topic Re: I don't get it, evidently in Understanding FICO® Scoring

I don't get it, evidently

Anonymous — Fri, 03 Jul 2020 20:11:41 GMT

My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.

Re: I don't get it, evidently

Jannelo — Fri, 03 Jul 2020 20:32:12 GMT

I decided to switch cards that I carried a tiny balance on for AZEO. That mean for about three or four days it would show all credit cards at zero balance. I lost 20 points. The day the card reported with the small balance my scores went back up 20 points. Everything went back to normal. So you're fine. Once that card reports the small balance, your will regain those points.

As far as your refinanced car loan, it would seem that once you have back an installment loan reporting you will regain a lot of those points lost from the payoff of the auto loan. I don't know much about that, though. Someone on here will be able to tell you.

Re: I don't get it, evidently

Girlzilla88 — Fri, 03 Jul 2020 21:05:03 GMT

Yes you do get a penatly for having all cards report 0, adding that balance back will definitely help you be sure it's on your BANK card and yes losing that vehicle part will ding you too but as stated it will bounce back after the new one reports as well so you should be a-ok!

Re: I don't get it, evidently

Anonymous — Fri, 03 Jul 2020 21:08:02 GMT

Thanks for easing my mind. I hope you're right.

Re: I don't get it, evidently

SouthJamaica — Fri, 03 Jul 2020 21:35:37 GMT

@Anonymous wrote:
My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.

If you're asking for someone to defend it, I have no defense for it.

But if you're asking for some speculation as to what happened :

1. By refinancing your auto loan you damaged some of your scores; you went from a mostly paid down loan, which is like rocket fuel to some of your scores, to having no open loans, which causes a point loss for 'credit mix'.

2. When the new auto loan reports you'll probably lose a few more points for a mostly unpaid loan showing up.

3. When you paid the only credit card balance to zero, and it reported, you got the "all zero" penalty. (That can be quickly eliminated by letting a small balance report on one of your cards).

4. In order to keep AZEO on your cards you need to let all your cards report a zero balance except for one bank card (not a store card, and not a credit union card) which reports a small balance before you pay it off. If you use a Chase card for the balance-reporting card, make sure never to pay it to absolute zero, because if you pay it to zero Chase will report the zero balance mid-cycle.

Re: I don't get it, evidently

Anonymous — Sat, 04 Jul 2020 18:05:49 GMT

@Anonymous wrote:
My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.

Yeah it doesn't make a whole lot of sense, but that's how the scores are put together -

You get penalized for COMPLETELY ZERO usage on revolving credit, because none of the score data prior to FICO10 (not in use yet) was based on trended data - ie data in your credit file over time. Score models assumed that ALL zeros on your credit report meant you weren't using your revolving credit at all. Penalty.

You get penalized for having TOO MANY balances, even if they're small. TOO Many balances, Penalty.

You get penalized for NOT having an active installment loan. No loan? PENALTY!

You get penalized for HAVING an installment loan whose balance is too high. PENALTY!

Some folks did some amazing research and figured out that you CONTINUE to get penalized (though not as much as if you HAD no installment loan) until you're at about 8.9% of the loan's value, at which the penalty goes away - until you pay off the loan. More than 8.9? PENALTY!

The models are all flawed. Their is no perfect way to sum up a person's ability to repay a loan in a single number..

Re: I don't get it, evidently

Revelate — Sat, 04 Jul 2020 19:59:16 GMT

@Anonymous wrote:
@Anonymous wrote:
My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.
Yeah it doesn't make a whole lot of sense, but that's how the scores are put together -

You get penalized for COMPLETELY ZERO usage on revolving credit, because none of the score data prior to FICO10 (not in use yet) was based on trended data - ie data in your credit file over time. Score models assumed that ALL zeros on your credit report meant you weren't using your revolving credit at all. Penalty.

You get penalized for having TOO MANY balances, even if they're small. TOO Many balances, Penalty.

You get penalized for NOT having an active installment loan. No loan? PENALTY!

You get penalized for HAVING an installment loan whose balance is too high. PENALTY!

Some folks did some amazing research and figured out that you CONTINUE to get penalized (though not as much as if you HAD no installment loan) until you're at about 8.9% of the loan's value, at which the penalty goes away - until you pay off the loan. More than 8.9? PENALTY!

