topic Re: baffling reason codes in the mortgage models in Understanding FICO® Scoring

baffling reason codes in the mortgage models

Anonymous — Mon, 17 Apr 2017 20:16:16 GMT

Hey folks. I took the plunge and pulled all my scores at myFICO last week. (Last time I did that was 20 months ago.)

I did that largely because I think I will likely be buying a house in Sept and wanted to see concretely what my mortgage scores were. I knew they would have taken a hit because of the new credit cards I opened last year and in Jan/Feb of this year... but how much of a hit?

The good news is that my middle score is 782. So from a practical perspective I will be fine, as long as I continue my resolve to stop applying for cards! (My last card was opened Feb 1.)

So again, no practical worries here. But I was still very curious to look at the reason codes, just from a theoretical standpoint, to see what they might imply about how the mortgage models viewed my score. And here I noticed two really odd codes, given my profile:

(a) You have too many accounts with balances

(b) You've made heavy use of your available revolving credit.

Why are those strange?

Well, in the case of (A), I carefully went over my profile, and for all three reports there were exactly 2 credit cards showing a positive balance and exactly 10 reporting a $0 balance. They are all straight credit cards -- no charge cards, no AU cards, and no cards with a monster-huge credit limit. (CLs varied between 5k and 27k.) 2 out of 12 is 17% of my cards reporting a balance. According to everything people have found thus far, that simply cannot be considered a negative result for this factor. And yet that reason code appears on both EX (FICO 98) and EQ (FICO 04).

In the case of (B), it's even stranger. Because my actual CC utilization as it appear on the reports is < 1%. (The exact utilization would be something like 0.7%.) There's no possible model where < 1% constitutes making "heavy use of your available revolving credit." Even when looked at as a total dollar value it's still pretty small: $952 total. (If I had a 500k total credit limit, and a utilization of 2%, that would be $10k as a raw dollar value of debt. But my actual dollar value is much lower, less than 1k.) This reason code appears on EX (FICO 98) and TU (FICO 04).

As you can imagine, neither reason code appears on FICO 8.

I have one possible explanation for B, though it is a bit of a stretch. One of my two cards showing a balance has an individual utilization of 18.46%. I admit that this might be triggering a small penalty in the old models; if the number were at < 8.99% then perhaps the code would go away. I will be going through mortgage pre-qual this summer (so that I can have a letter to take around I go shopping) and I will make sure I have exactly one card reporting a $20 balance. When I get my mortgage scores again, I will let you know whether the reason codes are still appearing. My guess is that they will still be there.

Assume for a second that they are still there in June/July. I am curious to hear if anyone has a guess as to what could be going on.

Neither code appears as #1 or #2 in level of impact to the score. So it is possible that after it gave me the first two codes the algorithm randomly chose utterly bogus codes from a hat. I have heard people suggest that this may sometimes happen, but I have never seen any evidence of it till now. If that truly is the explanation, that really seems deeply wrong. The codes are there to comply with a federal mandate to provide consumers with a somewhat accurate gauge of what is hurting their score. If my score is perfect except for two codes, then it seems to me like the algorithm should stop with two codes.

BTW, I can think of factors that are hurting my mortgage score far more than the two silly codes they gave. For example, my AAoA is not very high: 6.1. Surely that is a much better choice than the two codes I mention.

Some closing thoughts:

As touches (A) is it possible that the mortgage models care more about the raw number of accounts reporting a balance, and less about the percentage of accounts reporting a balance? Thus, is 2 out of 4 cards roughly as bad as 2 out of 12?

Is it possible that (A) is counting installment accounts too? I have 2 open installment accounts that are therefore showing a positive balance. Do the mortgage models view that as four accounts showing a balance? -- and they'd rather see two (one installment and one revolving, say)?

Or is the reason code generator complete BS after the first two codes? That's really sad for consumers if true.

Re: baffling reason codes in the mortgage models

panda11 — Mon, 17 Apr 2017 22:44:22 GMT

@CreditGuyInDixie congrats, what a fantastic mortgage score! do you mind sharing your profile? baddies etc..

