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A credit forum has back-engineered chunks of the scoring algorithm via experiments run by members. Your fico score is sensitive to net credit usage (quite reas

by x0x0 9y ago

A credit forum has back-engineered chunks of the scoring algorithm via experiments run by members. Your fico score is sensitive to net credit usage (quite reasonable), but also very sensitive to the usage on any individual card. eg Say you have a fico score around 800, $100k in total credit, and are using $1-2k for transactional spending that month. However, you still have an old credit card with a limit of $300, on which you charge $151. Maybe it's a gas card. Now you have an individual card reporting more than 50% utilization (but still a trivial amount of usage compared to your income and net credit.) Your score will take a 60 plus point hit. You will also take a hit if you don't have an installment loan. Hence people find banks that allow you to prepay loans, take out $2k loans, then prepay them down to the minimum balance the bank will allow; say $1/month for the next 59 months. This can also bump your score 20-40 points. Things like this, and their long fight against disclosing fico scores (and in particular, all your fico scores -- you have at least three relevant fico scores per credit reporting agency: the old 04-ish versions used for mortgages; fico08, commonly used for credit cards; and car ficos) can have enormous impacts on eg the cost of a mortgage. Fico is an ugly combination of stupid and/or evil.

nunez 9y ago
This is incredibly interesting. Can you post an archive.is to the post?
FICO 9y ago
This whole post is incorrect. I have been monitoring (really micromanaging) my credit closely for ~5+ years and none of which you say is accurate in my experience and your numbers sound completely made up. 60 plus point hit from someone otherwise creditworthy? No, just no. I had ~$120,000 in revolving credit. I opened up a new card with an $8,000 limit and maxed it out so 99% utilization hit my report on one card. My credit score only dropped about 20-30 points and it mostly recovered in about 3 months even though I was only been paying the minimum 1% balance. (I was riding the interest free period). Don't think your $300 limit example is very realistic. Credit limits are only ~$300 on customers without a credit history or one with poor credit. Companies typically will automatically up the credit limit as high risk customers become more creditworthy. Nobody with $100,000 in revolving credit has such a low credit limit on an individual card (and even if they did, it would be as simple as asking for an increase, as a $300 credit limit on a card you plan on actually using is totally infeasible) Old versions of FICO are not typically used for mortgages, don't know where you got that "information" from. I got a mortgage last year and FICO 8 was used. I got 3 quotes and all lenders used FICO 8. (this information was disclosed to me) I didn't have any installment loans for many years and I was not penalized. My FICO 8 score was 750+ every single month for years with only two credit cards as my history. As long as you have a strong credit history installment loans mean nothing over revolving accounts. Maybe you'll get a 20-40 point increase from opening a new installment account, but that would likely come with opening up a new revolving account as well. Furthermore, everything I've read about FICO 8 says closed accounts count the same as open accounts for FICO 8 so taking out a loan and paying it off the next day counts the same as taking out a loan and paying it off over several years. FICO is neither stupid or evil, its totally rational from the lender's perspective. I'm trusting there was some actual number crunching that went into these algorithms. Lenders, landlords, and insurance companies wouldn't use it if it wasn't working for them. Is it unfair to some populations? Yes, I don't think that is disputed, HOWEVER, it's "obvious" from a layman's perspective that someone who has used credit wisely is less risk then someone whose never used credit. The unintended side effect is punishing people who don't have a use for credit. Credit cards are becoming more important though for everyday life, I once saw someone get turned away from renting a car because he only had a debit card and no credit card.
- x0x0 9y ago
  Here's one of many posts discussing the version of fico scores used for mortgages http://www.doughroller.net/credit/which-fico-scores-do-mortgage-lenders-use/ http://www.doughroller.net/credit/which-fico-scores-do-mortg... Googling will get you dozens more. Maybe you found one fico8 lender; good for you. More likely, you have no idea at all what you're talking about. Further, experiments mentioned above (you can find on creditboards or r/churning) were replicated across many people, not just one.
  - FICO 9y ago
    I don't have any idea what I am talking about? Every single pre-approval I got (3 different companies) sent me a dead tree paper disclosure in the snail mail that showed all 3 of my credit scores for each credit bureau, when they were pulled (month/year) and the algorithm used to calculate them (it was FICO 8 - I pay attention to these things). Perhaps they use a different score when actually underwriting but my pre-approvals used FICO 8. Yes, there's plenty of people giving misinformation on the internet. You're giving very specific numbers out of thin air that are ridiculously inaccurate from my personal experience. (BTW, there's a back door way to get your credit report as many times a year as you'd like rather than just annually)

