topic Re: What's hurting your FICO score? in Understanding FICO® Scoring

What's hurting your FICO score?

Mythic850 — Fri, 23 May 2008 02:01:37 GMT

Is there any reasoning behind the ordering of the items in the "What's hurting your FICO score" section of the FICO score reports here on myFICO?

Are they listed in any particular order, such as the most negative factors first?

Re: What's hurting your FICO score?

Anonymous — Fri, 23 May 2008 02:36:31 GMT

Mythic850 wrote:
Is there any reasoning behind the ordering of the items in the "What's hurting your FICO score" section of the FICO score reports here on myFICO?

Are they listed in any particular order, such as the most negative factors first?

Yes, they are. Whichever factor is hurting you the most will be listed as #1. The second most damaging factor is #2, and so on. The negative factors can serve as a good to-do list when cleaning things up because they're listed in order of priority.

Of course, some of them you just can't do anything about other than wait (like "You have a short credit history," for example).

Re: What's hurting your FICO score?

smallfry — Fri, 23 May 2008 09:24:53 GMT

I now have two since I have paid my car loan from 50% to under 20% of original loan amount. Public records and short average age. Number two is a result of number one since I lost, and deservedly so, my old credit card history due to the BK. Cards were closed by credit grantor.

Re: What's hurting your FICO score?

RobertEG — Sat, 24 May 2008 07:44:12 GMT

Hey smalfry, we continue to reply!

so one more....

Whether an account is closed by the consumer, or by a creditor, has NO affect whatsoever upon FICO scoring of it as a closed account. It is simply closed. Period.

The issue has nothing at all to do with who closed it, it is a simple matter of whether or not it was closed in good standing (i.e, whether a balance remained upon closing).

Closing an account instantly deletes any CL on that account in %util, but does not delete any outstanding balance reported on that account from %util until that balance is paid. Nothing to do with why, or who, closed it. That is meaningless, except maybe to a a manual review, but not to FICO score.

It becomes a closed account in good standing once the balance is paid, and then that begins the ten year clock for future deletion of the account from the CR.

Re: What's hurting your FICO score?

Junejer — Sat, 24 May 2008 18:16:37 GMT

@RobertEG wrote:

Hey smalfry, we continue to reply!
so one more....
Whether an account is closed by the consumer, or by a creditor, has NO affect whatsoever upon FICO scoring of it as a closed account. It is simply closed. Period.
The issue has nothing at all to do with who closed it, it is a simple matter of whether or not it was closed in good standing (i.e, whether a balance remained upon closing).
Closing an account instantly deletes any CL on that account in %util, but does not delete any outstanding balance reported on that account from %util until that balance is paid. Nothing to do with why, or who, closed it. That is meaningless, except maybe to a a manual review, but not to FICO score.
It becomes a closed account in good standing once the balance is paid, and then that begins the ten year clock for future deletion of the account from the CR.

I think smallfry was saying that her credit history was shortened due to the fact that her BK caused her CCs to be IIB, thus taking it out of the mix.

Re: What's hurting your FICO score?

RobertEG — Sun, 25 May 2008 05:49:27 GMT

OK, mythic, here is the sliding order of risk that translates into a credit score.

The basic vanilla low-level view of risk is what type of accounts you are currently managing. This is called credit mix, and is only 10% of risk (85 points), and is not directly dependent upon the way in which current credit is actually being managed, only upon the types of credit you hold and have shown the ability to manage.

The remaining 90% of FICO risk analysis looks at how your credit is currently being managed. The first indicator of potential credit risk increase is simply seeking new credit. This is only 10% of FICO, for it is still not looking directly at how active credit is being utilized monthly. The risk asumption under FICO scoring is that seeking new debt may be an indicator for potential problems in the next two years in managing that new debt The basic measure of this potential risk is by way of new credit inquiries made by the consumer. Again, being a relatively insignificant indicator of potential increased risk, it is weighted low, and drops from scoring consideration after one year. It is an early indicator of a potential problem, but not based upon history or actual use.

On the FICO risk scale, the scoring then gets nervous when anything you are doing with your current TLs begins to exceed the norm... it looks at the length that the consumer has been managing credit, which is 15% of total FICO, and measures this by both the length of oldest credit, and average age of prior and current credit. Adding any new TL decreases your acount age, and is not good in current scoring, but may be neceassary for building future history.. The game is a maybe game. FICO looks as maybes from the point of view of historicall, how such actions have increased repayment risk in the next two years, so action taken here may have a short term neg FICO impact, but a long term positive impact.

