topic Re: Why are FICO 9 scores so much lower than 8? in General Credit Topics

Why are FICO 9 scores so much lower than 8?

Anonymous — Thu, 19 Jan 2017 02:24:25 GMT

All I've read of the changes in FICO 9 seem to be positives that would help someone's score, yet mine are 30-40 points lower with each bureau on FICO 9. I can't figure out why.....

Seems like a big scam just to lower scores across the board andjustifylenders charging higher interest.

Re: Why are FICO 9 scores so much lower than 8?

EW800 — Thu, 19 Jan 2017 02:38:47 GMT

It really depends on the specifics of your profile. In my case, my FICO 9 scores are abount 45-50 points higher than my FICO 8 scores. I went through some very ugly times about five years ago, so the way I interpret this is that FICO 9 is possibly a bit more forgiving about issues from years ago, or is giving me more credit for my good behaviour since then, or a combination of the two,

As far as your FICO 9 scores being lower, can you share what the negative aspects are of your profile? It sounds like there is something that FICO 9 is less forgiving about than FICO 8 is.

I suspect one of your resident experts will be able to weight in on this as well.

Re: Why are FICO 9 scores so much lower than 8?

Anonymous — Thu, 19 Jan 2017 05:15:54 GMT

Well my past credit really isn't an issue. 3 years ago I went to buy a new car and found out I was a "ghost". In general I've usually used cash for things under $20k, but I decided to go for a new car over the 3yo used I normally buy. I had not had active revolving accounts or loans in so long (at least 5 years) that everything was off my report and I had no score.

I ended up getting financed with a high interest loan and set about building a score again to refinance. Grabbed a couple secured cards to start. Over the past 3 years I refied the car loan and had a personal loan for 2 years, just paid off early. I also opened a few more major cards and couple store cards, mainly because my # of accounts was low and showing as a negative.

So I have a relatively short history now. 11 accounts (1 car, 8 revolving, 2 closed). 100% on time payments. 3-5 inquiries depending on the bureau. One 2 year old collection (medical-$700). Credit utilization is usually under 10%. Total credit around $15k. Sometimes it might spike to 25-30% if I forget to pay something by the grace period, but it's paid in a week or two. I have a decent income ($100k+) and really don't need to use cards, just do for rewards, so balances have never been an issue.

That's my credit in a nutshell. The easy answer would be to say it's the collection, but here's my problem with that. I'm sure I'm already taking a 30 point hit or more for that collection on FICO 8. So if that really is it, that would mean FICO 9 dings 60-70 points for one sub $1k collection, which I'd still consider bull**bleep** and a scam to keep scores lower and help the lending industry. That's just too much for 1 single collection when all other parts of the report are pretty decent.

Thoughts?

Re: Why are FICO 9 scores so much lower than 8?

Anonymous — Thu, 19 Jan 2017 06:02:49 GMT

That is a puzzle. If anything, FICO 9 is supposed to be more forgiving of medical collections thann FICO 8. Are you certain that the collection is tagged in your reports as being for a medical debt?

It's possible that FICO 9 considers a person with a very short history who is opening many credit cards to be risky -- much more than does FICO 8. (It's also possible that FICO 9 only views this as a big red flag when the person has at least one major derog.) Certainly that's plausible -- it wouldn't surprise me if FICO's statisticians have discovered that people who have little history and are opening 8 credit cards in that very short period involve significant risk (as a class).

That's all very speculative on my part. FICO 9 is been studied very little compared to FICO 8, so nobody knows.

Do bear in mind that almost no lenders are using FICO 9 right now. I am sure your FICO 9 scores will grow over the next few years, assuming you are opening few new cards and are being good with your payments and CC balances.

I can suggest a few things you might want to do moving forward, if you like.

Re: Why are FICO 9 scores so much lower than 8?