CH 7 BK Discharged NOV 2011
EXP 2008 FICO 699, EQU 2008 FICO 711; TU 2008 FICO 699.
CO Quicksilver 16500; CO Venture 30K; Barclays SM 10700; Barclays AA 15K; Wally 3300; NFCU Cash 26500; NFCU Flagship 22000; Chase C$P 5000; AXP Delta Gold 10000; AU Citi Costco 8000. AU Macy's 7000; AU Macys AXP 2300

Re: baffling reason codes in the mortgage models

SouthJamaica — Mon, 17 Apr 2017 22:45:34 GMT

@Anonymous wrote:
Hey folks. I took the plunge and pulled all my scores at myFICO last week. (Last time I did that was 20 months ago.)

I did that largely because I think I will likely be buying a house in Sept and wanted to see concretely what my mortgage scores were. I knew they would have taken a hit because of the new credit cards I opened last year and in Jan/Feb of this year... but how much of a hit?

The good news is that my middle score is 782. So from a practical perspective I will be fine, as long as I continue my resolve to stop applying for cards! (My last card was opened Feb 1.)

So again, no practical worries here. But I was still very curious to look at the reason codes, just from a theoretical standpoint, to see what they might imply about how the mortgage models viewed my score. And here I noticed two really odd codes, given my profile:

(a) You have too many accounts with balances

(b) You've made heavy use of your available revolving credit.

Why are those strange?

Well, in the case of (A), I carefully went over my profile, and for all three reports there were exactly 2 credit cards showing a positive balance and exactly 10 reporting a $0 balance. They are all straight credit cards -- no charge cards, no AU cards, and no cards with a monster-huge credit limit. (CLs varied between 5k and 27k.) 2 out of 12 is 17% of my cards reporting a balance. According to everything people have found thus far, that simply cannot be considered a negative result for this factor. And yet that reason code appears on both EX (FICO 98) and EQ (FICO 04).

In the case of (B), it's even stranger. Because my actual CC utilization as it appear on the reports is < 1%. (The exact utilization would be something like 0.7%.) There's no possible model where < 1% constitutes making "heavy use of your available revolving credit." Even when looked at as a total dollar value it's still pretty small: $952 total. (If I had a 500k total credit limit, and a utilization of 2%, that would be $10k as a raw dollar value of debt. But my actual dollar value is much lower, less than 1k.) This reason code appears on EX (FICO 98) and TU (FICO 04).

As you can imagine, neither reason code appears on FICO 8.

I have one possible explanation for B, though it is a bit of a stretch. One of my two cards showing a balance has an individual utilization of 18.46%. I admit that this might be triggering a small penalty in the old models; if the number were at < 8.99% then perhaps the code would go away. I will be going through mortgage pre-qual this summer (so that I can have a letter to take around I go shopping) and I will make sure I have exactly one card reporting a $20 balance. When I get my mortgage scores again, I will let you know whether the reason codes are still appearing. My guess is that they will still be there.

Assume for a second that they are still there in June/July. I am curious to hear if anyone has a guess as to what could be going on.

Neither code appears as #1 or #2 in level of impact to the score. So it is possible that after it gave me the first two codes the algorithm randomly chose utterly bogus codes from a hat. I have heard people suggest that this may sometimes happen, but I have never seen any evidence of it till now. If that truly is the explanation, that really seems deeply wrong. The codes are there to comply with a federal mandate to provide consumers with a somewhat accurate gauge of what is hurting their score. If my score is perfect except for two codes, then it seems to me like the algorithm should stop with two codes.

BTW, I can think of factors that are hurting my mortgage score far more than the two silly codes they gave. For example, my AAoA is not very high: 6.1. Surely that is a much better choice than the two codes I mention.

Some closing thoughts:

As touches (A) is it possible that the mortgage models care more about the raw number of accounts reporting a balance, and less about the percentage of accounts reporting a balance? Thus, is 2 out of 4 cards roughly as bad as 2 out of 12?

Is it possible that (A) is counting installment accounts too? I have 2 open installment accounts that are therefore showing a positive balance. Do the mortgage models view that as four accounts showing a balance? -- and they'd rather see two (one installment and one revolving, say)?

