Effective Limit for Best Rates? 720, 760...

[Anonymous]

When I run refi apr scenarios for a car loan, above 720 *seems* to not matter for the interest rate.

But I read that "exceptional" credit scores can be at 760 or 780.

I will want to refinance my auto loan from the TU 709 and 4.24% I got at first, now that my FICO 8 is TU 758.

Then get a mortgage in 6 months.

At what point does a higher FICO *not* get a lower interest rate?

Thanks!

[Gmood1]

There's no golden rule to this. It depends more on who you get your loan through than the scores to be honest. As fast as the rates have been climbing lately. You'll be lucky to get anything under 3%. The banks have been let off their leashes. They're running like a pack of hungry wolves now. lol

If you want to do this..do it now! Lately it seems like there's a rate hike once a month.😂

[Anonymous]

It's very lender specific.  720 for one lender may be 760 for another.  It's also important to know that score isn't everything, as all 720 scores or 760 scores aren't created equal.  It's feasible that under a manual review a lender could actually feel better about someone's profile that has a 720 score compared to someone else with a 760 score.  Maybe the 720 has 6 years of credit history where the 760 has only 9 months of credit history, for example.

[Anonymous]

Our OP mentions a mortgage in the next year.  The mortgage industry is fortunately more uniform.  Should be 740 middle score for best rates on the mortgage itself, 760 for best rates on PMI for the mortgage.  That assumes an ordinary conventional mortgage.  Certain kinds of loan programs (e.g. a VA mortgage) do not need as high scores.

Our OP should pay especial attention to the fact that the mortgage industry does not use FICO 8 scores, but rather the much older "mortgage" scores.

[NRB525]

CGID brings up a critical factor.
Tracking FICO 8 may provide some directional indication of where scores are going, but it is not used for auto loans or mortgages. Sometimes not even auto scores are used for auto loans with certain banks.

OP do you know what score version was used when your auto loan was granted?

[Anonymous]

Is there a reason why the "older" mortgage models haven't been updated?  Is it a case of simply not needing to change anything and if it aint broke don't fix it?  I figure if other models are being updated like FICO 09 for example, you'd think older models would get a revamp at some point as well no?

[Anonymous]

Seems I need to ask my CU which score they'll pull, see if I can learn if apr beforehand.

Yes, I know which version was used in past.

They pulled TU FICO Auto Score 8, which tracks, for me, ~22 pts above my TU FICO 8.

Contrast with TU FICO Score 4, used for mortgages, which tracks ~7 pts above my TU FICO 8.

TU FICO 8 is 759, Auto Score 8 is 781.

[Anonymous]

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@Anonymous wrote:

Is there a reason why the "older" mortgage models haven't been updated?  Is it a case of simply not needing to change anything and if it aint broke don't fix it?  I figure if other models are being updated like FICO 09 for example, you'd think older models would get a revamp at some point as well no?

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The problem is not on FICO's end.  They created a new improved scoring model (FICO 8 Mortgage) and released it in late 2010:

http://www.fico.com/en/newsroom/fico-8-mortgage-score-now-available-from-top-three-us-credit-reporting-agencies-10-26-2010

The problem was that Fannie Mae and Freddie Mac refused to approve its use.  They have an effective monopoly over decision making for the mortgage lending industry. 

Thus we are still stuck with very old models for credit scoring, models that are both old (Experian's is from 1998) and which were not specifically designed for mortgages.  There have been attempts to fix this (e.g. the proposed 2017 Credit Score Competition Act) but they are not likely to make it into law.

I am guessing that eventually we'll have a shift and F&F will switch to a more recent model.  I mean, the chance that in 2025 we'll still be using models from 1998 seems low (to me).  But I would not expect any change in the next year or two.

[Anonymous]

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@Anonymous

The problem was that Fannie Mae and Freddie Mac refused to approve its use.  They have an effective monopoly over decision making for the mortgage lending industry. 

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Is there a reason why?  Would the new Mortgage 8 model result in lower scores, thus resulting in less mortgage approvals?

[iv]

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@Anonymous wrote:

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@Anonymous

The problem was that Fannie Mae and Freddie Mac refused to approve its use.  They have an effective monopoly over decision making for the mortgage lending industry. 

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Is there a reason why? 

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Why a newer model hasn't been adopted? Bureaucratic inertia, politics...

Why do they have an effective monopoly? Because they provide the secondary market for most loans (see also: politics, again.)

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@Anonymous wrote:

Would the new Mortgage 8 model result in lower scores, thus resulting in less mortgage approvals?

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Doesn't matter - if a newer model has a different score distribution, the breakpoints for approve/refer/deny and rate premiums would be adjusted to match.  The numeric value of the score isn't what's important - it's the curve that it fits on....