The models are all flawed. Their is no perfect way to sum up a person's ability to repay a loan in a single number..

I'm not sure there's a difference between a closed installment loan and one slightly under 100% original balance. Frankly it's nearly impossible to unconflate installment utilization with credit mix unfortunately but pretty sure they are flatly different. Short of someone opening an installment loan (without one on the report), letting it report, paying it down to some trivial percentage, and then paying it off and see if the score goes back to the prior one not sure we can really dig it out.

We'll see, installment loans don't seem to factor into new accounts and I didn't lose anything when I took out the new mortgage, probably won't lose anything with the refinance of the existing mortgage and now that I'm dragging that out I might as well refinance the auto loan too to something longer and smaller payment. Oh well, no testing for me other than stuff already pretty confident on.

Re: I don't get it, evidently

Anonymous — Sun, 05 Jul 2020 04:54:25 GMT

@Anonymous wrote:
@Anonymous wrote:
My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.
Yeah it doesn't make a whole lot of sense, but that's how the scores are put together -

You get penalized for COMPLETELY ZERO usage on revolving credit, because none of the score data prior to FICO10 (not in use yet) was based on trended data - ie data in your credit file over time. Score models assumed that ALL zeros on your credit report meant you weren't using your revolving credit at all. Penalty.

You get penalized for having TOO MANY balances, even if they're small. TOO Many balances, Penalty.

You get penalized for NOT having an active installment loan. No loan? PENALTY!

You get penalized for HAVING an installment loan whose balance is too high. PENALTY!

Some folks did some amazing research and figured out that you CONTINUE to get penalized (though not as much as if you HAD no installment loan) until you're at about 8.9% of the loan's value, at which the penalty goes away - until you pay off the loan. More than 8.9? PENALTY!

The models are all flawed. Their is no perfect way to sum up a person's ability to repay a loan in a single number..

Yeah, well, it certainly is frustrating after working for a couple of years to attain those 800+ scores to have them all but obliterated in a matter of a few weeks. The incredible thing to me was that when the bank card that had the minimal balance dropped to zero temporarily, one of the bureaus (TU, I believe) dinged me 36 points for paying off $14! Unfortunately, I had prescheduled that payment and the zero balance reported before I remmembered to initiate a new charge. If the new balance on that card increases my score by that same 36 points, I'm okay but if it doesn't, I'm not going to be too happy about it.

I expected the auto refinance to have an adverse effect so I wasn't too surprised when it happened. I'll know in a few days how the new loan will effect my scores. My guess is that I will take another hit. It just seems there should be some way to devise an algorithm that would paint a more realistic picture than what the current models do about a person's credit worthiness.

Once the mortgage I've applied for is completed, I won't worry so much about it and can take my time to get the scores back up there where they belong. I'm just sweating bullets until I find out whether USDA underwriters are going to pull my scores again at some point prior to final approval. Like most people, I need the best interest rate I can get. I have been working on this loan for a while already and the contract has yet to be submitted to them. It's not easy trying to figure out what you want in a home without knowing the cost of any of the options and trying to stay within the maximum loan amount mandated by USDA at the same time. I'm think I have all of that ironed out now and hope the contract will be sent to them this coming week. I'm just waiting for the final numbers on the site prep work, utilities and such. Then it's a matter of waiting 4 to 6 weeks for them to decide if everything looks okay to proceed with the construction phase. If it's good to go, it will be another 6 weeks for the home to be built and delivered to the site. I have to say that anyone who goes through this process and comes out the other side with a home deserves an award of some kind! It's a grueling and tedious process and that's putting it nicely!

Thanks very much for your insight on this confusing topic. Maybe one day I will come to understand it but that day isn't today! Haha!

