FICO scores have become so unreliable

[Thomas_Thumb]

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@Peter1142 wrote:
Hey thanks for the reply, what you are saying makes sense. I guess it is more the old scoring metrics only the mortgage industry is sticking with being crappy than the new ones.

I posted before I gave up on the idea of refinance. But I will try to raise the score anyway and see where the rates go next month. I know some of the reasons my score is lower:

1. Of course, there was a new car loan after that 800 FICO (but an old one was paid off too, unclear the effect on old FICO for the latter.)
2. I got a new card and transfered a balance to it from a card with a higher limit.

So that's 2 new accounts in the last 12 months or so, and one of them is at 88% usage (the rest are all at 0-5% though, overall low utilization.) I have plenty of accounts, AAoA is 4.5 years according to Experian.

Also:
3. I have 3 30 day lates on authorized user accounts I put in a dispute to remove today. Transunion is already done. I believe FICO 8 ignores them.

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One of the three CRAs ignores all negative info on AU accounts when scoring profiles. The other two CRAs do consider negative AU info. Some AU accounts may be considered in Fico 8/9 while others may not. However, all AU accounts are factored into Fico 04 and the older Fico 98 model.

As mentioned above, get rid of the AU accounts - at least those with derogatories and/or moderate to high utilization. The below is for Fico 9 but, also applies to Fico 8 - with the possible exception of the rental component.

...

[Anonymous]

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@KJinNC wrote:

I just wonder if there is, in reality, a valid reason to have different numbers for different types of credit... what I am talking about is all of these very specific FICO scores for different types of loans, as if you can be a safe bet for one type but a risky bet for another.

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The thing is, all credit scoring models have a very fine granularity.  If a credit score was either thumbs up or thumbs down (Safe or Risky) then you might have a good point.  But they are not like 2-3 big blocks of stone, but are made rather with hundreds of grains of sand.  The standard score (300-850) has 551 grains of sand in it.  And given that it makes sense surely that an Auto-based score might give the same guy a slightly better or worse score than a Bankcard based score.  Suppose that guy has never had an auto loan before, or worse still, he did and there were lates or even a repo on it -- but his credit cards have a fairly low utilization and have no lates.  Surely that guy poses more of a risk to an auto lender than he does to a CC issuer?  That extra risk will be reflected in a lower score, by some number of points.

[Peter1142]

Question - How long is the inquiries treated as one window in Fico 04/08? I have seen a lot of conflicting info on this. They were correctly reported as mortgage pulls.

[Anonymous]

FICO 98 has a 14-day de-duplication window.  FICO 98 is the model that is used for the Experian mortgage score (aka FICO 2).

All later FICO models appear to have a de-duplication window of 45 days.

https://www.fico.com/blogs/risk-compliance/a-better-way-to-treat-inquiries/

I wish that link definitively stated that the switch from 14 days to 45 occurred in 2004 at the release of FICO 04 (the TU and EQ mortgage scores).  It gets close to saying that but I couldn't see where it said that for sure.

The practical upshot, however, is that when you are buying a house the smartest and simplest approach is to assume that all three FICO scores have a 14-day window.   That's because we know for sure that the EX mortgage score uses 14 days -- so why not go with the most restrictive?

Bear in mind that there is a different 30-day window that applies to all FICO models.  This other window says that FICO ignores a mortgage inquiry for its first 30 days.  That has nothing to do with de-duplication.

Finally bear in mind that you should look carefully at the reports themselves.  FICO bases its de-duplication effort on assuming all mortgage inquiries are correctly coded as such on the report.

[Peter1142]

Thanks for the info.

I just learned the newest FICO models completely ignore paid collections, even settled for less. This seems bizarre and doesn't make any sense to me. So as long as it doesn't report monthly on my credit report I can go ahead and ignore bills, let them go to collections, then settle for half with no repercussions?

What is their reasoning behind this change?

