topic Re: Credit score went down due to loan interest. How to fix? in Understanding FICO® Scoring

Credit score went down due to loan interest. How to fix?

Anonymous — Tue, 14 Apr 2020 01:00:10 GMT

So I was applying for a mortgage which required my credit score to be a 700. And according to credit karma my score dropped to a 690 due to college loans interest increasing the balance. I am currently on a income payment plan and totally forgot to take into account interest. How much interest do I need to pay off to get my score back to at least a 700?

My balance changed by 40$ and I paid back 50 just now

Re: Credit score went down due to loan interest. How to fix?

Anonymous — Tue, 14 Apr 2020 01:13:23 GMT

I forgot to say my payments are 0 a month.

I have 100% payment history

9% credit usage

0 derogatory Marks

2.25 years credit history

15 accounts (mainly loans)

5 hard inquiries (rent application, jc penny card, amazon card, target card, and my bank credit card)

Re: Credit score went down due to loan interest. How to fix?

AllZero — Tue, 14 Apr 2020 01:15:37 GMT

Free mortgage scores

EX2 + 3 Bureau report for $1 at Experian or CreditCheckTotal (part of Experian). Cancel in 7 days or less to avoid the reoccurring charge.
TU4 WyHy quarterly score. Not sure on membership requirement. Maybe hard pull TU?
EQ5 Get a savings account with DCU. Soft pull EQ to be a member. Free monthly score.

Re: Credit score went down due to loan interest. How to fix?

AllZero — Tue, 14 Apr 2020 01:18:17 GMT

I dont know of any mortgage lender who would use CreditKarma or VantageScore for application approval.

Those sites are good for following your reports but the score is irrelevant.

Re: Credit score went down due to loan interest. How to fix?

Anonymous — Tue, 14 Apr 2020 01:21:00 GMT

I am dumb when it comes to credit scores and whatnot. From my understanding credit karma uses 2 of like 3 actual measurements to give a credit score which means my score could be higher or lower than I am actually seeing. Are there reliable ways to see the actual score without a hard inquiry hurting my score

Re: Credit score went down due to loan interest. How to fix?

AllZero — Tue, 14 Apr 2020 01:30:58 GMT

@Anonymous wrote:
I am dumb when it comes to credit scores and whatnot. From my understanding credit karma uses 2 of like 3 actual measurements to give a credit score which means my score could be higher or lower than I am actually seeing. Are there reliable ways to see the actual score without a hard inquiry hurting my score

You've joined a great community here at myFICO. There is so much to read and learn. Hang out and absorb all you can. I was uneducated too before I came here.

I haven't really tried to figure out CreditKarma or VantageScore algorithm. The majority of lenders will use some version of FICO scores.

When you check our own reports, there is no hard pull involved. Use the Experian.com site I mentioned up thread. Cost is $1 to check your 3 bureau scores plus Experian FICO 2 score. Mortgage will use Experian 2, TransUnion 4, Equifax 5 scores.

Re: Credit score went down due to loan interest. How to fix?

thornback — Tue, 14 Apr 2020 01:36:34 GMT

@Anonymous wrote:
I am dumb when it comes to credit scores and whatnot. From my understanding credit karma uses 2 of like 3 actual measurements to give a credit score which means my score could be higher or lower than I am actually seeing. Are there reliable ways to see the actual score without a hard inquiry hurting my score

You won't incur hard inquiries when checking your own scores. You need to know your FICO Mortgage scores which are versions Experian FICO 2, Equifax FICO 5, and Transunion FICO 4. It's good to know all 3 because mtg. Lenders will typically use your middle mtg score (they throw out the highest and lowest and use the one in between).

The only site that offers all 3 mortgage scores (plus the 25 other FICO scores incl. 8, 9, auto, and bankcard) is myFICO.com. the service is a little costly, but worth it if monitoring or trying to improve to qualify for a mortgage.

Vantage scores (credit Karma) are not used by mortgage lenders and used by very very few credit lenders. The vsst majority of lenders use some version of your FICO to make credit decisions.