Or is the reason code generator complete BS after the first two codes? That's really sad for consumers if true.

I don't think there is a justifiable way for FICO to come up with those reason codes on your profile.

If FICO or MyFICO behaves irrationally, I'm not going to lose sleep over it.

Re: baffling reason codes in the mortgage models

Anonymous — Mon, 17 Apr 2017 23:08:24 GMT

@panda11 wrote:
@Anonymous congrats, what a fantastic mortgage score! do you mind sharing your profile? baddies etc..

CH 7 BK Discharged NOV 2011
EXP 2008 FICO 699, EQU 2008 FICO 711; TU 2008 FICO 699.
CO Quicksilver 16500; CO Venture 30K; Barclays SM 10700; Barclays AA 15K; Wally 3300; NFCU Cash 26500; NFCU Flagship 22000; Chase C$P 5000; AXP Delta Gold 10000; AU Citi Costco 8000. AU Macy's 7000; AU Macys AXP 2300

Sure. My mortgage scores were a lot higher 18 months ago (low 800s) but since I added so many new credit cards they dropped 30-40 points. I had 4 credit cards back then and now have 12.

My age of oldest is 16 years, my AAoA is 6.1, my age of youngest is two months, and I have no derogs of any kind. My lowest, middle, and best score are EX, EQ, and TU, and they correspond (perhaps coincidentally) to the number of inquiries I have. (EX = 4, EQ = 3, TU =1).

My CC utilization is 1% with 2 out of 12 cards showing a positive balance. According to the FICO reason codes, 1% is way too high and 2 out of 12 is way too many cards showing a balance, which is crazy -- and that's why I posted about it. Trying to figure out if there is any possible way I could actually be losing points on these two factors.

I will be gaining some points I think in the next three months when one inquiry from each bureau becomes > 366 days old. Whatever I gain from that I will lose from the mortgage pre-approval. I may also get some points when Age of Youngest turns 6 months and when a few cards turn 1 year old.

Re: baffling reason codes in the mortgage models

Thomas_Thumb — Tue, 18 Apr 2017 17:52:48 GMT

@Anonymous wrote:
Hey folks. I took the plunge and pulled all my scores at myFICO last week. (Last time I did that was 20 months ago.)

I did that largely because I think I will likely be buying a house in Sept and wanted to see concretely what my mortgage scores were. I knew they would have taken a hit because of the new credit cards I opened last year and in Jan/Feb of this year... but how much of a hit?

The good news is that my middle score is 782. So from a practical perspective I will be fine, as long as I continue my resolve to stop applying for cards! (My last card was opened Feb 1.)

Some closing thoughts:

As touches (A) is it possible that the mortgage models care more about the raw number of accounts reporting a balance, and less about the percentage of accounts reporting a balance? Thus, is 2 out of 4 cards roughly as bad as 2 out of 12?

Is it possible that (A) is counting installment accounts too? I have 2 open installment accounts that are therefore showing a positive balance. Do the mortgage models view that as four accounts showing a balance? -- and they'd rather see two (one installment and one revolving, say)?

Or is the reason code generator complete BS after the first two codes? That's really sad for consumers if true.

Yes - It could be associated with count as opposed to % reporting. Mortgages absolutely do count in # of open accounts with a balance. Again, from memory, I recall an unofficial article on Fico scoring mentioning more than 3 open accounts with balances as a trigger. Various articles I have read mention count is looked at.

With regards to revolving accounts having a balance, the % of accounts reporting a balance likely influences the impact of count. Reason codes/statements are CRA tweaked as shown in Credco report listing of reason codes by CRA.

Again, count can trigger the reason statement while % reporting may influence impact of count on score.

Too many accounts with balances

Your FICO® Score considers the number of accounts you have with balances. For credit cards, even if you pay them off in full each month, your credit report may still show a balance on those cards. The total balance on your last statement is generally the amount that is shown on your credit report.

What to do about this:

Pay down the balances on your credit obligations. For revolving accounts, once they are paid down, keep your balances low.