The remaining 65% of FICO scoring is the heart of the system. FICO gets real nervous with what you do with increasing debt and paying it timely It looks at the degree of debt utilization (30%), and the history of timely prior payment of debt (35%). You must keep debt low as compared to your CL, and never, ever, ever make one late payment. Late payments (including collections, etc) are the ultimate curse in your FICO, for they remain for 7 years, and account for over 1/3 of your FICO score.. Increasing debt is also neg, but can be recovered easily by paying it down, for debt util is a monthly snapshot, with no historical memory.

That is the level of importance of each category on credit score.

Message Edited by RobertEG on 05-24-2008 10:18 PM

Message Edited by RobertEG on 05-24-2008 10:21 PM

Message Edited by RobertEG on 05-24-2008 10:25 PM

Message Edited by RobertEG on 05-24-2008 10:30 PM

Message Edited by RobertEG on 05-24-2008 10:34 PM

Message Edited by RobertEG on 05-24-2008 10:43 PM

Message Edited by RobertEG on 05-24-2008 10:49 PM

Re: What's hurting your FICO score?

fused — Sun, 25 May 2008 19:41:11 GMT

Is this your intro...or is it your dissertation on FICO scoring

Re: What's hurting your FICO score?

MidnightVoice — Sun, 25 May 2008 20:00:44 GMT

RobertEG wrote:

Message Edited by RobertEG on 05-24-2008 10:18 PM

Message Edited by RobertEG on 05-24-2008 10:21 PM

Message Edited by RobertEG on 05-24-2008 10:25 PM

Message Edited by RobertEG on 05-24-2008 10:30 PM

Message Edited by RobertEG on 05-24-2008 10:34 PM

Message Edited by RobertEG on 05-24-2008 10:43 PM

Message Edited by RobertEG on 05-24-2008 10:49 PM

Did you know that each time one edits a post after the first time one can delete the old "edited by" bits so it looks like just one edit?

Re: What's hurting your FICO score?

smallfry — Tue, 27 May 2008 09:49:24 GMT

@Junejer wrote:

@RobertEG wrote:
Hey smalfry, we continue to reply!
so one more....
Whether an account is closed by the consumer, or by a creditor, has NO affect whatsoever upon FICO scoring of it as a closed account. It is simply closed. Period.
The issue has nothing at all to do with who closed it, it is a simple matter of whether or not it was closed in good standing (i.e, whether a balance remained upon closing).
Closing an account instantly deletes any CL on that account in %util, but does not delete any outstanding balance reported on that account from %util until that balance is paid. Nothing to do with why, or who, closed it. That is meaningless, except maybe to a a manual review, but not to FICO score.
It becomes a closed account in good standing once the balance is paid, and then that begins the ten year clock for future deletion of the account from the CR.

I think smallfry was saying that her credit history was shortened due to the fact that her BK caused her CCs to be IIB, thus taking it out of the mix.

Yep. It was an aside. Sorry for any misunderstanding.

Re: What's hurting your FICO score?

Junejer — Tue, 27 May 2008 15:50:54 GMT

@MidnightVoice wrote:

@RobertEG wrote:

Message Edited by RobertEG on 05-24-2008 10:18 PM

Message Edited by RobertEG on 05-24-2008 10:21 PM

Message Edited by RobertEG on 05-24-2008 10:25 PM

Message Edited by RobertEG on 05-24-2008 10:30 PM

Message Edited by RobertEG on 05-24-2008 10:34 PM

Message Edited by RobertEG on 05-24-2008 10:43 PM

Message Edited by RobertEG on 05-24-2008 10:49 PM

Did you know that each time one edits a post after the first time one can delete the old "edited by" bits so it looks like just one edit?

LOL.

Re: What's hurting your FICO score?

smallfry — Tue, 27 May 2008 19:01:59 GMT

I'm a he.

Re: What's hurting your FICO score?

Junejer — Tue, 27 May 2008 22:12:46 GMT

Sorry smallfry. Ballerina avi led me to mistakenly believe...nevermind, sorry man. I see you changed the avi. WTG. LOL.

ETA: ly to mistaken

Message Edited by ByrdMan on 05-27-2008 05:12 PM

Re: What's hurting your FICO score?

Anonymous — Tue, 27 May 2008 20:27:57 GMT

MidnightVoice wrote:

RobertEG wrote:

Message Edited by RobertEG on 05-24-2008 10:18 PM

Message Edited by RobertEG on 05-24-2008 10:21 PM

Message Edited by RobertEG on 05-24-2008 10:25 PM

Message Edited by RobertEG on 05-24-2008 10:30 PM

Message Edited by RobertEG on 05-24-2008 10:34 PM

Message Edited by RobertEG on 05-24-2008 10:43 PM

Message Edited by RobertEG on 05-24-2008 10:49 PM

Did you know that each time one edits a post after the first time one can delete the old "edited by" bits so it looks like just one edit?

Wow. I learn something here every day. If only late pays and baddies could be eliminated so easily.

