Is the FICO formula fair?

[BuffaloBoy]

Honest question. 

Payment History: Good

Amount of Debt: Very Good

Amount of New Credit: Good

Length of Credit History: Not Good (longest account 7 years ; average account 3 years)

For a 25 year old guy like myself, I think the FICO score formula is a bit unfair. I pay on time. I have low debt. I have many accounts all in good standing and a good credit mix. Yet my score is low (651) because I have a short credit history. My oldest account is 7 years old and my average is 3 years. I'm only 25. How old do they expect my history to be? 

Sure is tough on a responsible person who is mid 20's and wants to buy a house.

Just my 2 cents.

[InvincibleSummer3]

Fairness is, unfortunately, subjective.

You're doing all the right things. As those accounts age, your score will go up.

[BuffaloBoy]

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@InvincibleSummer3 wrote:

Fairness is, unfortunately, subjective.

You're doing all the right things. As those accounts age, your score will go up.

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I suppose you're right. 

Just seems a little odd that no matter how good you are with credit for 7 years, you have to WAIT longer just to make purchases that you should be allowed to anyway. 

[InvincibleSummer3]

Gardening will help. If your oldest account is seven years and your AAoA is three years, then not applying for anything will help a great deal.

FICO's not measuring your responsibility; it's just a bank algorithm. And forgive me, I'm not a homeowner so I wouldn't know, but you can't get approved for a home loan  with a 651 score? That's not disastrously low, really....just curious.

[Walt_K]

What is your utilization?  I would expect you to have a higher score if you have no negative information on your reports even if you do have a thin file.  What kind of balances are you carrying on your credit cards in relation to their limits?

[BuffaloBoy]

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@InvincibleSummer3 wrote:

Gardening will help. If your oldest account is seven years and your AAoA is three years, then not applying for anything will help a great deal.

FICO's not measuring your responsibility; it's just a bank algorithm. And forgive me, I'm not a homeowner so I wouldn't know, but you can't get approved for a home loan  with a 651 score? That's not disastrously low, really....just curious.

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Yes. But they want almost 5% with 25% down. 

[BuffaloBoy]

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@Walt_K wrote:

What is your utilization?  I would expect you to have a higher score if you have no negative information on your reports even if you do have a thin file.  What kind of balances are you carrying on your credit cards in relation to their limits?

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17%

I have one collection account, that was not even my fault. Don't get me started on that. That's the only negative out of my 7 accounts. 

[InvincibleSummer3]

Getting your utilization down might help - under 10% seems to be the sweet spot. Utilization is 30% of your score, so you could see some gains here.

I can't find any of the threads that mention this at the moment, but there'a another "prescription" that calls for all accounts except one paid down to zero, with the remaining account reporting 1-9%. Gets recommended around here quite a bit as quite beneficial to the credit score.

[Walt_K]

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@BuffaloBoy wrote:

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@Walt_K wrote:

What is your utilization?  I would expect you to have a higher score if you have no negative information on your reports even if you do have a thin file.  What kind of balances are you carrying on your credit cards in relation to their limits?

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17%

I have one collection account, that was not even my fault. Don't get me started on that. That's the only negative out of my 7 accounts. 

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That explains it.  Whatever the circumstances of that collection, so long as it is on your report, it is going to be scored.  If that were removed, you'd likely be well into 700s.

[pakman92]

Fair, I'm not sure.  But the whole purpose of credit rating is to asses risk for the creditors.  shorter the credit history, greater the risk.  Jus the way it is.  It's not different from you getting charged much higher for auto insurance because you are young.