Re: I don't get it, evidently

Anonymous — Sun, 05 Jul 2020 05:10:19 GMT

Yeah, I kinda know WHY the scores were affected but it just doesn't seem right to be penalized for both BEING in debt and NOT being in debt simultaneously. I also knew that the card reporting the balance needed to be a bank card. Only one of my four cards isn't through Chase and that one has been at zero for several months now. So currently, until the new car loan reports in a few days, the only debt I have is the small amount on the one bank card and it's at 1.2% of of my limit. I have no derrogatories whatsoever and every payment on the previous car loan was paid on or ahead of schedule. I even paid extra every month in hopes of paying it off more quickly until this mortgage issue came up. Oh, w

@SouthJamaica wrote:
@Anonymous wrote:
My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.
If you're asking for someone to defend it, I have no defense for it.

But if you're asking for some speculation as to what happened :

1. By refinancing your auto loan you damaged some of your scores; you went from a mostly paid down loan, which is like rocket fuel to some of your scores, to having no open loans, which causes a point loss for 'credit mix'.

2. When the new auto loan reports you'll probably lose a few more points for a mostly unpaid loan showing up.

3. When you paid the only credit card balance to zero, and it reported, you got the "all zero" penalty. (That can be quickly eliminated by letting a small balance report on one of your cards).

4. In order to keep AZEO on your cards you need to let all your cards report a zero balance except for one bank card (not a store card, and not a credit union card) which reports a small balance before you pay it off. If you use a Chase card for the balance-reporting card, make sure never to pay it to absolute zero, because if you pay it to zero Chase will report the zero balance mid-cycle.

ell, it is what it is, I guess. I'll just be holding my breath and praying that my mortgage is approved! Thanks for your input.

Re: I don't get it, evidently

Anonymous — Sun, 05 Jul 2020 17:13:43 GMT

@Anonymous wrote:
Yeah, well, it certainly is frustrating after working for a couple of years to attain those 800+ scores to have them all but obliterated in a matter of a few weeks.

Once the mortgage I've applied for is completed, I won't worry so much about it and can take my time to get the scores back up there where they belong. I'm just sweating bullets until I find out whether USDA underwriters are going to pull my scores again at some point prior to final approval. Like most people, I need the best interest rate I can get.

Nothing to be toooo worried about, anything 780 and above is just fine.

Re: I don't get it, evidently

Anonymous — Sun, 05 Jul 2020 19:12:49 GMT

@Anonymous wrote:
@Anonymous wrote:
Yeah, well, it certainly is frustrating after working for a couple of years to attain those 800+ scores to have them all but obliterated in a matter of a few weeks.

Once the mortgage I've applied for is completed, I won't worry so much about it and can take my time to get the scores back up there where they belong. I'm just sweating bullets until I find out whether USDA underwriters are going to pull my scores again at some point prior to final approval. Like most people, I need the best interest rate I can get.
Nothing to be toooo worried about, anything 780 and above is just fine.

Yeah, that's kind of the the whole point to this post. Because the 3 bureaus are dinging my scores both when I incur debt AND when I pay it down or off, my scores have dropped to BELOW 780! Another decrease will drop them to around 740! If the new charge on the bank card raises my score by the same number of ponts that dropped off when the balance went to zero, no worries. If not, I'm not going to be a happy camper. I had no late payments or any other kind of derrogatories, no BK, no nothing except all payments made on time. Then when the old car loan was paid off and again when the only cc carrying a balance was paid off, I was penalized more than 60 points in less than 2 months!!? The message that sends is that paying off debt is a bad thing and being in debt up to one's eyeballs (as long as you pay the bills on time) is a good thing...it's just not right in my opinion and is a false indicator of one's creditworthiness.

Re: I don't get it, evidently

SouthJamaica — Mon, 06 Jul 2020 00:01:29 GMT

@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:
Yeah, well, it certainly is frustrating after working for a couple of years to attain those 800+ scores to have them all but obliterated in a matter of a few weeks.

Once the mortgage I've applied for is completed, I won't worry so much about it and can take my time to get the scores back up there where they belong. I'm just sweating bullets until I find out whether USDA underwriters are going to pull my scores again at some point prior to final approval. Like most people, I need the best interest rate I can get.
Nothing to be toooo worried about, anything 780 and above is just fine.
Yeah, that's kind of the the whole point to this post. Because the 3 bureaus are dinging my scores both when I incur debt AND when I pay it down or off, my scores have dropped to BELOW 780! Another decrease will drop them to around 740! If the new charge on the bank card raises my score by the same number of ponts that dropped off when the balance went to zero, no worries. If not, I'm not going to be a happy camper. I had no late payments or any other kind of derrogatories, no BK, no nothing except all payments made on time. Then when the old car loan was paid off and again when the only cc carrying a balance was paid off, I was penalized more than 60 points in less than 2 months!!? The message that sends is that paying off debt is a bad thing and being in debt up to one's eyeballs (as long as you pay the bills on time) is a good thing...it's just not right in my opinion and is a false indicator of one's creditworthiness.

