My Score went down when I did what the website said to do?

[Anonymous]

Hmmm my score went from 766 to 752  in a little less than a month, yet the two things the website says were hurting my score actually improved in less than a 30 day period??? The explanation from FICO was that  since I had paid off 80% of my debt and one inquiry had dropped off, it caused me to be compared with a different group for statistical purposes? HUH There is no way to argue or fight the fact that your credit picture improved but your score drops. My credit reports are correct so there is no reason to dispute anything with them. The bottom line is everything either stayed the same or improved yet my score dropped. This in its self shows a flaw in the way FICO scores are calculated. My credit reports are my credit reports, if the information on them is incorrect I can dispute it. If my FICO score is lowered for no reason or for the wrong reasons I have to accept it?? You cannot dispute or argue or anything else. with FICO. If someone keys in a number wrong or whatever it is what it is and your stuck with it.  This seems like an inordinate amount of power to have over consumers in which they have no recourse. Many lenders look at the "score" and that is pretty much the only deciding factor. As the website says a few points can make the difference in obtaining credit or paying thousands more in interest to do so. A HUGE flaw in the FICO scores is not looking at ones ability to repay? Income is not even considered in the score. How can you look at debt or attempts to obtain credit without looking at the ability to repay?? This is pretty much the same thing that got many mortagage companies in trouble, only here it has the opposite affect. Mortagage companies made loans for amounts the borrower could never repay based on income. Here evern if you have more than enough income to comfortably service your debt whatever the amount is your credit score may drop because you applied for it??  There is just absolutely no logical reason for a credit score to drop when debt is significantly reduced and inquiries or attempts to obtain credit have decreased. I for intend to look into this further and visit with my elected officials about it. It seems to me that a credit rating score that has that much power over individuals should have some regulation or safeguards in place.

[Anonymous]

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@Anonymous wrote:

Hmmm my score went from 766 to 752  in a little less than a month, yet the two things the website says were hurting my score actually improved in less than a 30 day period??? The explanation from FICO was that  since I had paid off 80% of my debt and one inquiry had dropped off, it caused me to be compared with a different group for statistical purposes? HUH There is no way to argue or fight the fact that your credit picture improved but your score drops. My credit reports are correct so there is no reason to dispute anything with them. The bottom line is everything either stayed the same or improved yet my score dropped. This in its self shows a flaw in the way FICO scores are calculated. My credit reports are my credit reports, if the information on them is incorrect I can dispute it. If my FICO score is lowered for no reason or for the wrong reasons I have to accept it?? You cannot dispute or argue or anything else. with FICO. If someone keys in a number wrong or whatever it is what it is and your stuck with it.  This seems like an inordinate amount of power to have over consumers in which they have no recourse. Many lenders look at the "score" and that is pretty much the only deciding factor. As the website says a few points can make the difference in obtaining credit or paying thousands more in interest to do so. A HUGE flaw in the FICO scores is not looking at ones ability to repay? Income is not even considered in the score. How can you look at debt or attempts to obtain credit without looking at the ability to repay?? This is pretty much the same thing that got many mortagage companies in trouble, only here it has the opposite affect. Mortagage companies made loans for amounts the borrower could never repay based on income. Here evern if you have more than enough income to comfortably service your debt whatever the amount is your credit score may drop because you applied for it??  There is just absolutely no logical reason for a credit score to drop when debt is significantly reduced and inquiries or attempts to obtain credit have decreased. I for intend to look into this further and visit with my elected officials about it. It seems to me that a credit rating score that has that much power over individuals should have some regulation or safeguards in place.

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This is actually called rebucketing. You can search and read more threads about this and it should make you feel better.  You are actually in a better position to have even higher scores than you were before.  Congrats!!!

[GregB]

The FICO system does seem to have some quirks with scores in the high 700s or above. It all is academic anyway since either score will get you anything that is determined by a credit score. Even though that is a small drop in points, I'm a bit surprised it was that direction. I recall my score going up a couple when my last inquiry fell off and my score was 740ish at the time.