Re: baffling reason codes in the mortgage models

panda11 — Mon, 17 Apr 2017 23:14:46 GMT

lol you guys should not allowed anyone with Sub 800 FICO's to post anything here starting with me!

Re: baffling reason codes in the mortgage models

Anonymous — Mon, 17 Apr 2017 23:41:23 GMT

@Thomas_Thumb wrote:
@Anonymous wrote:
Hey folks. I took the plunge and pulled all my scores at myFICO last week. (Last time I did that was 20 months ago.)

I did that largely because I think I will likely be buying a house in Sept and wanted to see concretely what my mortgage scores were. I knew they would have taken a hit because of the new credit cards I opened last year and in Jan/Feb of this year... but how much of a hit?

The good news is that my middle score is 782. So from a practical perspective I will be fine, as long as I continue my resolve to stop applying for cards! (My last card was opened Feb 1.)

Some closing thoughts:

As touches (A) is it possible that the mortgage models care more about the raw number of accounts reporting a balance, and less about the percentage of accounts reporting a balance? Thus, is 2 out of 4 cards roughly as bad as 2 out of 12?

Is it possible that (A) is counting installment accounts too? I have 2 open installment accounts that are therefore showing a positive balance. Do the mortgage models view that as four accounts showing a balance? -- and they'd rather see two (one installment and one revolving, say)?

Or is the reason code generator complete BS after the first two codes? That's really sad for consumers if true.
Yes - It could be associated with count as opposed to % reporting. Mortgages absolutely do count in # of open accounts with a balance. Again, from memory, I recall an unofficial article on Fico scoring mentioning more than 3 open accounts with balances as a trigger. Various articles I have read mention count is looked at.

With regards to revolving accounts having a balance, the % of accounts reporting a balance likely influences the impact of count. Reason codes/statements are CRA tweaked as shown in Credco report listing of reason codes by CRA.

Again, count can trigger the reason statement while % reporting may influence impact of count on score.

Many thanks, TT. When I next pull my mortgage scores (for the pre-approval, likely in July) I will make sure exactly three accounts show a balance: two installment and one CC. I could make it two -- one installment and one revolving -- but then I would have to pay off one of my two installment loans, both with a very low installment utilization. And I just don't feel like doing that, just for the sake of science. If your guess is right (that the trigger is having four or more accounts reporting a balance) then I should get some relief as well as the message going away.

Even now, the ratio for the accounts is very low: 4 / 14 = 28.6% of my open accounts are showing a balance. (And it's 17% of revolving accounts.)

Do you have any guesses regarding the meaning of the reason code as touches its claim about my CC utilization? Do you think it is the fact that one card shows an 18% individual utilization? Or do you guess it is just random "pull a code out of the hat" nonsense?

Re: baffling reason codes in the mortgage models

Anonymous — Mon, 17 Apr 2017 23:45:03 GMT

@panda11 wrote:
lol you guys should not allowed anyone with Sub 800 FICO's to post anything here starting with me!

Hey Panda. People with scores in the 600s and 700s are just as important here on the Forums, maybe more so, since their scores are close to levels where each point actually matters, which is the situation many of our readers face.

Re: baffling reason codes in the mortgage models

Anonymous — Tue, 18 Apr 2017 00:50:07 GMT

Good information above CGID.

Glad to hear that your mortgage scores are solid and even more excited for you to snag a mortgage later this year!

Re: baffling reason codes in the mortgage models

Revelate — Tue, 18 Apr 2017 03:52:59 GMT

@Thomas_Thumb wrote:
@Anonymous wrote:
Hey folks. I took the plunge and pulled all my scores at myFICO last week. (Last time I did that was 20 months ago.)

I did that largely because I think I will likely be buying a house in Sept and wanted to see concretely what my mortgage scores were. I knew they would have taken a hit because of the new credit cards I opened last year and in Jan/Feb of this year... but how much of a hit?

The good news is that my middle score is 782. So from a practical perspective I will be fine, as long as I continue my resolve to stop applying for cards! (My last card was opened Feb 1.)