I'm not a fan of the algorithm's foolishness, either, but the message sent is not that you should be in debt up to your eyeballs.

The message is that you should have at least a tiny bit of debt.

The winning play is to have about 1% - 6% reported aggregate utilization of your revolving credit, and to owe 9% or less on your installment loans in the aggregate.

That is far from being in debt up to your eyeballs.

Re: I don't get it, evidently

Anonymous — Mon, 06 Jul 2020 04:48:39 GMT

@SouthJamaica wrote:
@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:
Yeah, well, it certainly is frustrating after working for a couple of years to attain those 800+ scores to have them all but obliterated in a matter of a few weeks.

Once the mortgage I've applied for is completed, I won't worry so much about it and can take my time to get the scores back up there where they belong. I'm just sweating bullets until I find out whether USDA underwriters are going to pull my scores again at some point prior to final approval. Like most people, I need the best interest rate I can get.
Nothing to be toooo worried about, anything 780 and above is just fine.
Yeah, that's kind of the the whole point to this post. Because the 3 bureaus are dinging my scores both when I incur debt AND when I pay it down or off, my scores have dropped to BELOW 780! Another decrease will drop them to around 740! If the new charge on the bank card raises my score by the same number of ponts that dropped off when the balance went to zero, no worries. If not, I'm not going to be a happy camper. I had no late payments or any other kind of derrogatories, no BK, no nothing except all payments made on time. Then when the old car loan was paid off and again when the only cc carrying a balance was paid off, I was penalized more than 60 points in less than 2 months!!? The message that sends is that paying off debt is a bad thing and being in debt up to one's eyeballs (as long as you pay the bills on time) is a good thing...it's just not right in my opinion and is a false indicator of one's creditworthiness.
I'm not a fan of the algorithm's foolishness, either, but the message sent is not that you should be in debt up to your eyeballs.

The message is that you should have at least a tiny bit of debt.

The winning play is to have about 1% - 6% reported aggregate utilization of your revolving credit, and to owe 9% or less on your installment loans in the aggregate.

That is far from being in debt up to your eyeballs.

Okay, so I exaggerated a bit. But even so, when I owed over $15k on my car loan, which was just under 50% paid off, my scores were in the 800s. Paid off all that debt and lost between 20 and 30 points just because I no longer had an installment loan. Paid off a measly $14 balance on a credit card and wham!, lost another 36 points because I didn't have a revolving account balance. Within the next few days, I'll be able to see the result of adding both types of debt back to my report. My gut tells me that because the new car loan will show 100% utilization, even though the amount will be the same as it was before, I'll suffer another drop. That winning play may work to give the best scores but that scenario still says being in debt is better than not being in debt, regardless of the magic percentage. I understand what you're saying and I know that it's true but that doesn't make it right nor does it give a truthful picture of a person's creditworthiness. Believe me when I say that I'll be very careful to carry a small balance on that one bank card from now on. I don't think I'll ever need to apply for a car loan again unless something unforseen happens to my current car but I'll still be paying on it for a few years and if the mortgage goes through, that debt will be hanging over my head for the rest of my life. Of course, then I'll have to wonder how long those other revolving accounts will be allowed to remain open with zero balances. My past experience is that creditors want you to carry a balance, at least periodically. If you don't, they figure you don't need the credit and they close the accounts. Maybe someday, some brilliant mind will come up with a way to provide a well-rounded and more accurate way of determining risk. Until then, we have no choice but to play the credit game because most of us will never be wealthy enough not to need it.

