topic Re: Fico Score 2 Help in Understanding FICO® Scoring

Fico Score 2 Help

Anonymous — Wed, 24 May 2017 22:28:01 GMT

Hello! I am buying a house and am 5 points away from getting a much lower score. I have 26% CC Utilization total, 48% on one card and 6% utilization on another and new student loans that have balances higher than the original loan amount due to accrued interest while in school. Should I use my cash to pay down my student loans so that they are lower than the original balances? Or get my CC utilization lower or pay off the lower balance of the cards? I wont be able to get it much lower than 23% total, but I can certainly pay my student loan balances to below the original amount. OR will either of these even make a difference? I just need a 5 point increase to save almost $100 a month. Please help

Thank you!

Re: Fico Score 2 Help

DollyLama — Wed, 24 May 2017 22:59:24 GMT

This is what I would try, but please wait for others opinions that you can weigh the best option.

Payoff the card that has 6% utilization. Overall going from 26 to 23 utilization isn't going to cross a threshold of a bump. See if you can get a credit line increase on any credit cards you have, but only as a SOFT pull inquiry that does not affect or ding your score. The increase will further decrease overall utilization.

Is this something that has to be done ASAP, ie you have a contract signed, or can you wait till the utilization is better off?

Also do you have any derogs at all, late payments, collections on any of the bureaus? Goodwill letters on lates, pay for deletes on collections can raise your scores.

You are talking your best middle score correct?

Re: Fico Score 2 Help

Anonymous — Wed, 24 May 2017 23:23:13 GMT

I have a couple of missed payments from 2013 and 2 collections. Do you think I can ask to have those collections removed if its been 5 years? I never heard of Goodwill letters. Unfortunately I am under contract and have about 3 weeks until closing. My CCs and student loans update at the end of this month. Im not sure a goodwill letter will be quick enough. How low do you think I would have to go on my UTL to get 5 more points?

Re: Fico Score 2 Help

Anonymous — Wed, 24 May 2017 23:39:09 GMT

You would almost certainly get the scoring points you need if your total CC utilization went to < 8.99%. Paying to < 18.99% might also help, though I do not know if anyone has shown a utilization breakpoint around 19% (that might just mean it hasn't been well studied).

The suggestion of paying the smaller balance card to $0 is a very good one and that might also get you some points (FICO likes it when you create as many $0 balance cards as you can, as long as one card shows a positive balance).

Do you have friends or relatives who would give you money? If they paid it directly into your credit card that might work (depositing it into your bank account is a red flag for underwriters). Be sure you get confirmation that friends giving you money in the way I describe would work. You need advice from the mortgage lenders who hang out in the mortgage forum.

Regardless your plan also needs to solve the problem of getting the new balances back to the credit bureaus quickly (e.g. by a method like Rapid Rescore).

Re: Fico Score 2 Help

Anonymous — Wed, 24 May 2017 23:47:35 GMT

PS. By "lower score" in the first sentence, I meant lower Interest rate.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 01:27:42 GMT

I forgot a detail. The lower balance credit card is in closed status because I never used it. But Still has a small balance. It doesn't count towards my total available credit but does count towards a monthly payment. I'm desperate. Thanks for your help ahead of time!

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 01:41:21 GMT

I am unclear how it is that you could have never used a card on which you owe a positive balance. Can you explain further?

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 01:57:08 GMT

I had used it awhile back to help pay for college.. Then I was just paying it it off, never added to the balance, and the bank closed it after while. Very low interest so I wasn't rushed to pay it off.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 02:50:01 GMT

OK. So you had used it, but it went for a while without being used.

Closed accounts of that sort are not good for your score. The credit limit is $0 but the balance is positive. I think one of the veterans here (Revelate) has observed that FICO may render that as a card which has > 100% individual utilization (again, because the amount owed is > the credit limit). Cards with that kind of utilization are bad for your score.

I may have misunderstood him, however -- this was several months ago.

Regardless it is a small balance so it makes sense to pay off. Can you pay your total utilization down to < 8.99%?

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 03:02:52 GMT

I can pay that off. I would not be able to make it to 8.99% unfortunately. I was sadly mislead by the Fico 8. And thought we were fine. Otherwise I would have been working on this months ago! But alas, I am here now.
Any thoughts on bringing the student loan balances to below the original loan amounts. They are higher due to deferment and interest build up. The score factors mention loan balances too high relative to original balances.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 14:19:05 GMT

@Anonymous wrote:

Any thoughts on bringing the student loan balances to below the original loan amounts. They are higher due to deferment and interest build up. The score factors mention loan balances too high relative to original balances.

There has been speculation in some quarters that bringing total installment utilization from > 101% to < 98% (say) could give you a scoring benefit. It's an interesting idea but it is highly speculative and (as far as I know) nobody has posted evidence that proves it.

The reason code you are getting that says loan balances too high relative to original balances has been shown to appear even when one's installment utilization is 75%, say -- some people get that reason code even when there installment utilization is quite a bit lower. So the presence of that reason code does not in itself suggest you'd get any benefit from lowering your installment util to 97% (say).

Just for clarity, are you sure you are seeing that reason code on your mortgage scores? (Not the reason code for your FICO but for your mortgage scores.) If so, can you clarify which bureaus you see it on? It would be very surprising if it appeared on the mortgage models for EQ and TU. Experan would not be a surprise.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 14:49:32 GMT

This is coming directly from my lender. Experian say loans, EQ says revolving loans, TU says nothing about it. I'm trying to get my experian score up since it's my Mid.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 16:02:57 GMT

Any way you could tell us the exact text of what the score factors are, work for word?