Re: What's hurting your FICO score?

smallfry — Tue, 27 May 2008 21:04:45 GMT

@Junejer wrote:
Sorry smallfry. Ballerina avi led me to mistaken believe...nevermind, sorry man. I see you changed the avi. WTG. LOL.

LOL.

Re: What's hurting your FICO score?

haulingthescoreup — Thu, 29 May 2008 22:50:49 GMT

@smallfry wrote:

@Junejer wrote:

Sorry smallfry. Ballerina avi led me to mistaken believe...nevermind, sorry man. I see you changed the avi. WTG. LOL.
LOL.

Goodness, smallfry, I miss the old avi. It was about as confusing as MV's former avi (the English rose.) The new one is about as far as you can get from the tiny ballerina! I thought you were one of our avant-garde members or something.

I think I'll switch to Timothy's old avi of the grumpy lobsterman, or whatever the heck it was.

Re: What's hurting your FICO score?

smallfry — Sat, 31 May 2008 12:43:36 GMT

I know you need to take some of the reasons with a grain of salt that FICO generates for your scores but this is a little info I have gleaned from my experiences over the course of the past year.

I received the red flag on all reports when new accounts went from 4 to 5.

16% utilization was considered heavy usage while 9% was considered excellent.

Re: What's hurting your FICO score?

Anonymous — Sat, 31 May 2008 17:53:56 GMT

Smallfry,

That is valuable information - but I have come to find that those positives and negatives are very much bucket dependent.

For example, I am in one of the newer credit buckets - either 2-5 years or one for multiple new accounts. Either way, for me 13% utility was reported as my #2 positive factor on one report. In addition, I was flagged on 2 of 3 reports for 3 new accounts opened in a 1 year period.

In your case, 13% utility would be considered bad, but when compared to people with young credit (usually young consumers in college or just out), I was holding relatively low balances for that population. The next month when I lowered it to 6% it obviously gave me more points but it moved no higher on the list of positives (my clean payment history has always been #1).

Re: What's hurting your FICO score?

smallfry — Sat, 31 May 2008 18:09:31 GMT

Despite what some may say about installments not mattering to your score I can tell you that my TU remained at 717 for 4 months from January to April. Once I paid the loan down to 10% of the original balance from 50% April to May my score went up 14 points and it no longer showed as a negative on the Fico summary page. TU Quarterly also listed this as the reason my score went up from 717 to 731. Now I have just 2 public records and short credit history as my only negatives. Average age is just 3 years while oldest account just under 11 years.

Re: What's hurting your FICO score?

Anonymous — Sat, 31 May 2008 19:37:17 GMT

smallfry wrote:
Despite what some may say about installments not mattering to your score I can tell you that my TU remained at 717 for 4 months from January to April. Once I paid the loan down to 10% of the original balance from 50% April to May my score went up 14 points and it no longer showed as a negative on the Fico summary page. TU Quarterly also listed this as the reason my score went up from 717 to 731. Now I have just 2 public records and short credit history as my only negatives. Average age is just 3 years while oldest account just under 11 years.

FICO does seem funny about that. Your score barely moves from lowering installment debt until you get pretty low it seems but then you will take a score hit the second you don't have an installment loan. Damned if you do, damned if you don't, except for the final year of a loan.

Re: What's hurting your FICO score?

Mythic850 — Sun, 01 Jun 2008 01:03:35 GMT

FICO does seem funny about that. Your score barely moves from lowering installment debt until you get pretty low it seems but then you will take a score hit the second you don't have an installment loan. Damned if you do, damned if you don't, except for the final year of a loan.

As further proof that installment balances do matter, look at what's on two of my latest FICO reports contain these snippets among the negative factors:

TU

The balances on your non-mortgage credit accounts are too high.

Total amount you owe on all non-mortgage accounts:$28890
Most FICO High Achievers [?] carry a total balance of less than $1200 on non-mortgage accounts.

The remaining balance on your non-mortgage installment loans is too high.

In my case, $26,000-ish is an auto loan. The remainder is CC balance that has been paid off (should be reported in the next 10 days). The installment loan currently has debt-to-credit ration of 92% (it's only nine months old). The CC util currently reporting is 20%.

Clearly, in both cases the balance amount does include the installment loan balance. It will be interesting to see how the analysis changes when the CC balances are removed.

On another note, it seems very odd that the high achievers have non-mortgage balances less than $1,200. You would think that some of these installment loans (like a 36/48/60 month auto) that's being paid on-time for long periods of time would be a major positive showing that you can responsibly manage your credit payments. Apparently, FICO seems it another way.

Or,like the OP, is this stuff about non-mortgage installment loans just FICO grasping at straws to list some negative factor when their isn't anything else to list. (In my case, it's the third item. Number 1 is serious delinquency (4 of them). Number 2 is multiple accounts showing missed payments (4 of them).