Thomas_Thumb — Thu, 19 Jan 2017 11:26:07 GMT

@Anonymous wrote:
Well my past credit really isn't an issue. 3 years ago I went to buy a new car and found out I was a "ghost". In general I've usually used cash for things under $20k, but I decided to go for a new car over the 3yo used I normally buy. I had not had active revolving accounts or loans in so long (at least 5 years) that everything was off my report and I had no score.

I ended up getting financed with a high interest loan and set about building a score again to refinance. Grabbed a couple secured cards to start. Over the past 3 years I refied the car loan and had a personal loan for 2 years, just paid off early. I also opened a few more major cards and couple store cards, mainly because my # of accounts was low and showing as a negative.

So I have a relatively short history now. 11 accounts (1 car, 8 revolving, 2 closed). 100% on time payments. 3-5 inquiries depending on the bureau. One 2 year old collection (medical-$700). Credit utilization is usually under 10%. Total credit around $15k. Sometimes it might spike to 25-30% if I forget to pay something by the grace period, but it's paid in a week or two. I have a decent income ($100k+) and really don't need to use cards, just do for rewards, so balances have never been an issue.

That's my credit in a nutshell. The easy answer would be to say it's the collection, but here's my problem with that. I'm sure I'm already taking a 30 point hit or more for that collection on FICO 8. So if that really is it, that would mean FICO 9 dings 60-70 points for one sub $1k collection, which I'd still consider bull**bleep** and a scam to keep scores lower and help the lending industry. That's just too much for 1 single collection when all other parts of the report are pretty decent.

Thoughts?

Is your medical collection paid? If not, I suspect the difference relates to the unpaid medical collection.

Fico 8 treates medical collections over $100 the same regardless of paid/unpaid. In Fico 9 paid medical collections don't count against you. The model was tweaked to provide an incentive to pay up. Conversely, unpaid medical collections mayy be treated more harshly.

Re: Why are FICO 9 scores so much lower than 8?

Anonymous — Thu, 19 Jan 2017 13:57:32 GMT

@Thomas_Thumb wrote:
Is your medical collection paid? If not, I suspect the difference relates to the unpaid medical collection.

Fico 8 treates medical collections over $100 the same regardless of paid/unpaid. In Fico 9 paid medical collections don't count against you. The model was tweaked to provide an incentive to pay up. Conversely, unpaid medical collections mayy be treated more harshly.

Hi TT. Actually, in FICO 9, all paid collections are ignored (medical or otherwise). The change in FICO 9 that specifcally deals with medical collections has to do with unpaid medical collections -- and here FICO 9 is supposed to treat them more softly then did FICO 8.

Re: Why are FICO 9 scores so much lower than 8?

Anonymous — Thu, 19 Jan 2017 14:03:09 GMT

But if his collection is not being tagged as a medical debt, then it is quite possible that FICO 9 treats unpaid non-medical collections more harshly than did FICO 8. Which is why I brought that possibility up earlier.

If our OP has a strong desire to improve his FICO 9, he could certainly pay the collection, which under FICO 9 would remove the penalty altogether.

Re: Why are FICO 9 scores so much lower than 8?

Thomas_Thumb — Fri, 20 Jan 2017 12:35:31 GMT

@Anonymous wrote:
@Thomas_Thumb wrote:
Is your medical collection paid? If not, I suspect the difference relates to the unpaid medical collection.

Fico 8 treates medical collections over $100 the same regardless of paid/unpaid. In Fico 9 paid medical collections don't count against you. The model was tweaked to provide an incentive to pay up. Conversely, unpaid medical collections mayy be treated more harshly.
Hi TT. Actually, in FICO 9, all paid collections are ignored (medical or otherwise). The change in FICO 9 that specifcally deals with medical collections has to do with unpaid medical collections -- and here FICO 9 is supposed to treat them more softly then did FICO 8.