[Anonymous]

Thanks for the replies from gregb and qtip4. I am happy to hear that being rebucketed may over time improve my score and I agree that 752 would allow me to obtain most credit. I still have some issues with the quirk or flaw in the scoring system. Under the circumstances my credit score should have at the very least remained the same. My major issue is that there is no way to correct this. It's FICO's system and your score is what it is right or wrong.

752 is still a decent score. The problem is that most if not all lenders use a score of 760 as the break point between the very best offers and rates and the next level down. If I were in the market for or in need of an automobile right now I would not qualify for the best rates or zero interest offers that many auto makers offer because I was rebucketed from 766 to 752 at no fault of my own. My overall credit worthiness improved yet my score dropped and there is nothing I can do about it. If my credit report is incorrect I can take steps to have it corrected. I can in fact get it corrected if I am willing to spend the time and effort to do so. With FICO there is no regulation or means to correct a score that dropped when in fact it should have increased. This is a very big sword FICO has.

Another concern I have with this whole thing now that I look at it is this. If you were a bank and had two customers. One that had been rebucketed from above 760 to say the 750's and one that had a 780 score. Which would you rather lend to?

As we all know banks are gamblers, they loan money hoping they are repaid with interest. loaning someone with a 780 score money is a pretty good bet they will receive payment, however because they have less perceived risk they have to charge less interest to get the loan. Now if you take a person that has an above 760 credit score and they were rebucketed to the 750's because of this quirk or flaw in the system. Even though they had reduced debt considerably and had fewer credit inquiries and all other factors remained the same or improved.

If I were a bank I would rather have the rebucketed customer for the obvious reason. They are or should be treated almost the same as the 780 customer as far as risk is concerned, however due to the rebucketing and the magical 760 cutoff I am going be able to charge a higher interest rate. I get a higher rate of return with the same amount of risk.

This is why I say more individual factors should be looked at when these scores are derived and a means of disputing the score should be available to consumers.

I spoke with a very nice supervisor  from FICO today and one of the reassurances he gave me was that it was not me personally but it was the bucket I was statistically placed in.  Well about all that tells me is that there are many people paying higher interest rates than they should be because of this quirk or flaw in the scoring system.

Credit reporting agencies do just that, they report what they are provided. They are provided false or inaccurate information at times and on rare occasions they make mistakes in house. As I said before there are avenues to correct these and laws to enforce it. Don't get me wrong I do not have a vendetta with FICO but they interpret what these credit reporting agencies provide them, yet there is no means to correct obvious flaws, quirks or errors by them.

FICO has enormous power and a few points one way or the other means billions of dollars and with that type of power you better have some form of checks and balances or the system is to easily manipulated one way or the other. Right now as far as I can tell there are no checks and balances. They could have just as easily rebucketed me to 552 and there is nothing I could do about it.

[mkm77]

You are fine....As a mortgage originator we use 741 to score best rates and even a 721 would be at worse a little higher in fees but the same rate.

[GregB]

I completely agree with you in saying that two improvements in your credit report should always make your score go UP. I am a bit upset over any defect in a system. Can you tell I am an engineer?

However, almost everyone agrees the FICO system was a huge improvement over the previous way that creditworthiness was determined.

It is important to understand: 

1.  It was created in a time when computing power was expensive.

2. It needed to be very complex so that competitors couldn't duplicate it.

3. Once established, it is difficult to improve since the customers (lenders) want to continue to use the same system.

When you look at the time it is taking for lenders to switch from the 1998 TU FICO to the 2004 TU FICO you can see just how slowly things change. Can you imagine how upset some people are going to be when they finally eliminate the ability to help your score by being an AU on someone else's credit?

I can tell you the last time I financed a car, the best rate started at 720. I was a bit miffed since my score was 780ish at the time and I thought I should get a better rate. I have heard that the best rates on a mortgage start at 760 but the people I know that are actually dealing with giving or receiving mortgages are saying that the best rate is obtained at a lower score. This agrees with mkm77's post above.