Some closing thoughts:

As touches (A) is it possible that the mortgage models care more about the raw number of accounts reporting a balance, and less about the percentage of accounts reporting a balance? Thus, is 2 out of 4 cards roughly as bad as 2 out of 12?

Is it possible that (A) is counting installment accounts too? I have 2 open installment accounts that are therefore showing a positive balance. Do the mortgage models view that as four accounts showing a balance? -- and they'd rather see two (one installment and one revolving, say)?

Or is the reason code generator complete BS after the first two codes? That's really sad for consumers if true.
Yes - It could be associated with count as opposed to % reporting. Mortgages absolutely do count in # of open accounts with a balance. Again, from memory, I recall an unofficial article on Fico scoring mentioning more than 3 open accounts with balances as a trigger. Various articles I have read mention count is looked at.

With regards to revolving accounts having a balance, the % of accounts reporting a balance likely influences the impact of count. Reason codes/statements are CRA tweaked as shown in Credco report listing of reason codes by CRA.

Again, count can trigger the reason statement while % reporting may influence impact of count on score.

If you can find that article I'd be interested in seeing it.

I have to go back and look at some reports but I've had the same reason code as CGID when I was prepping for apps which is to say 1-2 revolvers with balances on older models. I thought it might have been installment loans at the time but wasn't sure.

I may need to go play a bit more with the revolvers at zero testing and start zeroing out some installment loans too if I still see that on current reason codes... be interesting test if everything is zero on older models except the mortgage line, and the HELOC is likely paid off next month and I can pay off the Alliant loan anytime.

Re: baffling reason codes in the mortgage models

Thomas_Thumb — Tue, 18 Apr 2017 23:05:41 GMT

@Anonymous wrote:
Many thanks, TT. When I next pull my mortgage scores (for the pre-approval, likely in July) I will make sure exactly three accounts show a balance: two installment and one CC. I could make it two -- one installment and one revolving -- but then I would have to pay off one of my two installment loans, both with a very low installment utilization. And I just don't feel like doing that, just for the sake of science. If your guess is right (that the trigger is having four or more accounts reporting a balance) then I should get some relief as well as the message going away.

Even now, the ratio for the accounts is very low: 4 / 14 = 28.6% of my open accounts are showing a balance. (And it's 17% of revolving accounts.)

Do you have any guesses regarding the meaning of the reason code as touches its claim about my CC utilization? Do you think it is the fact that one card shows an 18% individual utilization? Or do you guess it is just random "pull a code out of the hat" nonsense?

I get that statement from time to time on Fico 04 and Fico 98. It is a mystery to me as, like you, my revolving balance in aggregate is always quite low. I thought it might relate to my AMEX charge card but, a couple times the AMEX reported a zero balance. In fact, on a 3/2015 report my aggregate utilization was 0.5% with 3 cards reporting balances. The individual card utilizations were: 3%, 2% and 1%.

It was listed 4th and was clearly bogus. The 1st two reason statements generally have some merit. The 3rd and 4th, if listed, are best ignored as they likely have little or no merit relative to score.

Re: baffling reason codes in the mortgage models

Revelate — Wed, 19 Apr 2017 04:29:56 GMT

@Thomas_Thumb wrote:
@Anonymous wrote:
Many thanks, TT. When I next pull my mortgage scores (for the pre-approval, likely in July) I will make sure exactly three accounts show a balance: two installment and one CC. I could make it two -- one installment and one revolving -- but then I would have to pay off one of my two installment loans, both with a very low installment utilization. And I just don't feel like doing that, just for the sake of science. If your guess is right (that the trigger is having four or more accounts reporting a balance) then I should get some relief as well as the message going away.

Even now, the ratio for the accounts is very low: 4 / 14 = 28.6% of my open accounts are showing a balance. (And it's 17% of revolving accounts.)

Do you have any guesses regarding the meaning of the reason code as touches its claim about my CC utilization? Do you think it is the fact that one card shows an 18% individual utilization? Or do you guess it is just random "pull a code out of the hat" nonsense?
I get that statement from time to time on Fico 04 and Fico 98. It is a mystery to me as, like you, my revolving balance in aggregate is always quite low. I thought it might relate to my AMEX charge card but, a couple times the AMEX reported a zero balance. In fact, on a 3/2015 report my aggregate utilization was 0.5% with 3 cards reporting balances. The individual card utilizations were: 3%, 2% and 1%.