by x0x0 9y ago

nunez 9y ago

This is incredibly interesting. Can you post an archive.is to the post?

FICO 9y ago

This whole post is incorrect. I have been monitoring (really micromanaging) my credit closely for ~5+ years and none of which you say is accurate in my experience and your numbers sound completely made up. 60 plus point hit from someone otherwise creditworthy? No, just no. I had ~$120,000 in revolving credit. I opened up a new card with an $8,000 limit and maxed it out so 99% utilization hit my report on one card. My credit score only dropped about 20-30 points and it mostly recovered in about 3 months even though I was only been paying the minimum 1% balance. (I was riding the interest free period). Don't think your $300 limit example is very realistic. Credit limits are only ~$300 on customers without a credit history or one with poor credit. Companies typically will automatically up the credit limit as high risk customers become more creditworthy. Nobody with $100,000 in revolving credit has such a low credit limit on an individual card (and even if they did, it would be as simple as asking for an increase, as a $300 credit limit on a card you plan on actually using is totally infeasible) Old versions of FICO are not typically used for mortgages, don't know where you got that "information" from. I got a mortgage last year and FICO 8 was used. I got 3 quotes and all lenders used FICO 8. (this information was disclosed to me) I didn't have any installment loans for many years and I was not penalized. My FICO 8 score was 750+ every single month for years with only two credit cards as my history. As long as you have a strong credit history installment loans mean nothing over revolving accounts. Maybe you'll get a 20-40 point increase from opening a new installment account, but that would likely come with opening up a new revolving account as well. Furthermore, everything I've read about FICO 8 says closed accounts count the same as open accounts for FICO 8 so taking out a loan and paying it off the next day counts the same as taking out a loan and paying it off over several years. FICO is neither stupid or evil, its totally rational from the lender's perspective. I'm trusting there was some actual number crunching that went into these algorithms. Lenders, landlords, and insurance companies wouldn't use it if it wasn't working for them. Is it unfair to some populations? Yes, I don't think that is disputed, HOWEVER, it's "obvious" from a layman's perspective that someone who has used credit wisely is less risk then someone whose never used credit. The unintended side effect is punishing people who don't have a use for credit. Credit cards are becoming more important though for everyday life, I once saw someone get turned away from renting a car because he only had a debit card and no credit card.

x0x0 9y ago
Here's one of many posts discussing the version of fico scores used for mortgages http://www.doughroller.net/credit/which-fico-scores-do-mortgage-lenders-use/ http://www.doughroller.net/credit/which-fico-scores-do-mortg... Googling will get you dozens more. Maybe you found one fico8 lender; good for you. More likely, you have no idea at all what you're talking about. Further, experiments mentioned above (you can find on creditboards or r/churning) were replicated across many people, not just one.
- FICO 9y ago
  I don't have any idea what I am talking about? Every single pre-approval I got (3 different companies) sent me a dead tree paper disclosure in the snail mail that showed all 3 of my credit scores for each credit bureau, when they were pulled (month/year) and the algorithm used to calculate them (it was FICO 8 - I pay attention to these things). Perhaps they use a different score when actually underwriting but my pre-approvals used FICO 8. Yes, there's plenty of people giving misinformation on the internet. You're giving very specific numbers out of thin air that are ridiculously inaccurate from my personal experience. (BTW, there's a back door way to get your credit report as many times a year as you'd like rather than just annually)