Re: I don't get it, evidently

909 — Mon, 06 Jul 2020 05:54:43 GMT

Anniebee5, what you're describing is true: credit score changes are sometimes arbitrary and capricious. While plenty of people will defend the algorithm, no human on the planet will agree that you became double-digits more of a risk because you paid off a small balance...which just happened to be your last remaining balance. Snapshots in time based on imprecise rules result in bad information. If there's a saving grace, it's that you werenkt at 750 dropping to 710 or worse. Good job keeping your scores in the 800s so you can reasonably weather these capricious drops.

Re: I don't get it, evidently

SouthJamaica — Mon, 06 Jul 2020 20:30:57 GMT

@Anonymous wrote:
@SouthJamaica wrote:
@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:
Yeah, well, it certainly is frustrating after working for a couple of years to attain those 800+ scores to have them all but obliterated in a matter of a few weeks.

Once the mortgage I've applied for is completed, I won't worry so much about it and can take my time to get the scores back up there where they belong. I'm just sweating bullets until I find out whether USDA underwriters are going to pull my scores again at some point prior to final approval. Like most people, I need the best interest rate I can get.
Nothing to be toooo worried about, anything 780 and above is just fine.
Yeah, that's kind of the the whole point to this post. Because the 3 bureaus are dinging my scores both when I incur debt AND when I pay it down or off, my scores have dropped to BELOW 780! Another decrease will drop them to around 740! If the new charge on the bank card raises my score by the same number of ponts that dropped off when the balance went to zero, no worries. If not, I'm not going to be a happy camper. I had no late payments or any other kind of derrogatories, no BK, no nothing except all payments made on time. Then when the old car loan was paid off and again when the only cc carrying a balance was paid off, I was penalized more than 60 points in less than 2 months!!? The message that sends is that paying off debt is a bad thing and being in debt up to one's eyeballs (as long as you pay the bills on time) is a good thing...it's just not right in my opinion and is a false indicator of one's creditworthiness.
I'm not a fan of the algorithm's foolishness, either, but the message sent is not that you should be in debt up to your eyeballs.

The message is that you should have at least a tiny bit of debt.

The winning play is to have about 1% - 6% reported aggregate utilization of your revolving credit, and to owe 9% or less on your installment loans in the aggregate.

That is far from being in debt up to your eyeballs.
Okay, so I exaggerated a bit. But even so, when I owed over $15k on my car loan, which was just under 50% paid off, my scores were in the 800s. Paid off all that debt and lost between 20 and 30 points just because I no longer had an installment loan. Paid off a measly $14 balance on a credit card and wham!, lost another 36 points because I didn't have a revolving account balance. Within the next few days, I'll be able to see the result of adding both types of debt back to my report. My gut tells me that because the new car loan will show 100% utilization, even though the amount will be the same as it was before, I'll suffer another drop. That winning play may work to give the best scores but that scenario still says being in debt is better than not being in debt, regardless of the magic percentage. I understand what you're saying and I know that it's true but that doesn't make it right nor does it give a truthful picture of a person's creditworthiness. Believe me when I say that I'll be very careful to carry a small balance on that one bank card from now on. I don't think I'll ever need to apply for a car loan again unless something unforseen happens to my current car but I'll still be paying on it for a few years and if the mortgage goes through, that debt will be hanging over my head for the rest of my life. Of course, then I'll have to wonder how long those other revolving accounts will be allowed to remain open with zero balances. My past experience is that creditors want you to carry a balance, at least periodically. If you don't, they figure you don't need the credit and they close the accounts. Maybe someday, some brilliant mind will come up with a way to provide a well-rounded and more accurate way of determining risk. Until then, we have no choice but to play the credit game because most of us will never be wealthy enough not to need it.

True dat

Re: I don't get it, evidently

Anonymous — Tue, 07 Jul 2020 07:35:59 GMT

@Anonymous wrote:
My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.

@Anonymous okay first off you haven't given us any profile statistics to guess your scorecard. Sounds like you may be in a thin scorecard.

Anyway let me try to ease your mind a little bit. You looking at the fluctuations of version 8, based on changes in aggregate installment utilization. You get a bonus when you have a loan paid down to about 65% and then a bigger bonus when you have one paid down to 9% and then when it's paid off you lose that bonus.

The same principle, you get a bonus when you're using your revolving credit, in other words when you have a balance more than zero on a card. Now, when you start to use too much your start to incur penalties. That's they way they look at it anyway.

