Credit Score Reform needed

[Anonymous]

Heres another link. The first result on google

http://www.creditcards.com/credit-card-news/price-mueller-will-a-second-credit-card-hurt-my-credit-s...

Is "Slight Drop" 19-20 points?

You tell me "goalers"!!

[Anonymous]

You are more than likely in the wrong fourms.

Try your local congressman.

[Anonymous]

With my last post I will insult.

Many of you argue like liberals.

I despise the way liberals argue or debate. Its all personal. Always.

In any and every attempt you've made to debate the topics you've always assumed and impliled things about me. Typical liberal weakness.

It's been fun rattling some TCCA cages today.

Later!!

[Gunnar419]

---

@Anonymous wrote:

With my last post I will insult.

Many of you argue like liberals.

I despise the way liberals argue or debate. Its all personal. Always.

In any and every attempt you've made to debate the topics you've always assumed and impliled things about me. Typical liberal weakness.

It's been fun rattling some TCCA cages today.

Later!!

---

And with you, of course, it's always been totally rational and dispassionate and you've never stooped to personal abuse. You've considered everyone's position with care and answered in measured, compassionate, wise ways.

We have truly been blessed to have such a superior being among us.

[Walt_K]

FICO doesn't want you to do anything.  It's not normative.  FICO has found through statistical analysis of a large amount of data that those people that use their cards a little bit are a slightly less credit risk than those people that don't use their cards at all.  For that reason, the algorithm gives more points for a little utilization than it does for zero utilization. 

Much of your confusion seems to be misunderstanding what FICO does.  They aren't really a consumer driven company.  They provide a service to lenders rating consumers for risk.  It's no different than me hiring an analyst to provide me a report on stocks I'm considering purchasing.  The companies I might pass on don't have a right to his analysis.  It's actually quite fortunate that we have access to as much information as we do. 

In general, whenever these threads about the problems with FICO pop up, they are overblown.  At the margins, there are some counterintuitive aspects to FICO.  But most of it is pretty straightforward.  Pay your bills on time, don't max out all of your cards.  The rest will take care of itself. 

[p-]

@Anonymous wrote:
Topic 1... Opening a credit card lowers your score....
Topic 2...you carry a balance on your CC for a more favorable result...

1. Yes, it does. Your credit score is affected by AAOA, or average age of accounts. It is also affected by number of inquiries. So a new card carries a double hit. In this board is a series of threads called "understanding fico scoring" that details it. Quite often, people here will ask "should I apply for x" and get feedback from the community whether it's worth the hit to a score. That's why you should almost never apply for new credit just before you are trying to get a mortgage.

The good news is, new accounts are a temporary hit. After a few months, the advantages to your utilization, and the additional account with good history begin to outweigh the drag from the new app and AAOA.

2. You don't exactly have to carry a balance. I can only speculate why it's this way, but your score is better if you are actually using your credit. I think because it demonstrates that you can use it and not go out of control. What I do is use only one card at a time. I pay it in full every month, after I get the statement. That way, my credit report shows the statement balance, but I don't pay any interest. I've spoken with underwriters at multiple banks, and they all see paying in full every month as a positive.

If I plan to apply for new credit, I will keep my balance total less than 5% of available, and make sure only one card shows a balance. Again, as soon as that statement cuts, I pay in full. No interest paid, and the balance shows on my report until the next statement date.

Any other topics?

[p-]

---

CreditReform wrote:  Many of you argue like liberals.

---

Hahahahaha..   Ok....  gasp...   thanks for that.  Wow.

I'm not sure if I've ever met a liberal that would argue in defense of a bank's practices...   In fact, statistically, liberals are more in favor of regulating banks and creditors to protect the consumer, but lean away from considering it one's personal responsibility to figure it out on one's own.

But that's fine, make what assumptions you want.

The funny thing; a huge percentage of people here probably agree with your assertion that fico scoring should be more transparent.  But instead of whining about it, they've chosen to learn and teach others.  You can complain, or you can make a difference.  Which of those choices would you consider to be politically left or right?

Learn, or lose.  It's up to you.

[Anonymous]

I wanted to take the time to thank Walt. Although I thought I was done here. His response was what I was looking for. On point.

Walt, while your last sentence sums it up. The CSR I spoke to this morning had a slightly different message. She actually said that carrying a balance each month and not paying in full would result in a more favorable score. Who can you trust if not for the people working behind the curtain?

I personally think it should be as simple as your last sentence and my score proves that. I get irked when a company that designs the formulation lenders use suggests carrying a balance and paying interest. That screams handshakes.

Again, thank you for the response.

[llecs]

Welcome to the forums CreditReform!

There's a number of misconceptions floating in here and wanted to take a moment and clear those up before I comment about the nitty gritty of FICO scoring. First off, myFICO moderators (there's a few of us) are regular Joes (and Janes) who happened along here, much like you, with the quest for more knowledge about all things credit. We are unpaid volunteers and we all pop in here whenever we can to pay it forwards to those who helped us before. With the help of these forums I started in the low 500s and hit into the high 700s due to the expertise and guidance of others. We don't work for FICO. FICO didn't hire all of these posters in here to impress you. I don't think FICO hired you to make us look good. I hope that clears the air. 

You started posting about a FICO score drop due to adding a new account, so I'll start there. First off, credit-related CSR-types are most usually wrong (including from myFICO). They lack the training and foresight into the ins and outs of FICO and credit. Over the years I've been given poor advice from CC-issuers to even mortgage lenders. In some cases, had I taken their advice my score would have tanked. So, ignore them. The posters on here frequently pull FICO reports and have a level of understanding of FICO more so than elsewhere on the web.

Why a drop? Whenever you add new credit there's always a potential impact to your FICO because of the new account ding, changes to your mix of credit, impact due to changes in AAoA, impact due to changes in utilization, possible impact from any new inquiry, etc. For most people, their FICO will drop when a new account is added. However some can see an increase. For example, I came on here with zero CCs. When I added my first 3 CCs my FICO increased each time by quite a bit. It increased because my mix of credit improved. However, as I added more credit, my FICO decreased by approx. 20-25 per new account. The level of decrease was dependent on changes to util, recentness of other added accounts, and so on. In short, always expect a decrease when adding credit. It's normal. In the viewpoint of a lender, new credit on a borrower-to-be is seen as an elevated risk; it can imply that the borrower is desparate for new credit. IME, any lost points returned within 12 months with most by 6 months.

The other point was all -$0 balances vs. carrying balances. Why is there a ding? There's a ding because in the eye's of lenders you can be viewed as someone with unused credit. Creditors have their best interest in mind, not yours. Therefore they tend to frown on that. However, carrying all balances will damage your credit more than carrying all $0s. FICO isn't dinging you for not paying interest because the damage is pretty bad when you are carrying balances. Ideally for max points, pay all CCs to $0 except for one and get one to report a balance of under 9% of the reported credit limit.

You also can be 100% debt-free and still pay $0 in interest and still have balance(s) report. How? Your CCs report once per month and they report the balance you had on the statement date. So, if all of your CCs are at $0 now (as they should), then use one CC after the due date but before the statement date for a pack of gum or cup of coffee. That small balance will report. Pay it off immediately and you will not be charged any interest because of the CC's 25-day or so grace period. So, you can get balances to report, pay no interest, and be debt-free.

ETA....Forgot to post a kind reminder to everyone to play nice. 

[p-]

llecs wrote: The posters on here frequently pull FICO reports and have a level of understanding of FICO more so than elsewhere on the web.

+1

It's like a credit lab where everything has been tested and analyzed to the nth degree.  No matter what the situation, someone here has been there.