 720, EX 702* (09/02/14, EX older)
Goal Score: 700 on EQ '04 (01/01/15)


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Frequent Contributor
Dadaluma83
Posts: 364
Registered: ‎08-23-2011
0

Re: FICO bias against renters?

I think people try to read too much into, and are too obsessed with FICO scores. I currently rent an apartment because as a single guy I am not ready for, and owning a home doesn't make much financial sense right now. I refuse to get an auto loan because it is financially smarter, and fits my lifestyle better to pay cash for a high mileage, but well maintained used car. My current car is 13 years old and runs great since I have put some work into it recently. No plans on a new car since I figure since a car is a tool to get me around town, drive it until the wheels fall off before justifying another car.

 

I do have student loans that will be paid off completely in about 2 more years. I am making twice the minimum payment on them, then every year after christmas shopping I put all my extra income towards the loans. I know if I draw it out making the minimum payment every month it will become a long 10 year old account to greatly help payment history and AAoA, but it is financially smarter to pay it off in 2-3 years instead. Not worth it to have debt hanging around my head longer, and pay more in interest, just for some 3 digit number.

 

In a perfect world I would have known ahead of time I wanted my current major from the start, since my first degree was paid for with a scholarship and I graduated with no student loan debt, had to take out a loan for the second degree when I found out I didnt really like my first one. I know my student loan is greatly helping my score right now for the mix of installment and revolving credit, but if I could do it over I would graduate with  zero student loan debt.

 

I can't justify any store card, or having more than 2 or 3 bank cards at one time. Right now I am only using two credit cards, both bank cards. Discover More for 5% cashback, and a travel card for everything else, currently United Explorer.

 

I have no need for more cards, especially if more cards mean additional annual fees.

 

The way I see it is make decisions that  make financial sense, only take out a loan if you absolutely have to, not to improve your score. If renting at the current moment of your life makes financial sense, don't fret over not having a mortgage.

 

Seems to be a good rule to live by, make decisions that make the most financial sense for you, a good credit score will happen naturally as a byproduct.

FICO Scores: TU: 768 (Jan 2012), EQ: 755 (Jan 2012 Lender pull)

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