Yes, I am aware that Fico 09 ignores all paid collections. Your point regarding unpaid medical collections receiving beneficial treatment on Fico 9 is correct. I had read that unpaid collections may be treated more harshly in Fico 9 (perhaps due to lender feedback) and overlooked splitting out medical COs. Per the below Fico 9 enhancements do not apply to 1st party collections

Here are a couple interesting score comparison charts from a Fico World presentation

The below link has some good Q/A on Fico 9.

https://www.transunion.com/resources/transunion/doc/products/resources/product-fico-9-risk-scores-faqs.pdf

Re: Why are FICO 9 scores so much lower than 8?

Revelate — Sat, 21 Jan 2017 15:27:03 GMT

Does beg the question how FICO is determining whether a collection is medical or not; if we're sorting users between paid and unpaid collections though, it wouldn't surprise me in the slightest if unpaid (sigh, typo) were more heavily weighted under FICO 9 to TT's point.

Derp, what are your scores, and out of curiosity what are the reason codes you have for FICO 9 (and FICO 8 too, but it'd be interesting to see if you have the PR/collection one under FICO 9, you will on FICO 8 probably as your top reason code).

I simply don't have much good FICO 9 data though I would suggest new accounts or inquiries might be treated more harshly there... EX has always been my busiest report and I was missing on the order of 40 points there compared to EQ FICO 9 (I know I know, different bureaus be different but that's supposedly addressed in FICO 9 and when my EX got cleaner the score was nearly identical to EQ for an identical file tradeline wise) so it'd be interesting to me anyway on the codes and also what your new account history looks like.

Re: Why are FICO 9 scores so much lower than 8?

Anonymous — Sat, 21 Jan 2017 14:33:16 GMT

@Revelate wrote:
Does beg the question how FICO is determining whether a collection is medical or not; if we're sorting users between paid and unpaid collections though, it wouldn't surprise me in the slightest if paid were more heavily weighted under FICO 9 to TT's point.

Not fully sure I understand what you mean. Paid collections are not counted at all under FICO 9, right?

Derp, what are your scores, and out of curiosity what are the reason codes you have for FICO 9 (and FICO 8 too, but it'd be interesting to see if you have the PR/collection one under FICO 9, you will on FICO 8 probably as your top reason code).

I simply don't have much good FICO 9 data though I would suggest new accounts or inquiries might be treated more harshly there... EX has always been my busiest report and I was missing on the order of 40 points there compared to EQ FICO 9 (I know I know, different bureaus be different but that's supposedly addressed in FICO 9 and when my EX got cleaner the score was nearly identical to EQ for an identical file tradeline wise) so it'd be interesting to me anyway on the codes and also what your new account history looks like.

Derp has a very short account history (three years) with many accounts (11) being opened in that period, including 8 credit cards. That's why I conjectured that a change in FICO 9 from FICO 8 might be (speculation) that it views opening many credit cards by a person with a very short total history to be a sign of risk, especially if the person has at least one substantial derog. If that were true, it would explain why his FICO 9 is substantially lower.

Re: Why are FICO 9 scores so much lower than 8?

Revelate — Sat, 21 Jan 2017 15:28:36 GMT

@Anonymous wrote:
@Revelate wrote:
Does beg the question how FICO is determining whether a collection is medical or not; if we're sorting users between paid and unpaid collections though, it wouldn't surprise me in the slightest if paid (should have been unpaid, mea culpa) were more heavily weighted under FICO 9 to TT's point.

Not fully sure I understand what you mean. Paid collections are not counted at all under FICO 9, right?

That would be a classic typo by yours truly that I didn't catch on my revisions.

Re: Why are FICO 9 scores so much lower than 8?

sjt — Sat, 21 Jan 2017 17:31:10 GMT

@Thomas_Thumb wrote:
@Anonymous wrote:
Well my past credit really isn't an issue. 3 years ago I went to buy a new car and found out I was a "ghost". In general I've usually used cash for things under $20k, but I decided to go for a new car over the 3yo used I normally buy. I had not had active revolving accounts or loans in so long (at least 5 years) that everything was off my report and I had no score.

