topic Re: Might sound silly, but how does this happen? in General Credit Topics

Might sound silly, but how does this happen?

CreditDrama85 — Fri, 18 Jul 2008 16:50:04 GMT

i have always wondered how someone with a recent bankruptcy can have a higher fico score than someone who does not have a bankruptcy but might have a past due bill or high credit card balance?

does anyone really know the answer to this? is it because all the debts iib are forgiven and fico doesnt factor in each account individually anymore and only deducts a certain amount of points for having a bankruptcy?

im a little confused about this.

Re: Might sound silly, but how does this happen?

Anonymous — Fri, 18 Jul 2008 16:58:45 GMT

Maybe buckets?

Re: Might sound silly, but how does this happen?

Anonymous — Fri, 18 Jul 2008 17:43:06 GMT

Same here- lots of folks with BK have higher scores than I. I can tell you that high util is a KILLER!!!!

Re: Might sound silly, but how does this happen?

granny031350 — Fri, 18 Jul 2008 23:48:17 GMT

sometimes people are so far in the hole a BK helps them because all balances are reset to zero due, no longer past due etc. However, to get scores to climb higher I think is harder than those with no bk.

Re: Might sound silly, but how does this happen?

haulingthescoreup — Sat, 19 Jul 2008 01:18:08 GMT

But the lates, etc that are IIB are still included and noted, which is why BK is generally such a killer.

I'm guessing that the others are right, it's buckets. If you don't have a BK or a collection, but you maybe have a major derog (60 days late or more) AND high util, your score is lower because the formula thinks that you should be a bit more on top of things than you are. If you're able to start attacking your util, give that a try and see if your scores don't start moving on up.

Re: Might sound silly, but how does this happen?

CreditDrama85 — Sat, 19 Jul 2008 16:13:07 GMT

i have always found the bucket theory interesting. it is almost like saying: "this is not normal behavior for people like you who do business, so.....let me lower your fico score a little" and as a result someone who actually pays their bills on time and has had a BK, gets a boost because they are they best of the worst. HA, not fair!

Re: Might sound silly, but how does this happen?

haulingthescoreup — Sat, 19 Jul 2008 17:17:27 GMT

@CreditDrama85 wrote:

i have always found the bucket theory interesting. it is almost like saying: "this is not normal behavior for people like you who do business, so.....let me lower your fico score a little" and as a result someone who actually pays their bills on time and has had a BK, gets a boost because they are they best of the worst. HA, not fair!

People always get angry when they see someone with a worse negative getting a higher score, but remember that lenders combine your score with a review of your credit report. So when they look, they'll see that in fact you don't have a BK, so you're going to look like a better risk. Your score just means that compared to others with a serious derog (but not a BK or CA), you could be doing better.

Lenders are very aware of the existence of the score pools. I was poking along online today and got several hits on mortgage and auto loan forums, and they were quite knowledgeable about them.

Re: Might sound silly, but how does this happen?

marty56 — Sat, 19 Jul 2008 21:38:50 GMT

I think I have been the recipient of the positive side of score bucketing at least on my TU and pre-autoloan TU. Maybe even EQ but you wouldnt know that from my EQ score.

Re: Might sound silly, but how does this happen?

Anonymous — Mon, 21 Jul 2008 01:15:32 GMT

Well, being one with a fairly recent BK, I can comment on this.

First of all, my amounts owed (30% of FICO score) dropped to zero when the BK debt was discharged.

Second, my UTIL dropped to zero as well. Many of the people without BK's have high UTIL and/or high amounts owed. That is very bad stuff for FICO scores.

Bottom line can be summed up like this:

High balances owed and/or high UTIL is a current status. Either you have high $ owed and high UTIL or you don't. Balance history places a premium on how well you have paid your bills in the past 12 months and a bit less on the past 24 months.

So, if you have a BK (like me) but have been clean for 12 months (like me), then your score increases quite a bit due to this, and even more since I have a relatively long credit history (20 years with EX; 13 years with EQ and TU).

Current scores: EX 687; EQ 663; TU 685. Looking for 700+ scores by end of this year. I fully expect all to be over 700 by next summer when my BK hits the 2 year mark. From what we hear, FICO scores weight the last 2 years payment history heavily and FICO 08 will do this even more.

Re: Might sound silly, but how does this happen?

