How fickle are the FICO scores?

[Lel]

Last October, without my permission, a Bank of America agent submitted two loan applications on my behalf on the same day.  One was for a refinance of a first loan, and the second was for a HELOC.  A few weeks later, I received information about the credit scores that were independently obtained for each of these loan applications.

I received two separate letters.  Both indicated that my credit score was obtained from Experian.  Both stated that the credit score was checked on 10/19/2007.

One said that my FICO score was 805.

The other said that my FICO score was 822.

How can a single credit reporting agency generate two different credit scores on the same day?

[Junejer]

You likely got dinged for an inquiry (17 pts), b/c the HELOC inq wasn't coded as a mtg., so it didn't get de-duplicated. FICO was probably more sensitive to your extremely high scores.

[Lel]

That's interesting the HELOC inquiry may have been treated as a non-mortgage inquiry, though I guess it make intuitive sense since HELOCs are not true mortgages, but rather large revolving lines of credit. By that logic, then, shopping around for HELOCs would be quite damaging to one's credit score, correct? Thanks for your reply.

[Lel]

I just pulled my Experian score today, and it's 794. So it's down nearly 30 points from its high. It's obviously still a very good score, but I have to admit that being above 800 was a source of personal pride. I haven't applied for any other credit since these inquiries from B of A, and my credit card balances are never more than 4% of my total revolving credit, so I have to believe that the lower score is a consequence of these unauthorized credit applications. Is it worth my while to try to have these inquiries removed from Experian's record, to see if this would bump my score up again? I have to admit that I'm quite paranoid about my score now, because I am hoping to refinance my jumbo mortgage if mortgage rates come down now that higher conforming limits have been temporarily improved. I've read in some places that lenders might be even more stringent about creditworthiness, to the point that a score above 800 might even garner a lower rate than a score slightly below that. Any truth to this source of anxiety?

[Junejer]

Shopping for a HELOC through a broker, and thus his/her correspondent banks should code you properly as a mortgage (just went through it myself).

If I were you, I would take the time to get those points back. 28 points is 28 points, no matter what the current score. I haven't heard the 800+ rate break, but things are definitely tightening up out there. With the jumbos there is a lot more at risk/stake, so any advantage you can get is definitely well worth your time and effort.

[Anonymous]

I don't know the answer to yoru question, but has the higher Jumbo loan already been made law?? I have not heard! If this is true, then it is a happy day for me. Please let me know. thanks,

[Lel]

Yes, Congress passed and the President signed a law that increases the loan amounts that can be purchased by Fannie and Freddie.  The new "jumbo conforming" limits will vary according to location.  The new limits will be up to 175% of the median home price in a given area, to a maximum of $729,750 (which is 175% of the regular conforming limit of $417,000).  So, the $729,750 number that is often quoted may not necessarily apply to you if you live in a lower-priced area.  And it's the government that determines what the median price and new limits are for the different geographical areas.

If you live in a high-cost area like the SF Bay area, then the new jumbo conforming limit is $729,750.  This has already been declared by the government.  If you live in an area where the median home price is $300,000, then the jumbo conforming limit will be $525,000.

Having said that, there's no guarantee that jumbo conforming loan rates are going to come down to the levels of the regular conforming loans.  There are many analysts who think that it's not going to affect rates at all.  The interest rates on mortgages do not follow lockstep with the Fed's actions, because the lenders have to take into account the long-term cost of lending.  With the Fed's current trend of easing interest rates, this creates inflationary pressure.  The lenders thus will want to protect themselves against inflation, and thus will not readily drop the 30-year fixed rate.  In fact, inflation worries are more likely to increase mortgage rates, as has already been demonstrated since the Fed start easing last year.

Ironically, it's the ARM holders that stand to benefit the most from the Fed's actions.  My ARM, for example, is tied to the 1-year LIBOR.  I still have 5 years left of a fixed rate before my first adjustment.  If it were to adjust today, my interest rate would drop to 4.5%, or nearly 2 percent lower than my fixed rate.

[Lel]

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@Junejer wrote:
If I were you, I would take the time to get those points back. 28 points is 28 points, no matter what the current score. I haven't heard the 800+ rate break, but things are definitely tightening up out there. With the jumbos there is a lot more at risk/stake, so any advantage you can get is definitely well worth your time and effort.

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Well ByrdMan, I took your advice and worked to get the credit inquiries off my Experian report. I first confronted the B of A agents who were responsible for the unauthorized inquiries, and brought along my Experian scores from both before and after these inquiries. Though they questioned whether the inquiries really had an effect, they nevertheless acknowledged their fault and wrote a letter for me. I sent this, along with a cover letter to Experian, and within a couple weeks I received notice that the two inquiries were deleted from my credit file. Victory!

The question now is whether those lost points will actually come back to me. After reading these forums extensively, I, too, find it difficult to believe that credit inquiries would have such a dramatic effect on FICO scores.

I'm also doing some fancy footwork with my credit cards - I use about 6 over the course of a month, and am paying them off before the statement posting dates so that they will report as zero balance to the CRAs. This will probably have a positive effect on the FICO score as well, so it will be difficult to parse out which move(s) had the biggest effect.

Thanks again for your advice!

[Junejer]

Good work Lel. On those CCs, make sure you allow one of them to report a tiny balance (like 1% uti) or something. You don't want to get dinged for not having any usage on the cards.

[Lel]

Well, I just pulled my Experian score again today, and my score has gone up from 794 to 803. This is probably a combined effect of deleting two inquiries from my record and also going from 7 accounts with balances to 6. Utilization went from about 3% to 1.5%, but I doubt that made much of a difference.

I'm quite pleased, but it's going down again soon because I've decided to apply for a HELOC.

ByrdMan, thanks again for encouraging me to get those inquiries off my file!