@Anonymous wrote:Hey folks. I took the plunge and pulled all my scores at myFICO last week. (Last time I did that was 20 months ago.)
I did that largely because I think I will likely be buying a house in Sept and wanted to see concretely what my mortgage scores were. I knew they would have taken a hit because of the new credit cards I opened last year and in Jan/Feb of this year... but how much of a hit?
The good news is that my middle score is 782. So from a practical perspective I will be fine, as long as I continue my resolve to stop applying for cards! (My last card was opened Feb 1.)
So again, no practical worries here. But I was still very curious to look at the reason codes, just from a theoretical standpoint, to see what they might imply about how the mortgage models viewed my score. And here I noticed two really odd codes, given my profile:
(a) You have too many accounts with balances
(b) You've made heavy use of your available revolving credit.
Why are those strange?
Well, in the case of (A), I carefully went over my profile, and for all three reports there were exactly 2 credit cards showing a positive balance and exactly 10 reporting a $0 balance. They are all straight credit cards -- no charge cards, no AU cards, and no cards with a monster-huge credit limit. (CLs varied between 5k and 27k.) 2 out of 12 is 17% of my cards reporting a balance. According to everything people have found thus far, that simply cannot be considered a negative result for this factor. And yet that reason code appears on both EX (FICO 98) and EQ (FICO 04).
In the case of (B), it's even stranger. Because my actual CC utilization as it appear on the reports is < 1%. (The exact utilization would be something like 0.7%.) There's no possible model where < 1% constitutes making "heavy use of your available revolving credit." Even when looked at as a total dollar value it's still pretty small: $952 total. (If I had a 500k total credit limit, and a utilization of 2%, that would be $10k as a raw dollar value of debt. But my actual dollar value is much lower, less than 1k.) This reason code appears on EX (FICO 98) and TU (FICO 04).
As you can imagine, neither reason code appears on FICO 8.
I have one possible explanation for B, though it is a bit of a stretch. One of my two cards showing a balance has an individual utilization of 18.46%. I admit that this might be triggering a small penalty in the old models; if the number were at < 8.99% then perhaps the code would go away. I will be going through mortgage pre-qual this summer (so that I can have a letter to take around I go shopping) and I will make sure I have exactly one card reporting a $20 balance. When I get my mortgage scores again, I will let you know whether the reason codes are still appearing. My guess is that they will still be there.
Assume for a second that they are still there in June/July. I am curious to hear if anyone has a guess as to what could be going on.
Neither code appears as #1 or #2 in level of impact to the score. So it is possible that after it gave me the first two codes the algorithm randomly chose utterly bogus codes from a hat. I have heard people suggest that this may sometimes happen, but I have never seen any evidence of it till now. If that truly is the explanation, that really seems deeply wrong. The codes are there to comply with a federal mandate to provide consumers with a somewhat accurate gauge of what is hurting their score. If my score is perfect except for two codes, then it seems to me like the algorithm should stop with two codes.
BTW, I can think of factors that are hurting my mortgage score far more than the two silly codes they gave. For example, my AAoA is not very high: 6.1. Surely that is a much better choice than the two codes I mention.
Some closing thoughts:
As touches (A) is it possible that the mortgage models care more about the raw number of accounts reporting a balance, and less about the percentage of accounts reporting a balance? Thus, is 2 out of 4 cards roughly as bad as 2 out of 12?
Is it possible that (A) is counting installment accounts too? I have 2 open installment accounts that are therefore showing a positive balance. Do the mortgage models view that as four accounts showing a balance? -- and they'd rather see two (one installment and one revolving, say)?
Or is the reason code generator complete BS after the first two codes? That's really sad for consumers if true.
I don't think there is a justifiable way for FICO to come up with those reason codes on your profile.
If FICO or MyFICO behaves irrationally, I'm not going to lose sleep over it.
@Thomas_Thumb wrote:
@Anonymous wrote:Hey folks. I took the plunge and pulled all my scores at myFICO last week. (Last time I did that was 20 months ago.)
I did that largely because I think I will likely be buying a house in Sept and wanted to see concretely what my mortgage scores were. I knew they would have taken a hit because of the new credit cards I opened last year and in Jan/Feb of this year... but how much of a hit?
The good news is that my middle score is 782. So from a practical perspective I will be fine, as long as I continue my resolve to stop applying for cards! (My last card was opened Feb 1.)
Some closing thoughts:
As touches (A) is it possible that the mortgage models care more about the raw number of accounts reporting a balance, and less about the percentage of accounts reporting a balance? Thus, is 2 out of 4 cards roughly as bad as 2 out of 12?
Is it possible that (A) is counting installment accounts too? I have 2 open installment accounts that are therefore showing a positive balance. Do the mortgage models view that as four accounts showing a balance? -- and they'd rather see two (one installment and one revolving, say)?
Or is the reason code generator complete BS after the first two codes? That's really sad for consumers if true.
Yes - It could be associated with count as opposed to % reporting. Mortgages absolutely do count in # of open accounts with a balance. Again, from memory, I recall an unofficial article on Fico scoring mentioning more than 3 open accounts with balances as a trigger. Various articles I have read mention count is looked at.
With regards to revolving accounts having a balance, the % of accounts reporting a balance likely influences the impact of count. Reason codes/statements are CRA tweaked as shown in Credco report listing of reason codes by CRA.
Again, count can trigger the reason statement while % reporting may influence impact of count on score.
If you can find that article I'd be interested in seeing it.
I have to go back and look at some reports but I've had the same reason code as CGID when I was prepping for apps which is to say 1-2 revolvers with balances on older models. I thought it might have been installment loans at the time but wasn't sure.
I may need to go play a bit more with the revolvers at zero testing and start zeroing out some installment loans too if I still see that on current reason codes... be interesting test if everything is zero on older models except the mortgage line, and the HELOC is likely paid off next month and I can pay off the Alliant loan anytime.