My guess is that Equifax doesn't say "revolving loans" since loans are basically a subcategory of installment accounts, so they are not revolving. My guess is that EQ might say "revolving balances" (credit cards).

It would be helpful to hear the exact wording for Experian too.

Again, it won't be strange if Experian mentions your loan balances, but it would be odd if EQ does, since the mortgage scores for EQ and TU are not supposed to care about loan balances.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 16:51:00 GMT

I just re-reviewed:

Equifax says nothing about it

Experian says: 33 PROPORTION OF LOAN BALANCES TO LOAN AMOUNTS IS TOO HIGH

Transunion says: 010 PROPORTION OF BALANCES TO CREDIT LIMITS IS TOO HIGH ON BANK
REVOLVING OR OTHER REVOLVING ACCOUNTS

@Anonymous wrote:
Any way you could tell us the exact text of what the score factors are, work for word?

My guess is that Equifax doesn't say "revolving loans" since loans are basically a subcategory of installment accounts, so they are not revolving. My guess is that EQ might say "revolving balances" (credit cards).

It would be helpful to hear the exact wording for Experian too.

Again, it won't be strange if Experian mentions your loan balances, but it would be odd if EQ does, since the mortgage scores for EQ and TU are not supposed to care about loan balances.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 17:30:21 GMT

Good. Nice to see that get confirmed. To recap:

* The EX mortgage model does care about the percentage of your open installment debt that you have managed to pay off. Thus that reason statement. People often see this reason code even when they have paid off a substantial chunk of their loans (e.g. if they have paid off 50% of each loan). Thus the reason code is not talking about you being at > 99%.

* The TU and EQ mortgage models do not care about the percentage of your open installment debt that you have managed to pay off.

Thus the absence of that reason statement.

* All models do care about your revolving balances. You will gain scoring benefit if you were to pay down your cards to < 8.99%.

As touches that last item, is getting friends or family to help you an option?

Re: Fico Score 2 Help

DollyLama — Thu, 25 May 2017 17:47:28 GMT

@Anonymous wrote:
I just re-reviewed:

Equifax says nothing about it
Experian says: 33 PROPORTION OF LOAN BALANCES TO LOAN AMOUNTS IS TOO HIGH
Transunion says: 010 PROPORTION OF BALANCES TO CREDIT LIMITS IS TOO HIGH ON BANK
REVOLVING OR OTHER REVOLVING ACCOUNTS

@Anonymous wrote:
Any way you could tell us the exact text of what the score factors are, work for word?

My guess is that Equifax doesn't say "revolving loans" since loans are basically a subcategory of installment accounts, so they are not revolving. My guess is that EQ might say "revolving balances" (credit cards).

It would be helpful to hear the exact wording for Experian too.

Again, it won't be strange if Experian mentions your loan balances, but it would be odd if EQ does, since the mortgage scores for EQ and TU are not supposed to care about loan balances.

I think paying off the small one is crucial, since it's closed and you are carrying a balance, any balance on that card is 100% utilization. Zero credit limit is hurting badly.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 18:45:16 GMT

Yup, I agree with DL.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 18:47:22 GMT

* The EX mortgage model does care about the percentage of your open installment debt that you have managed to pay off. Thus that reason statement. People often see this reason code even when they have paid off a substantial chunk of their loans (e.g. if they have paid off 50% of each loan). Thus the reason code is not talking about you being at > 99%.

* All models do care about your revolving balances. You will gain scoring benefit if you were to pay down your cards to < 8.99%.

As touches that last item, is getting friends or family to help you an option?

Unfortunately It would take too much $$ to get to <8.99%. Not an amount i would be able to ask for. So it isnt really an option.

I did pay the little CC card today. It reports in 3 days so we will see what happens with that. I do have the $$ to pay my newer student loans down to <99%, but if it would do absolutely nothing for experian scoring, it would be wiser for me to keep the cash for closing. If its experimental, it might be worth it since 5 points is such a small move.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 19:15:08 GMT

Good news to hear that you are paying off the small closed card ASAP, and that this card will be reporting to the bureaus four days from now. (It may take another week before that updated balance makes its way into their database. Hopefully it will happen a bit sooner.)

I think that leaves you with one exactly one open credit card... right?

How difficult would it be to get that card down to < 18.99%? (From > 23%) I think the probability that this will give you a score boost is greater than the probability that you will get one from lowering your open installment debt from > 101% to < 98%. The revolving breakpoint at 19% and the installment breakpoint at 100% are both speculative -- i.e. neither one could give you any benefit whatsoever. But personally I think the chance that you will get a benefit with the revolving paydown is greater.

If the revolving paydown may be possible, I encourage you to get feedback from some of people more experienced in the theory of FICO scoring (as to whether it is advisable). You could send a PM to Revelate and Thomas_Thumb, direct them to this thread, and ask their opinion.

Re: Fico Score 2 Help

Anonymous — Thu, 25 May 2017 19:28:22 GMT

Yes just one open CC with a balance. I will message Thomas_thumb and see if he has any opinion on the loan balance vs. CC UTL. I have about 2 weeks until the CC reports, so i may be able to come up with some to get to 18%. I will update!

Thank you for all your help!!