From what I have seen, the competitors to FICO have come up with some pretty poor scoring systems in general. For example, my EX Plus score still puts me in the "Excellent" catagory while my EQ FICO has fallen to 701. The 701 does make sense with the huge amount of revolving debt that my divorce has added - changed from $44K to $143K. There is no way that I would rate myself as excellent at this point.

[Anonymous]

Yep you were rebucketed.

It would be a best guess given the data, but the giveaway is "it caused me to be compared with a different group for statistical purposes."

It's like moving up to the advanced reading group.  When you were in the lower reading group, you were the top - the creme de la creme.  Now you've moved into the advanced reading group and you're hanging out with a whole different set of folks.

It's really got nothing to do with fair.  Statistically, folks from your old group had a certain reliability or likelihood to default.  Now you're in another group of folks, and their behavior is a little different than the last group.  And now statistically, folks in your new group with criteria similar to yours have a certain reliability or likelihood to default.  FICO is an algorithm that uses stats to predict future behavior - that's all that it is.  I probably shouldn't have used the reading group analogy because FICO is not a grade on your personal behavior.  You didn't go from a B to a B-.  You are being scored on your statistical likelihood to default based on the data from your report and a bunch of other reports.

Now, the fun part is when you look at your Simulator.  When you choose the best scenario, it will give you a range of how much your FICO score can improve.  If you can still pull up your old report and its Simulator, you'll see that FICO score range has probably changed.  That's the good stuff.  Back to the reading group - that old reading group could qualify you to move up to the next grade - your new reading group can put you in the advanced placement class and earn you college credit.  Bonus!

You might also see new reasons given for "What's Helping your Credit" and "What's Hurting your Credit.'

It can be very frustrating to see a score decrease when you don't understand rebucketing and the new opportunities for higher FICO scores that can come with it.  And, of course, you can stay frustrated.  Or, if you're like me , you can pat yourself on the back for your exceptional good work, your awesome new bucket, and of course you can celebrate with something very very yummy.  Like hot fudge.

edited. twice. because I can't think.  or spell.

[Anonymous]

A more realistic view might be that you're now being compared with your credit peers correctly. Before, being on the far end of the scale you were being compared on actually gave you a higher score than you should have been getting.

it's human nature to go the other way but you're as likely - if not more likely - to have benefitted unfairly than to currently be being scored unfairly.

[Anonymous]

You actually point out one of the flaws with using this system. I agree with your premise to a point. How likely or unlikely I was to have been affected one way or the other is impossible to tell. If what you say is correct then the system is flawed.

I will never know what bucket I am in. I understand statistics and I also understand that statistics are only as good or relevant as the information used and how heavily each item is weighted to make the statistical analysis. That's the problem with bucketing or should I say changing buckets when looking for the same outcome, the ability to and or then likely hood one will repay a debt using a numerical value to illustrate this abililty.  and the problem with the system.

One set of parameters should be used and applied period.  There should only be one bucket. Trying to rebucket and change the inputs or how they are weighted serves no purpose, it actually skews the results. It seems as though it is an attempt to individualize the scoring system without actually using individual factors such as income which along with existing debt and past history are probably the biggest factors in the ability to and the likelyhood one will repay a loan of some type which is the purpose of the score.

Put one bucket out there with the factors they feel are important  and apply them. Now you are comparing apples to apples. Everyone has a score based on this one scale. If you want to try to drill down to individualize then do so correctly.

Some lenders still actually look at many factors when you apply for credit. The problem with using "the score" is that they also as one reply to this thread states charge more or less for that credit based on this score.

 FICO points out there own flaw in the education section. A person with one credit card with a 20k limit and a 15K balance has a 75% util. Hmm 75% seems high or is it? If I have no other debt and I make $300K a year that's not really all that high. However if I make $30k a year it is very high. So if a persons FICO is lowered because they have a perceived high UTIL. then basically the score means nothing. Both of these people would benefit from obtaining additional credit when one person does not need it and the other can't afford it.

That being said it may very well be the best system we have but it needs to be improved so the information used by lenders to make credits decisions is accurate and protects both the lender and consumer.

[Anonymous]

+1

I have to agree with you.