I ended up getting financed with a high interest loan and set about building a score again to refinance. Grabbed a couple secured cards to start. Over the past 3 years I refied the car loan and had a personal loan for 2 years, just paid off early. I also opened a few more major cards and couple store cards, mainly because my # of accounts was low and showing as a negative.

So I have a relatively short history now. 11 accounts (1 car, 8 revolving, 2 closed). 100% on time payments. 3-5 inquiries depending on the bureau. One 2 year old collection (medical-$700). Credit utilization is usually under 10%. Total credit around $15k. Sometimes it might spike to 25-30% if I forget to pay something by the grace period, but it's paid in a week or two. I have a decent income ($100k+) and really don't need to use cards, just do for rewards, so balances have never been an issue.

That's my credit in a nutshell. The easy answer would be to say it's the collection, but here's my problem with that. I'm sure I'm already taking a 30 point hit or more for that collection on FICO 8. So if that really is it, that would mean FICO 9 dings 60-70 points for one sub $1k collection, which I'd still consider bull**bleep** and a scam to keep scores lower and help the lending industry. That's just too much for 1 single collection when all other parts of the report are pretty decent.

Thoughts?
Is your medical collection paid? If not, I suspect the difference relates to the unpaid medical collection.

Fico 8 treates medical collections over $100 the same regardless of paid/unpaid. In Fico 9 paid medical collections don't count against you. The model was tweaked to provide an incentive to pay up. Conversely, unpaid medical collections mayy be treated more harshly.

Ive read that all paid or settled collections are ignored in FICO09 scoring.

Re: Why are FICO 9 scores so much lower than 8?

elim — Sat, 21 Jan 2017 17:44:55 GMT

mine are much higher

Re: Why are FICO 9 scores so much lower than 8?

Thomas_Thumb — Sat, 21 Jan 2017 22:32:24 GMT

My Enhanced Fico 9 scores are, as a general rule, lower than my Enhanced Fico 8 scores. I have one open installment loan, a 15 year mortgage - at about 30% B/L, four open revolving credit cards, one open charge card, one open AU card. On file: No closed mortgages (they aged off), two closed store cards and no inquiries. Clean file.

I strongly suspect Fico 9 deducts more points than Fico 8 for thin files - files that lack a critical mass of open accounts as these profiles typically result in "too few accounts with recent payment history". The other downside of a thin file that may be treated more harshly in Fico 9 is: Too many accounts with balances if, like me you allow charges to report on statements and then PIF the reported balance. I typically report a balance on over 50% of my open accounts.

Here is what Citi reports from Fico about my EQ file.

Here is how my Fico 8 and Fico 9 scores compare:

Re: Why are FICO 9 scores so much lower than 8?

Revelate — Sun, 22 Jan 2017 00:27:48 GMT

@elim wrote:
mine are much higher

Mine too on EX/EQ, by 40-50 points sometimes, well depending how badly I've beaten like a rented mule my EX with inquiries.

Though I did lose points when my tax lien came off EX temporarily on FICO 9 (not by much, like -12) which suggests explicit bucketing event so the paid tax lien did count, and different bucket score ranges. Incidentally I gained 16 on FICO 8.

Certainly appears to have a much higher high-end for my FICO 9 scorecard than my FICO 8 ones with the lien and delinquencies there.

Re: Why are FICO 9 scores so much lower than 8?

sjt — Tue, 24 Jan 2017 04:27:41 GMT

My friend pulled their 3Bs and his Experian FICO 9 score is 100 points higher then his 08. No medical collection on file. Has a paid and unpaid collection and a few paid CO. Other then that we can't figure out the wide variance.

Re: Why are FICO 9 scores so much lower than 8?

