topic Re: Why??? in Understanding FICO® Scoring

Why???

Anonymous — Wed, 11 Jun 2008 09:16:08 GMT

There are so many things I disagree with the FICO scoring system...for instance, why is it when you pay a car loan off, the account is closed but your score is affected negatively? At one time, that was a good thing...I thought! Not anymore..Other things which I disagree with are closing an account you don't use or want, lowers your score. Paying off a debt or debts to $0 still reports as a negative. Paying your credit cards down every month to 0, isn't shown ..only the last amount that was posted on the account...so thats bad too. I hate this system..and wish there was a way out of it because it is the most unfair system ever created. Why can't we, as consumers, protest it in someway to change it, or abolish it completely and go back to the old system where your report was just that...a report, where lenders and finance companies could look at it and say, "yeah I see you paid off your car, and only missed one payment that's pretty good for a four year loan" instead of some stupid scoring system that makes you into less than human because you had a rough time 6 years ago and were late!! or is it just "me"..who thinks like this??

Re: Why???

Anonymous — Wed, 11 Jun 2008 11:10:36 GMT

I understand your frustration about being judged by a number. I'm there myself, after having my EQ score tank over inquiries & new accounts even though my payment record is perfect and I have no baddies at all. Now I have to just play the waiting game for these accounts to age and my score to creep back up.

All that said, if you know some of the tricks, you can work it to your advantage as best you can.

- If you pay off a car loan, and it's your only installment loan, it can cause your score to drop. FICO looks at your total mix of credit, including revolving, installment, CC, etc. So your best bet here is to have another active installment loan in your mix to avoid that drop.

- Closing an account you don't use or want can lower your score if it causes your average account history/age to be shorter. Don't ever close accounts unless they're costing you money.

- CCs report your account balance when the statement drops to the CRAs. If you want to show a 0 balance on your CC, you need to pay it off a few days before the statement drops to ensure that 0 balance shows. However, for maximum FICO score advantage, allow fewer than half of your CCs to report a balance of 1 - 9%. Showing all 0 balances can make FICO think you're afraid to use your credit. Showing 1 - 9% makes FICO think ok, this guy (or gal ) knows how to use credit judiciously.

And there are lenders out there - smaller banks, CUs, etc - who will look at your total history, not just your credit score, to make decisions. I don't want to go back to the "good old days" because that might mean that I couldn't get credit without my DH's signature and that just ain't happenin'.

nogeez wrote:
There are so many things I disagree with the FICO scoring system...for instance, why is it when you pay a car loan off, the account is closed but your score is affected negatively? At one time, that was a good thing...I thought! Not anymore..Other things which I disagree with are closing an account you don't use or want, lowers your score. Paying off a debt or debts to $0 still reports as a negative. Paying your credit cards down every month to 0, isn't shown ..only the last amount that was posted on the account...so thats bad too. I hate this system..and wish there was a way out of it because it is the most unfair system ever created. Why can't we, as consumers, protest it in someway to change it, or abolish it completely and go back to the old system where your report was just that...a report, where lenders and finance companies could look at it and say, "yeah I see you paid off your car, and only missed one payment that's pretty good for a four year loan" instead of some stupid scoring system that makes you into less than human because you had a rough time 6 years ago and were late!! or is it just "me"..who thinks like this??

*edited for proper grammar, says the writer chick

Message Edited by desifink on 06-11-2008 04:10 AM

Re: Why???

Anonymous — Wed, 11 Jun 2008 12:27:55 GMT

No- this is NOT true

This needs to stop being posted as it is FALSE-

Closed accounts are factored in Avg age, and should remain for 10 years after being closed.

You get smacked around by FICO for closing accounts for Utilization-

There are plenty of good reasons to close accounts- they just need to be calculated.

"- Closing an account you don't use or want can lower your score if it causes your average account history/age to be shorter. Don't ever close accounts unless they're costing you money."

Re: Why???

athensguy — Wed, 11 Jun 2008 17:52:32 GMT

If you closed your last account of a type, it can hurt your score. Closing the last store card might hurt your score. Closing an auto loan or mortgage or sig loan might hurt your score, too. Closing your last revolving account would probably tank your score.

Message Edited by erchambers on 06-11-2008 01:52 PM