It was listed 4th and was clearly bogus. The 1st two reason statements generally have some merit. The 3rd and 4th, if listed, are best ignored as they likely have little or no merit relative to score.

Hrm while I sort of agree, my installment utilization one was #3 on my FICO 8 models IIRC when I paid down to the pretty ratio and that was a substantial shift (near 20 points which I consider my personal benchmark for being relevant).

Granted the big scorekillers were #1 and #2 but at least on dirty files the additional reason codes might be meaningful. Clean files and well built files I think they're mostly spurious, oh noes you went from 850 to 836, quelle horreur!

Re: baffling reason codes in the mortgage models

Thomas_Thumb — Thu, 20 Apr 2017 02:59:25 GMT

@Revelate wrote:

Clean files and well built files I think they're mostly spurious, oh noes you went from 850 to 836, quelle horreur

This reminds me of Apocalypse Now - "The horror - The horror"

Re: baffling reason codes in the mortgage models

Waterboy122 — Thu, 20 Apr 2017 00:32:22 GMT

Here's my favorite, my mortgage company sold my mortgage yet again, and I got dinged 10-15 points on my scores because of it. They actually decreased because my loan DECREASED from 222K to 0??? Really, does the the sale of my mortgage make me an outlier in model through no action of my own?

Re: baffling reason codes in the mortgage models

Anonymous — Thu, 20 Apr 2017 00:52:30 GMT

From a scoring perspective, especially if your mortgage balance was substantially paid down (which by FICO terms is about 75% or less utilization) it's unfortunate since you as the customer have absolutely no control over this. You also get a "new account" that you didn't want. I guess the on a positive note you don't take in inquiry, but that's pretty minor in the grand scheme of things related to this topic.

Re: baffling reason codes in the mortgage models

Anonymous — Thu, 20 Apr 2017 01:02:50 GMT

Has the new mortgage tradeline appeared yet? If not, the score change is a temporary blip. FICO just thinks that you don't have an open loan anymore.

The real thing to watch is how the new mortgage TL reads when it appears. Let's assume that your mortgage was originally for 240k, that you owed 225k on it last month when it changed hands, and that the loan was originally taken out on July 2005.

What you want to make sure happens is that the "new" mortgage still has the same date opened (July 2005) rather than March 2017, and that the original amount of the loan reads 240k (rather than 225k). After all, this is a single loan that you have been steadily paying on for X years. If a CC of yours is sold to another bank (happened to me twice) the date opened should (and did) travel with it, and the principle should IMO be the same for a loan.

That doesn't always happen. For example, when my student loan was sold to another bank, they closed it and had a date opened of the same month/year as the transfer. Since it was my oldest account that could have seriously hurt me when the closed line fell off, so I worked with the original bank and the new loan servicer and the CRAs to get the loans reporting with the original date opened and original amount owed.

It took a lot of phone calls but I eventually got it straightened out to my satisfaction. If I were you I would watch how this loan sale affects you as well.

Re: baffling reason codes in the mortgage models

Thomas_Thumb — Thu, 20 Apr 2017 02:24:18 GMT

@Waterboy122 wrote:
Here's my favorite, my mortgage company sold my mortgage yet again, and I got dinged 10-15 points on my scores because of it. They actually decreased because my loan DECREASED from 222K to 0??? Really, does the the sale of my mortgage make me an outlier in model through no action of my own?

Mortgages are sold and purchased routinely. Your discontinuity should be very short term temporary. It should report at the same original loan amount, balance and origination date with the new mortgage company. Once that happens, your score should return to pre-sale status assuming no other changes.

The temporary score drop is either due to the mortgage being your only open installment loan closing => score drop on Fico 8 if no open loans; or you have a second, open, non mortgage installment loan that is at a high balance to loan ratio. In either case you sold mortgage will trump the current state when it shows up under new ownership. Make sure to check origination date to confirm it has not changed.