Anonymous — Thu, 06 Jul 2017 18:08:51 GMT

Agree with your premise. This is a Credit Industry and they are in business to make money. It will never change - just make the best deal you can make and either accept or reject the offers. If you feel desperate - then you will undoubtedly pay more interest. If you can walk away from an offer or generate more offers – you may find competitive rates. BUT you can self-finance, I saw my parents build 3 family homes in the 1950s – 1960s, and my Dad was a mechanic and my mother was a secretary (so they were not wealthy). My Dad always said bankers only lend money to people who don’t need it.

Back to your point about FICO 9 versus FICO 8 – I too receive complementary scores from credit card companies. One uses FICO 9 and the other FICO 8. FICO 9 has me at 721 and FICO 8 has me at 762. I have no delinquencies (i.e., zero). The FICO 9 explanation is that I owe too much on my home – (i.e., I haven’t paid it down since financing). What they don’t take into account is that the account has been refinanced several times for better terms and has been paid down in the process. The original purchase was $300k+, refinanced for $200k 7 years ago, now $160k currently owed. On top of that, the property value has appreciated to $500k+! These guys are hacks and they are owned and operated by the Credit Industry.

I would say the following: 1) learn to save and self-finance; 2) quit viewing your FICO scores – it only empowers these hacks; 3) don’t need to borrow money; 4) if you do need to borrow money just make the best deal you can by price shopping and go with the best deal. Regards, Max

Re: Why are FICO 9 scores so much lower than 8?

Thomas_Thumb — Thu, 06 Jul 2017 18:31:08 GMT

@sjt wrote:
My friend pulled their 3Bs and his Experian FICO 9 score is 100 points higher then his 08. No medical collection on file. Has a paid and unpaid collection and a few paid CO. Other then that we can't figure out the wide variance.

If the unpaid collection is under $100 and the paid collection is over $100 that could account for a majority of the point spread. As mentioned above, Fico 9 ignores all paid collections. Fico 8 does not ignore paid collections but ignores them if under $100. Not sure how charge offs are treated F8 vs F9.

Re: Why are FICO 9 scores so much lower than 8?

Anonymous — Thu, 06 Jul 2017 18:42:39 GMT

@Thomas_Thumb wrote:
@sjt wrote:
My friend pulled their 3Bs and his Experian FICO 9 score is 100 points higher then his 08. No medical collection on file. Has a paid and unpaid collection and a few paid CO. Other then that we can't figure out the wide variance.
If the unpaid collection is under $100 and the paid collection is over $100 that could account for a majority of the point spread. As mentioned above, Fico 9 ignores all paid collections. Fico 8 does not ignore paid collections but ignores them if under $100. Not sure how charge offs are treated F8 vs F9.

Slight tweak to what TT just said. FICO 8 ignores collections, whether paid or unpaid, if under $100.

I am guessing that FICO 9 counts unpaid collections under $100, but it's possible that FICO 8's policy was inherited in the new model.

Re: Why are FICO 9 scores so much lower than 8?

sjt — Thu, 06 Jul 2017 19:32:46 GMT

@Anonymous wrote:
@Thomas_Thumb wrote:
@sjt wrote:
My friend pulled their 3Bs and his Experian FICO 9 score is 100 points higher then his 08. No medical collection on file. Has a paid and unpaid collection and a few paid CO. Other then that we can't figure out the wide variance.
If the unpaid collection is under $100 and the paid collection is over $100 that could account for a majority of the point spread. As mentioned above, Fico 9 ignores all paid collections. Fico 8 does not ignore paid collections but ignores them if under $100. Not sure how charge offs are treated F8 vs F9.
Slight tweak to what TT just said. FICO 8 ignores collections, whether paid or unpaid, if under $100.

I am guessing that FICO 9 counts unpaid collections under $100, but it's possible that FICO 8's policy was inherited in the new model.

Im also thinking that Fico 9 puts more emphasis on payment pattern and utilization then Fico 8. That could be the reason for the score variance.