It is also highly unlikely that a $40 student loan balance increase affected your FICO scores. However, I do recommend paying at least the interest each month, if possible, so it doesn't compound too much over time.

Welcome to the forums!

Re: Credit score went down due to loan interest. How to fix?

Anonymous — Tue, 14 Apr 2020 01:43:00 GMT

Last stupid question. I have never worried about credit or anything until now. Is it paramount to check your score before a mortgage? My last hard inquiry my bank reported a score of 750 (last fall) and I havent done anything that would harm my score besides the loan interest. Should i finish preapproval and see where I get or should I check my score? Sorry if my questions seem ignorant

Re: Credit score went down due to loan interest. How to fix?

thornback — Tue, 14 Apr 2020 02:07:21 GMT

There are no stupid Qs around here. 😜

Here's the thing - mtg scores tend to be lower than the other FICO versions. And- you don't know from which version of FICO that 750 score stems. You could have a 750 FICO 8 and a 680 mortgage score.

It's a good idea to know where you stand so you can make improvements prior to apping, if needbe- not just to get approved, but to get approved with the best possible terms/rates.

Re: Credit score went down due to loan interest. How to fix?

thornback — Tue, 14 Apr 2020 02:02:28 GMT

If prchasing your scores is the issue, then what you could do is take @allzero's advice and sign up for the Experian CreditWorks trial. That service will give you one of your mtg scores (Experian FICO2) so at least you'll have some idea of where you are. If info on all 3 credit reports are identical, it's probable that all 3 mtg scores will be within 10-15 points of one another. If your Experian FICO 2 is low/concerning, then definately pay for all 3 at myFICO.

My advice is to bite the bullet and get all 3 scores tho. Mortgages are big apps - one should be prepared and fully aware of their credit standing from the beginning.

Re: Credit score went down due to loan interest. How to fix?

Anonymous — Tue, 14 Apr 2020 02:03:54 GMT

So I just bit the bullet and purchased my score. I got reported much higher than credit karma. I used the mortgage section and it reported 740 fico 8 score

Re: Credit score went down due to loan interest. How to fix?

thornback — Tue, 14 Apr 2020 02:06:17 GMT

FICO 8 is not your motgage score. Mortgage scores are versions 2, 5, and 4.

Did you purchase from the Experian site or myFICO?

Re: Credit score went down due to loan interest. How to fix?

KLEXH25 — Tue, 14 Apr 2020 20:23:56 GMT

Hi @Anonymous here is a quick breakdown of credit scores and the different versions. There are three Credit Reporting Agencies:

1. Experian (EX)

2. Equifax (EQ)

3. Transunion (TU)

There are also two TYPES of credit scores:

1. FICO

2. Vantage

Credit Karma reports Vantage, but very few lenders use those scores so they are pretty useless (this is also why you can get them for free). FICO scores are what you want. Within Fico there are different versions that lenders will use: Mortgage, Auto, Credit Cards, etc. When applying for a mortgage, most lenders will use your mortgage scores, which is EQ5, TU4, EX2 such as the pic below:

Re: Credit score went down due to loan interest. How to fix?

Trudy — Tue, 14 Apr 2020 22:25:28 GMT

Biting the bullet will be paying for all 28 scores from MyFICO and will cost $50+. Look for your scores with this header and note regarding used in MTG lending. There are other 5 (EX), 4 (TU) , 2 (EX) scores but it will be preceded by Auto or Bankcard.

As stated above the lender will use your middle score. So from below, 801 would be used.

Re: Credit score went down due to loan interest. How to fix?

Trudy — Tue, 14 Apr 2020 22:30:24 GMT

@Anonymous wrote:
So I just bit the bullet and purchased my score. I got reported much higher than credit karma. I used the mortgage section and it reported 740 fico 8 score

No offense but this actually doesn't make sense. Not sure how to say it differently

FICO 8 scores are different than MTG scores as noted above. I assume you pulled all 3 FICO 8 scores from EX? That's a good tool for getting your Classic 8 scores for cheap, but does not provide you all 3 MTG scores. Unless you have the accounts that provide a free MTG from the different bureaus the only way to get your MTG scores is thru MyFICO.