CreditDrama85 — Mon, 21 Jul 2008 01:38:58 GMT

fico formulas need to be re examined IMHO. no one with a recent BK should be over 600 no matter how well they have paid their bills in the past. A BK IS A BK.

Re: Might sound silly, but how does this happen?

Anonymous — Mon, 21 Jul 2008 02:32:00 GMT

Mr. Drama - have you ever filed a bk, know what it entails, know the different reasons why someone may file for one, or otherwise are qualified to discuss this subject?

I hope you are not planning a back and forth on this, as I would submit that I may well be a lower risk than you are and I don't even know your scores. Reasons:

--I have virtually no debt now (30% of FICO score)

--My utilization is less than 5% of my credit limits (FICO loves this too)

--I cannot file another BK before July 2015 (lenders look upon this favorably) - By the way, not planning on EVER filing another

--I have 12 months of clean history on my mortgage, equity line, auto and 5 credit cards

I can tell you that anyone with a BK filed in the last 3 months has a FICO score above 600, but with good payment history post-BK, I just like you are proving to be a lower and lower risk.

Remember, FICO scores exist to prevent future risk of defaulting. Just because folks like me have defaulted in the past does not make us more likely to default again than someone like you who has never defaulted.

Re: Might sound silly, but how does this happen?

Anonymous — Mon, 21 Jul 2008 02:42:36 GMT

@CreditDrama85 wrote:
fico formulas need to be re examined IMHO. no one with a recent BK should be over 600 no matter how well they have paid their bills in the past. A BK IS A BK.

Oh, ppffbbht.

First of all, those who file BK still have to pay off their debts. And in fact, I'm pretty sure that they pay off their **bleep** debts faster than the average credit-holder.

Second of all, BK usually comes hard on the heels of a personal tragedy. It's RARELY ever a case of someone waking up and deciding they just don't "feel like paying" their bills anymore. You'd be VERY hard-pressed to find someone who didn't work their asses off to avoid BK ... or someone who didn't feel utterly lost and hopeless before applying for one.

Third of all, I think as some of the stories here will attest, those who HAVE had BK work their asses off to avoid it AGAIN. It's a hefty "lesson to learn" but they've learned it the HARD way. And it's really **bleep**ty, IMO, to blast someone for going through something hard and wanting a second chance.

Don't know if you know this, but this country's all ABOUT second chances. Our history's built on second chances. And for you to decide that those who've SUFFERED through BK don't deserve a second chance might be a good indicator as to whether or not you DESERVE to be an American.

Hmph.

'Nuff said.

Re: Might sound silly, but how does this happen?

Anonymous — Mon, 21 Jul 2008 02:45:20 GMT

Mods: Sorry for my outburst and I hope that you don't have to edit my post too much!

I promise to play nicely from now on ... just had to get that particular bit of bile up and OUT of my system.

I don't apologize for what I said ... but I do apologize for possibly making your job more difficult than it already is.

Re: Might sound silly, but how does this happen?

Anonymous — Mon, 21 Jul 2008 03:34:15 GMT

Nope- I am not editing it-

This is a very difficult discussion to have for those (like me) that have not been though it NOR could BK if they wanted to.

I have bit my toungue about this very subject for a long time-

and will continue to do so (for now)

Wonderin wrote:
Mods: Sorry for my outburst and I hope that you don't have to edit my post too much!

I promise to play nicely from now on ... just had to get that particular bit of bile up and OUT of my system.

I don't apologize for what I said ... but I do apologize for possibly making your job more difficult than it already is.

Re: Might sound silly, but how does this happen?

CreditDrama85 — Mon, 21 Jul 2008 11:23:10 GMT

i know a lot about BK, and im not suggesting that people who file BK are bad people or do it as a tactical move rather than because they really need too. im simply saying that the fico formula should be re-examined to be harder on those with a BK, thats all. sure your utilization is down and your risk for defaulting is down, because you've thrown in the towel and have told society that you need a pass. sometimes, that is necessary. everyone deserves a second chance; but for you to think that your score and risk should be assessed using the same formula for someone who has not filed BK, is not right. that is all i was saying.

Re: Might sound silly, but how does this happen?

Anonymous — Mon, 21 Jul 2008 13:44:29 GMT

I am going to stop this thread before it gets more heated-