No wonder mortgage lenders don't want to update their score models.

[Anonymous]

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@Peter1142 wrote:
Thanks for the info.

I just learned the newest FICO models completely ignore paid collections, even settled for less. This seems bizarre and doesn't make any sense to me. So as long as it doesn't report monthly on my credit report I can go ahead and ignore bills, let them go to collections, then settle for half with no repercussions?

What is their reasoning behind this change?

No wonder mortgage lenders don't want to update their score models.

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Remember that in addition to the collection there would also likely be Day 90 and Day 120 lates and even a charge-off.  Those aren't eliminated in FICO 9 by paying off the collection.  Day 90 lates and COs are considered very serious derogs so it's not clear to me how much scoring benefit such a consumer gets from having collections eliminated (i.e. someone with corresponding severe lates and a CO).

I agree with you, however, if a consumer only had collections (no lates or COs -- it can happen) then erasing all scoring impact for paying them off seems silly.  The person seems objectively at much higher risk than a person who's never missed a payment in his life, but FICO 9 is unable to see that.

If FICO was the Collection Agency itself I can see them offering to erase collections if you paid the amount in full.  (Look up Pay For Delete Agreements and you'll see that many CAs do that now.)  But FICO is not a collection agency.  The big banks don't benefit either since their accounts have already gone to the CA by the time that FICO 9's new policy takes effect.

[Anonymous]

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@Peter1142 wrote:

No wonder mortgage lenders don't want to update their score models.

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Remember it is not the mortgage lenders who are reluctant to move to a more recent model.  Many lenders who offer home loans also offer personal loans, student loans, auto loans, and issue credit cards.  In all those other areas most lenders have seen great value in upgrading their scoring tool to a later version. 

The reason that they all use the ancient models (FICO 98 and FICO 04) is that Fannie Mae forces them to do that.

But you may be right that one reason FICO 9 hasn't caught on as quickly as it might have is that the erasure of paid collections may be a drawback for a prospective creditor rather than a selling point.  Hard to say.  In a few months FICO 9 will have been out for 5 years and still most lenders are not using it (not counting mortgage lenders, who as I said who only have the very old models as their sole option).

[Peter1142]

So Transunion removed the AU account in a matter of hours.

Equifax seems like more of a mess. It won't let me check status online, and when I called to see if the online dispute even went through I found out it didn't. Anyone know the timeframe for action on this cut-and-dry AU account removal?

[Revelate]

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@Anonymous wrote:

FICO 98 has a 14-day de-duplication window.  FICO 98 is the model that is used for the Experian mortgage score (aka FICO 2).

All later FICO models appear to have a de-duplication window of 45 days.

https://www.fico.com/blogs/risk-compliance/a-better-way-to-treat-inquiries/

I wish that link definitively stated that the switch from 14 days to 45 occurred in 2004 at the release of FICO 04 (the TU and EQ mortgage scores).  It gets close to saying that but I couldn't see where it said that for sure.

The practical upshot, however, is that when you are buying a house the smartest and simplest approach is to assume that all three FICO scores have a 14-day window.   That's because we know for sure that the EX mortgage score uses 14 days -- so why not go with the most restrictive?

Bear in mind that there is a different 30-day window that applies to all FICO models.  This other window says that FICO ignores a mortgage inquiry for its first 30 days.  That has nothing to do with de-duplication.

Finally bear in mind that you should look carefully at the reports themselves.  FICO bases its de-duplication effort on assuming all mortgage inquiries are correctly coded as such on the report.

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There was an old TU datasheet describing their models that said TU FICO 4 was a 45 day de-dupe; I don't have the link handy unfortunately anymore... I never did see anything explicit regarding EQ FICO 5 though, but I agree go with 14 days FTW cause that's the most restrictive.

[Peter1142]

Is the 14 day thing rolling? I.e. what happens when you have one at Day 1, Day 9, and Day 17.