Back to easing your mind, this is not having the same effect on your mortgage scores. These bonuses on score 8 for instalment utilisation are not very prevalent on the mortgage scores.

So overall any hit you take when it reports is gonna be from average age, which should not be too big on any version, even if it crosses a threshold.

So stop stressing, your mortgage scores aren't fluctuating like your version 8 scores, I promise. But you need a balance on one revolver, one National bankcard on any version.

And it is gonna lower your DTI without affecting your mortgage score very much. In this case I think the LO was on point. Either that or something else happened on your report.

Re: I don't get it, evidently

Anonymous — Tue, 07 Jul 2020 19:42:05 GMT

@Anonymous wrote:
@Anonymous wrote:
My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.
@Anonymous okay first off you haven't given us any profile statistics to guess your scorecard. Sounds like you may be in a thin scorecard.

Anyway let me try to ease your mind a little bit. You looking at the fluctuations of version 8, based on changes in aggregate installment utilization. You get a bonus when you have a loan paid down to about 65% and then a bigger bonus when you have one paid down to 9% and then when it's paid off you lose that bonus.

The same principle, you get a bonus when you're using your revolving credit, in other words when you have a balance more than zero on a card. Now, when you start to use too much your start to incur penalties. That's they way they look at it anyway.

Back to easing your mind, this is not having the same effect on your mortgage scores. These bonuses on score 8 for instalment utilisation are not very prevalent on the mortgage scores.

So overall any hit you take when it reports is gonna be from average age, which should not be too big on any version, even if it crosses a threshold.

So stop stressing, your mortgage scores aren't fluctuating like your version 8 scores, I promise. But you need a balance on one revolver, one National bankcard on any version.

And it is gonna lower your DTI without affecting your mortgage score very much. In this case I think the LO was on point. Either that or something else happened on your report.

Okay, so I'm not sure what information you would want exactly but here's a snapshot:

Revolving accounts: 3

2 bank cards issued by Chase, one with a zero balance on a $3500 limit and the other with a $66 balance on a $5500 limit (this second one is the one that temporarily dropped to a zero balance before I remembered to make a new purchase).

1 store card issued by Synchrony Bank with a zero balance on a $2500 limit.

Installment loans: 1

I recently refinanced my car at the suggestion of my USDA Direct loan specialist. The original loan was not quite 50% paid off when I did the refi. Balance is $15,823 with 1st pmt of $246 being auto-drafted tomorrow so should start reporting maybe next week.

Applying for mortgage through USDA Direct but as it has not gone through underwriting as yet, I don't have a clue what the terms might be. I am waiting for the final numbers and contract to be drawn up/submitted to USDA. I was pre-approved in April and have been looking since then.

2 recent hard pulls: one for the mortgage and the other on the car refi.

No derrogatories, bankruptcies, foreclosures or student loans of any kind within the past 4 or 5 years, at least. I am 68 years old so I have ample history; just not a lot of current debt to report. Prior to the auto refi, all three bureaus' version 8 scores were over 800 and my mid mortgage score was 796. Not sure what it is right now.

I have been itching to run an updated 3-bureau report but I have been holding off until the new car loan and balance on the one bank card are reported so I can see what effect those will have on my scores and I don't want to have to pay for an extra report. I do realize that mortgage scores are not the same as version 8 scores but I wasn't sure how much they would be effected. I do appreciate your insight on this as I do everyone who responded to my query. I can rest easier for now and hopefully even more after I pull the next report update.

