topic Re: Conflicting issues in Understanding FICO® Scoring

Conflicting issues

Anonymous — Tue, 05 Jun 2007 20:22:57 GMT

So I have a 6 credit cards & I am planning to buy a car in early 2008. To improve my credit score, I started keeping a zero balance on most of them. and my score rose to 708. But then I read somewhere that lenders want to see that you can *manage* credit instead of just having a ton of unused credit. So, I kept minimal balances on all cards (under $50) and my credit score dropped down to 690. One of reasons mentioned in the score report was "Too many accounts with balances"

What am I supposed to really do ..to get above 720 ?

TIA

-Akhil

Re: Conflicting issues

Anonymous — Tue, 05 Jun 2007 20:31:15 GMT

Pay them off again, and then use them to buy something small that you can pay in full. If you score is better with no or little balance than that is the route I would go.

Re: Conflicting issues

fused — Tue, 05 Jun 2007 20:58:29 GMT

akhil wrote:
So I have a 6 credit cards & I am planning to buy a car in early 2008. To improve my credit score, I started keeping a zero balance on most of them. and my score rose to 708. But then I read somewhere that lenders want to see that you can *manage* credit instead of just having a ton of unused credit. So, I kept minimal balances on all cards (under $50) and my credit score dropped down to 690. One of reasons mentioned in the score report was "Too many accounts with balances"

What am I supposed to really do ..to get above 720 ?

TIA

-Akhil

There has been a lot of discussion at this forum about the 1-9% util rule. For me, I keep a 1-9% on three of my five revolving cc's. It seems to be working for me. I'm still not convinced 1-9% util on all of my cc's is helpful.

Re: Conflicting issues

Anonymous — Wed, 06 Jun 2007 03:30:29 GMT

MY score droped when my balance was 0%.

And than went up on avarage of 10 points just for 1 CC util @ 1%-%9.

What cards do you have and do they report your limits.

My crap1 does not report limit so I do not use it at all, or if I do I use it until reported and then paid in full.

Re: Conflicting issues

Anonymous — Wed, 06 Jun 2007 04:31:17 GMT

The credit br does not report that an account is "paid in full" each month. As a lender I run into this often. When reviewing a customers credit I consider all their monthly debt. Having balances increases your DTI (debt to income, how much much of your income goes to mthly debt). Having balances increases your DTI, it DTI is too high I will decline the customer UNLESS they can prove that the card has been paid off. Having a higher fico is much more important.

Re: Conflicting issues

fused — Wed, 06 Jun 2007 19:02:18 GMT

3rd325 wrote:
The credit br does not report that an account is "paid in full" each month. As a lender I run into this often. When reviewing a customers credit I consider all their monthly debt. Having balances increases your DTI (debt to income, how much much of your income goes to mthly debt). Having balances increases your DTI, it DTI is too high I will decline the customer UNLESS they can prove that the card has been paid off. Having a higher fico is much more important.

It's the opinion of some the super contributor's at this forum it's best to keep a 1-9% util on all of your revolving TL's. This is suppose to maximize your FICO scores. How does one know this for sure? I noticed the mortgage lenders I spoke with did not mind a bunch of balances as long as they were very low.

Re: Conflicting issues

Anonymous — Wed, 06 Jun 2007 19:16:58 GMT

3rd325 wrote:
The credit br does not report that an account is "paid in full" each month. As a lender I run into this often. When reviewing a customers credit I consider all their monthly debt. Having balances increases your DTI (debt to income, how much much of your income goes to mthly debt). Having balances increases your DTI, it DTI is too high I will decline the customer UNLESS they can prove that the card has been paid off. Having a higher fico is much more important.

I'm confused by your post, so is it more important to have a high FICO score than it is to have a low DTI?

Re: Conflicting issues

fused — Wed, 06 Jun 2007 19:48:12 GMT

Boswd wrote:

3rd325 wrote:
The credit br does not report that an account is "paid in full" each month. As a lender I run into this often. When reviewing a customers credit I consider all their monthly debt. Having balances increases your DTI (debt to income, how much much of your income goes to mthly debt). Having balances increases your DTI, it DTI is too high I will decline the customer UNLESS they can prove that the card has been paid off. Having a higher fico is much more important.

I'm confused by your post, so is it more important to have a high FICO score than it is to have a low DTI?

I'm confused too.

Re: Conflicting issues

Anonymous — Thu, 07 Jun 2007 02:58:44 GMT

A strong fico score is important. However, when you have a balance your disposable income decreases. This decrease may be minor but enough to cause a lender to either require that the account be paid off or the customer provide proof that it is paid off. Credit scores are important but they are not the "end all". I have declined 800+ scores for DTI or other issues.

Re: Conflicting issues

fused — Thu, 07 Jun 2007 04:10:11 GMT

3rd325 wrote:
A strong fico score is important. However, when you have a balance your disposable income decreases. This decrease may be minor but enough to cause a lender to either require that the account be paid off or the customer provide proof that it is paid off. Credit scores are important but they are not the "end all". I have declined 800+ scores for DTI or other issues.

How does one with Fico scores over 800 get declined for DTI reasons? Don't most folks with scores this high have very small balances on CC's, that is low util of 1-9%? What do you mean by other issues? Just curious.

Re: Conflicting issues

Anonymous — Thu, 07 Jun 2007 04:22:19 GMT

If I decline someone for DTI it mearly means that they, according to the guidlines established by my employer, can not afford the payment. In othe words my employer will not lend to them because even though they have steller credit chances are they will not make be able to make the payment and we will lose money.

An example would be: I had a cust who wanted a loan but their DTI was higher than I was comfortable with. I stippulated that I would approve it if we paid off three credit cards bringing the DTI to 55%. The customer did not want to pay them off so I was forced to decline him.

Message Edited by 3rd325 on 06-06-2007 09:22 PM

Re: Conflicting issues

fused — Thu, 07 Jun 2007 04:54:02 GMT

3rd325 wrote:
If I decline someone for DTI it mearly means that they, according to the guidlines established by my employer, can not afford the payment. In othe words my employer will not lend to them because even though they have steller credit chances are they will not make be able to make the payment and we will lose money.

An example would be: I had a cust who wanted a loan but their DTI was higher than I was comfortable with. I stippulated that I would approve it if we paid off three credit cards bringing the DTI to 55%. The customer did not want to pay them off so I was forced to decline him.

Message Edited by 3rd325 on 06-06-2007 09:22 PM

Okay! So if one has a high DTI but it's not from cc's, might they be from high installment loan payments. i.e.. student, auto and etc.

Re: Conflicting issues

Anonymous — Thu, 07 Jun 2007 05:03:59 GMT

Yes!! I should have mentioned that earlier. DTI is seperate from credit scores. Although credit scores do affect DTI a customer is allowed. Typically, according to my employer's guidlines, a customer with an 800 will be allowed 50-55% DTI while a person with a 610 will only be allowed a max of 45% DTI.

Everything is situational though. I have approved DTI as high as 64%. The reason I allowed a higher DTI was because it was a 150k loan on a property worth over 500k and the customer had a mid 700 fico and an IRA with over 200k in it. Even though the DTI (monthly debt) was higher than normal the risk to the bank was rellatively low.