FICO lowered due to opening Savings Accounts

Anonymous · ‎09-07-2009

I'm pretty irked about this. We're in the process of applying for a home loan. My most recent middle score was 717 but the PMI companies need a 720 for the conventional loan, otherwise I have to go FHA and pay 1.75% more for the loan.

My most recent FICO on here stated that I had 6 inquiries in the last year. 2 of these were from mortgage companies and 4 were from Wells Fargo where I opened 3 savings accounts and 1 checking. They never told me they would put a hard inquiry on my credit. I complained to the branch manager and they said they would be removed. They even gave me a letter from corporate stating this. So I just checked my report again and they are still there. It looks to a lender like I applied for credit from Wells 4 times in a year, unreal!

I plan to get in touch with equifax tomorrow with my letter from wells to get it removed. Any other thoughts?

llecs · ‎09-07-2009

It's common to place inquiries while opening checking, savings, brokerage accts, etc. Even if you could get WF to remove the inquiries, it may take time for the request to be processed. Also, inquiries outside of 12 months old, even if still reporting, are not factored into scoring. The damage slowly diminishes over time. Unless these are brand new, you might not see that much of an increase. I'm not saying not to try. Do so. But there are faster ways to increase your scores.

The fastest way to bump your FICO scores is through CC utilization. Ideally, you'd want all but one CC to report $0 with the remaining CC reporting a balance under 9%. Do you have any wiggle room to improve utilization?

Anonymous · ‎09-07-2009

They did a Hard Inquiry for each account you opened...That's just wrong why didn't they just use the one for all of them.

Anonymous · ‎09-07-2009

I actually had 4 inquiries, 1 for a business account (no card attached), 1 for family checking with debit card, a savings account then I closed that one and opened a higher yield savings with 90k. So basically for depositing a bunch of money in their bank, I get my credit dinged at a time when I need to get a loan FROM THEM!

Anonymous · ‎09-07-2009

I hear that it's common now (after the fact) but I wasn't told that my credit would be checked when I opened the accounts, very frustrating.

Other things that frustrate me are:

I pay off my cc each month in full but recently learned that the only day that matters is the day the cc company reports. So now I have the car paid to zero the day they report only to learn that I should have left a little money on there because for some reason it's better to have money on a card than to use it and have it at zero.

Next, I have 2 car loans. One of them was at 7% the other at 2.9%. I paid off the one at 7% ($17500 balance paid) only to learn that paying off a vehicle could also affect my credit.

This FICO algorithm isn't smart at all. There needs to be some common sense in all of this!

llecs · ‎09-07-2009

humvee2020 wrote:
I hear that it's common now (after the fact) but I wasn't told that my credit would be checked when I opened the accounts, very frustrating.

Other things that frustrate me are:

I pay off my cc each month in full but recently learned that the only day that matters is the day the cc company reports. So now I have the car paid to zero the day they report only to learn that I should have left a little money on there because for some reason it's better to have money on a card than to use it and have it at zero.

Next, I have 2 car loans. One of them was at 7% the other at 2.9%. I paid off the one at 7% ($17500 balance paid) only to learn that paying off a vehicle could also affect my credit.

This FICO algorithm isn't smart at all. There needs to be some common sense in all of this!

One big drain to your credit is the lack of mix of credit. IMO, you'd need a minimum of 2 revolving and one charge card (e.g. store, gas). While you can have a high 700 FICO with only one card, you aren't likely to ever hit 800 with only one card. If you only have one, you may want to talk with your LO. First, try to let that one report $10 and see what happens. The reason that mix is so important is because lenders like to see if you are responsible across multiple credit-types vs just one.

Paying off a car loan or any loan, so as long as other installment accounts are open (car, home, SLs, etc.) will have zero impact to your score. It is when you pay off that last installment account that can impact your score. I paid off my last installment (car) and one FICO dropped and the other gained, both by single digits.

Anonymous · ‎09-07-2009

So let me ask you this then, if my previous cc amount reported to the bureaus was about 50% of max (though I pay it off in full each month) and this next one is zero, shouldn't my score go up quite a bit? Are you saying it would have been better to have left $10 on the account as opposed to paying in full?

llecs · ‎09-07-2009

This is only a guess, but has worked for many, but for every 10% you pay down in utilization, you gain about 10 points. Now if you go from 90% to 80%, you definitely won't see 10 points, but if you go from 90% to under 10%, you'd see 80 points. Most of the points will show up at around the 10%-20% range. However, this is dependent on your mix of credit. If you had multiple CCs, kept util the same across all cards, and went from 50% to under 10%, and kept more than half at $0, I'd guess a min. of 40 points gained. However, if you only have one card and did the same, your gain would be 10-20 at best.

Getting your CC to report a small balance of under 9%, and not $0, will give you max points with that CC. You'd have to play around and see if 2% works best, 3% and so on.

Anonymous · ‎09-07-2009

I learn something new every day. Thank you! Given I'll be running my credit in the next couple of days, I'll come back and tell you the impact this had given it's the only thing I changed.

As for the car, though paying off the car didn't help my credit, it made a huge leap for the debt/income. The only debt I have now is a 2.9% car loan with payment of 375.

llecs · ‎09-07-2009

humvee2020 wrote:
As for the car, though paying off the car didn't help my credit, it made a huge leap for the debt/income. The only debt I have now is a 2.9% car loan with payment of 375.

Plus you save $$$.