Re: How # of cards with balance can effect FICO score
03-23-2012 12:34 PM
Wait, is the SIZE of my mortgage factored into my FICO??!!! I live where houses cost more. That does not seem fair.
Am I being penalized for doing a Re-fi? I refi'd with no cash out, so my mortage started over with 100% due, nothing paid off. Are you penalized for % paid/not paid too? I am not even underwater... again not fair.
It will be years until a new mortgage gets a good ratio.
Please tell me I am misunderstanding this tidbit of information.
Installment loan balances have a very small effect on FICO score, if any. I, too, live in an area in which basically everyone has jumbo loans, so I would be annoyed if this had a major effect on scores. It doesn't.
The primary negative FICO pressure of a refinance is not that you've reset the loan to "100%" utilization, but rather because there's a new account reporting, a new inquiry associated with the loan application, and a possible effect on average account age. However, in my experience the effect is temporary. When I refinanced a home equity loan, there was a small drop in my FICO scores, but within a few weeks it was back where it had been for a while. As I have paid down my loans, there really hasn't been any effect on FICO scores. My credit card balances are what drive the small fluctuations in score.