Score fluctiation

[culture]

2 months ago, the company I hold my car loan, incorrectly reported that I had a 30 day late payment on my account,

My cores dropped from 70 to 80 point in each of the agencies. The error was fixed and last report all the scores were updated, but instead of getting the same points back i got 60ish points in each report.

Also interesting that one of the "recommendations"of what is affecting my score was "too few credit cards"

I have 8 credit cards, with around 90k  limits.     3 are store cards,  (ashley, banana and jcpeney )  the others are amex, boa,  discover, chase, united and a credit union mc.

Im still trying to understand why these numbers are so crazy.

[bdhu2001]

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@culture wrote:

2 months ago, the company I hold my car loan, incorrectly reported that I had a 30 day late payment on my account,

My cores dropped from 70 to 80 point in each of the agencies. The error was fixed and last report all the scores were updated, but instead of getting the same points back i got 60ish points in each report.

Also interesting that one of the "recommendations"of what is affecting my score was "too few credit cards"

I have 8 credit cards, with around 90k  limits.     3 are store cards,  (ashley, banana and jcpeney )  the others are amex, boa,  discover, chase, united and a credit union mc.

Im still trying to understand why these numbers are so crazy.

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Your score will bounce back don't worry too much over it.  Is your car loan your only installment?  If so, I'd get a shared loan.  The CBAs appear to like two.installment loans. When I paid off my house, my score took an 8 point hit.  I don't know how much it would affect me over time, because my new mortgage loan will soon be hitting my report. But my point is I still had a car loan.  

Evidently the formulas are built for two installment loans.  l'm sure it's so that you can buy big ticket items like car and house. But with that built in, it appears you need at least two installment loans for better scores. 

[Thomas_Thumb]

My experience is one open loan fully satisfies Fico 8 score model - be it a mortgage or car loan. A 2nd loan may help or hurt score depending on its contribution to debt ratio.

Aggregate loan debt to credit ratio is an important factor in Fico score models. This is where a large loan (mortgage) with a low balance can hurt score when it closes if you have a highly leveraged smaller loan (car) still open.

Example: $200k mortgage with $80k balance and $22k car loan with $20 k balance.

 - Aggregate debt ratio = 100/222 = 45% (quite good).

Sell house, no more mortgage until new one purchased

 - New aggregate debt ratio = 20/22 = 90% (not too good) => score penalty

OP -

I would not put much stock in the "too few credit card" reason statement. All you really need is 3 cards for scoring purposes. However, 5 cards usually is beneficial for more flexibility (added aggregate CL) and buffer on card count if you or the issuer cancel a card.

Scores do fluctuate naturally due to changes in utilization or # cards reporting a non zero balance. There should be no lingering effect associated with the late if it is removed from the CRA files.

[bdhu2001]

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@Thomas_Thumb wrote:

My experience is one open loan fully satisfies Fico 8 score model - be it a mortgage or car loan. A 2nd loan may help or hurt score depending on its contribution to debt ratio.

Aggregate loan debt to credit ratio is an important factor in Fico score models. This is where a large loan (mortgage) with a low balance can hurt score when it closes if you have a highly leveraged smaller loan (car) still open.

Example: $200k mortgage with $80k balance and $22k car loan with $20 k balance.

 - Aggregate debt ratio = 100/222 = 45% (quite good).

Sell house, no more mortgage until new one purchased

 - New aggregate debt ratio = 20/22 = 90% (not too good) => score penalty

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Thanks Thomas.  I didn't consider that.  I just looked at having one closed.  In my situation, it was a 1 year of payments on a  30 year mortgage loan that I re-financed to a 15 year loan.  So the mortgage that closed was a high balance.  

The car will be finished soon so who knows what the reason is.  I guess I'll know if I gain any points when the 15 year hits.  I'm sure that by the time I pay a year on the 15 year, I'll gain all of my points back.  In addition, 2 years will have past for the majority of my inquiries and 1 year will have past for the inquiry for the new mortgage.

[Anonymous]

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@culture wrote:

2 months ago, the company I hold my car loan, incorrectly reported that I had a 30 day late payment on my account,

My cores dropped from 70 to 80 point in each of the agencies. The error was fixed and last report all the scores were updated, but instead of getting the same points back i got 60ish points in each report.

Also interesting that one of the "recommendations"of what is affecting my score was "too few credit cards"

I have 8 credit cards, with around 90k  limits.     3 are store cards,  (ashley, banana and jcpeney )  the others are amex, boa,  discover, chase, united and a credit union mc.

Im still trying to understand why these numbers are so crazy.

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What credit monitoring service (myFICO, Credit Karma, Credit Sesame, credit.com, etc.) told you that you didn't have enough credit cards?  Eight cards is way more than enough -- adding more will not improve your score.

Was this a "recomendation" of the CMS or was this an official FICO reason code?  Many credit monitoring services are biased towards pushing you to apply for more cards, since they hope that you will do so by clicking on a button that they provide.  (Scroll to the top of this screen and look at all the APPLY NOW buttons,) The credit card companies give kickbacks to a CMS for each applicant who they bring.  Credit Karma and Credit Sesame used to be terrible in this respect, telling their clients that 13 accounts was not enough, but that they could add a couple more cards in just a few clicks.

[culture]

Thanks for all the replies.

My biggest concern was if i got hit with -80 points for a late payment, and this was an error.  Why when the correction was reported I didnt get the 80 points back, nothing in my utilization change between the 2 time points. 

To the other question, yes it was a myfico msg regarding the not number of CC's , interesting right....

[cem13]

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@culture wrote:

Thanks for all the replies.

My biggest concern was if i got hit with -80 points for a late payment, and this was an error.  Why when the correction was reported I didnt get the 80 points back, nothing in my utilization change between the 2 time points. 

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I had a similar situation that happened to me.  I was put into collections incorrectly.  I called the OC and they realized the mistake and took it off.  When it hit my CR, it dropped my score 60 points.  When the OC removed the collection, I bounced back 50 points.  It took another month for everything to cycle to get the other 10 points back.

[Anonymous]

Hi Culture.  Well that is sad.  It really shows that none of the credit monitoring services, including myFICO, is immune to this bias towards the giving of objectively false information about a client's "need" to add more and more credit cards.  It's absolute BS that someone with EIGHT open credit cards needs to add more cards to improve his FICO scores.  This would be good advice if you had two cards -- MAYBE if you had three.  But eight?  Gimme a break. 

I can only explain it as an artifact of their business model.  In order for a typical CMS to stay in the black, they rely on their clients using their portal to find and apply for more credit cards, for which (as I said earlier) they get a kickback from the credit card companies.

I have no problem with a CMS hawking the wares of the CCCs, and collecting its take, but I really think the people who program up the advice that the CMS gives ought to draw a line in the sand and say No: we won't distort advice we give to our clients about their scores to make a buck.