Re: I don't get it, evidently

RadioRob — Tue, 07 Jul 2020 20:05:28 GMT

@Anonymous wrote:
@Anonymous wrote:
@Anonymous wrote:
My version 8 scores were all over 800 just a couple of months ago. I was AZEO on my credit cards and was applying for a mortgage through USDA Direct. I was approved with no problem but my maxmum loan amount wasn't high enough to afford any property that would even pass USDA inspection. My specialist advised me that if I refinanced my car to lower my payment, it would lower my DTI enough to increase the max loan amount to the point that would allow me to actually purchase a home. So, I did as he suggested knowing that I would take a ding on my credit scores. As I suspected, all three version 8 scores dropped over 25 points when my old loan was paid off and the new loan hasn't been reported as yet but will be after the first payment is auto-drafted from my bank account on the 8th of this month. I am expecting another ding when that happens. Well, in the meantime, the only credit card that carried a balance was paid off leaving a zero balance and lo, and behold, I was dinged again! Another 20+ points!!! I charged a small purchase of $66 to keep a balance on the one card and leaving the others at zero balances. If I lose another 25 points when the new car loan reports, the excellent credit rating I have worked so hard to achieve will drop into the lower 700 range! I have already gone from Excellent to Very Good at all three bureaus. How can this happen? It seems that the reporting agencies are having it both ways by penalizing me for NOT being in debt and penalizing me again for HAVING debt! I don't know if USDA will pull my credit again before my loan finalizes but I'm afraid if they do and if they see the series of decreases, it might spook the underwriters and they might not approve it! I am terrified! Can someone explain to me why I am being dinged on both ends and also what I need to do to maintain AZEO on my credit cards without incurring further penalties on my scores? Any insight will be very much appreciated.
@Anonymous okay first off you haven't given us any profile statistics to guess your scorecard. Sounds like you may be in a thin scorecard.

Anyway let me try to ease your mind a little bit. You looking at the fluctuations of version 8, based on changes in aggregate installment utilization. You get a bonus when you have a loan paid down to about 65% and then a bigger bonus when you have one paid down to 9% and then when it's paid off you lose that bonus.

The same principle, you get a bonus when you're using your revolving credit, in other words when you have a balance more than zero on a card. Now, when you start to use too much your start to incur penalties. That's they way they look at it anyway.

Back to easing your mind, this is not having the same effect on your mortgage scores. These bonuses on score 8 for instalment utilisation are not very prevalent on the mortgage scores.

So overall any hit you take when it reports is gonna be from average age, which should not be too big on any version, even if it crosses a threshold.

So stop stressing, your mortgage scores aren't fluctuating like your version 8 scores, I promise. But you need a balance on one revolver, one National bankcard on any version.

And it is gonna lower your DTI without affecting your mortgage score very much. In this case I think the LO was on point. Either that or something else happened on your report.
Okay, so I'm not sure what information you would want exactly but here's a snapshot:
Revolving accounts: 3
2 bank cards issued by Chase, one with a zero balance on a $3500 limit and the other with a $66 balance on a $5500 limit (this second one is the one that temporarily dropped to a zero balance before I remembered to make a new purchase).
1 store card issued by Synchrony Bank with a zero balance on a $2500 limit.

You can't let a Chase account be the account that reports a small balance when doing AZEO.

Meaning if the account you let report a small balance is a Chase card, the minute it reports and then you pay it off, Chase will report the zero balance off cycle. That will end up with you having all revolving accounts reporting $0. So you will only be AZEO for just day or so between the statement date and when they report the updated 0 balance.

Re: I don't get it, evidently

Anonymous — Tue, 07 Jul 2020 20:29:36 GMT

I know what you're saying, however I don't have a card with any other bank... just the Synchrony card for Ashley Furniture. The problem I had was that I had pre-scheduled the payment and since the total balance was less than the minimum amount due, I had to pay the full balance. Normally, I would charge a small purchase just before or on the same day the payment is scheduled to post to prevent the balance from going to zero. I'd open a new bank card with a different bank but I can't do that until after the mortgage process is completed. Another hard pull at this time will cause more harm than good.

Re: I don't get it, evidently

Anonymous — Tue, 07 Jul 2020 22:17:55 GMT

@Anonymous when that car loan reports closed, you're gonna see a drop. Again don't stress, it's not mirroring the other versions. And it is gonna lower your DTI.

One piece of good news is this: Whenever the first inquiry was pulled for either the mortgage or the car, any other instalment loan inquiries in the following 45 days are all be counted as one scorewise.

So at least you weren't penalized twice for those two and, depending on your timeline, you may be able to accomplish the mortgage inside the 45 day window still?

Either way, the ding doesn't affect your score until 30 days after the first installment inquiry anyway.

Yeah don't waste your money until after you have everything reported and you are at AZEO. Glad your mind is more at ease. I knew you had a thinner profile!