Does a Good Credit Score Always Mean Better Credit Options?

[danielcarter]

I've been thinking about how much a credit score actually tells us about someone's financial situation.

Someone can have a decent credit score but still struggle to get approved for credit, while another person with a similar score may have a completely different experience.

Do you think lenders should look at more than just the credit score, such as recent payment history, income and current financial circumstances?

I'd be interested to hear how others have experienced this.

[JoeRockhead]

Lenders absolutely look at more than just the score. A high score may help you qualify or pre-qualify for better offers, but when it comes to an actual approval, the overall profile is king.

Income, debt, utilization, recent payment history, existing accounts, inquiries, and the lender’s own underwriting criteria can all factor in.  Two people with the exact same score can get very different approvals, limits, rates... or even an approval versus a denial.

The score is important, but it’s only one piece of the puzzle.

[Vinjints]

No. A credit score is a quick glance. There are members here with great scores that get denied products because of too much existing credit. You may also be denied with a 700+, but have a very young credit history. There may be limits to even start looking at certain products based on score, but the underwriting and alogrithims will still look into your overall profile, including those elements you mentioned.

[Realist]

It does not.  There are many things a lender can look at, and score is only the "hello, may we do business" portion of it.  It's the depth of the credit profile that matters most, and even that's not entirely the end all, be all.  While a lenders goal is profitability for the institution, they are also analyzing how likely an individual is going to pay them back.  That information can come from a few different methods, as I'll share below one example.

Part of what I do is to help young individuals walk out of the gate with very high FICO scores, along with helping troubled individuals to improve.  Starting out strong is an excellent starting point, but it's only that.  It's an opportunity if nurtured, but it always produces a thin credit profile.  Even with a credit card or two, and even three acquired, the scores will start to dip as they'll show a developing credit profile, and as it's still a bit on the light side until aged.  Diversifying loan types help to strengthen the profile.

In a very recent situation, I helped a young individual acquire a 40k vehicle.  Good credit, a few credit lines to their name, but not top tier.  Still a solid score and a developing profile for a young individual.  We selected three lenders, and all three had some common criteria, but two of them wanted money down, higher rate, co-borrower, etc.  However, one, seeing how he banks with them, noticed there was enough cash in the account to pay cash for the vehicle.  Instantly they approved the loan at A+ status, best rate for the term, no down and no co-borrower.  When this information was relayed to the other lenders to see what they could offer, magically they also adjusted their approvals providing very similiar loan terms and rates, no more co-borrower, but with the exception that they still wanted 10% down.  It's the assumption the 10% was required because they didn't have the history, relationship, or bank account that the other one had.  The loan was taken with the lender that offered the best.  Now, I don't recommend chasing an expensive vehicle like this, not at all, however their position was unique and they were pretty firm on what vehicle they wanted.  I just offered a solution to help make it so much more practical.

Now, why would anyone want to take out a loan for a vehicle they could pay cash for?  Why not a combination?   Well, in this instance, the recommendation is to prepay it down with double payments, with a safety net of a longer term loan if the world goes upside down or job loss occurs.  This should result in a payoff in 36-40 months, and negates most of the damaging effects of long term interest accumulation.  It nearly neuters any interest rate.  Secondly, it helps to build out a credit portfolio by offering another diverse loan product.  Third, with the entire amount of cash sitting in a safe and conservative CD investment, the interest earned in the CD will outpace the interest paid on the vehicle and more - over the same timeline.  It will actually earn a bit more, and the power and control of those funds remain within the hands of the buyer at all times.  It's a win at every level.

Finance is a very personal thing for every individual and every situation.  Some people are well positioned to do things others can't at that moment in life.  Other people are positioned differently to take advantage of other situations.  This is why I love finance so much.  Every individuals' financial position, is like reading a new book for me.  It's like solving a puzzle to make the inefficient - efficient, and in doing so, I don't see chaos in the numbers - only opportunity.  Each transaction, should be a building block unto something better in the future, most especially if you are young, or someone seeking to improve credit wise.

[FicoMike0]

I think the simple answer is yes. All other things being equal, you have better options with a better score. Score is only one of the criteria, but a low score is often disqualifyIng. I say this, after being turned down with an 850 score. I found that having too many recent new accounts was also disqualifying for penfed. I think the process at many banks is do you meet all of several criteria? If you miss one, you're disqualified. You can't make it up by exceeding other threasholds. It's all pass/fail.

[BrutalBodyShots]

Lenders do look at more than score. Credit is approved or denied because of your overall credit profile, not your scores. Your profile is always looked at. Your scores sometimes aren't looked at at all, or if they are can matter very little depending on the lending decision.

[amelia854taylor]

Hello,

A score is useful, but it doesn’t always reflect someone’s current income, payment history, or overall financial situation. A more complete picture seems much fairer.  ebtEDGE

[TrapLine]

Another item that can affect getting a positive lending decision is any prior relationship with the lender that can weigh in.

A credit report and outside sources can look stellar but, if the lender has a past relationship on file and it was not stellar, a denial may be forth coming.

Saying, the credit report(s) may look good but the internal data held by a lender stays way beyond a credit bureau report and may forever haunt a borrower. We read about this around the MyFico Forum often.

That is why you may read posters suggesting that a borrower keep their doors open to options and lenders.