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     | Friday, January 19, 2001 - 12:44 pm  I just got a merged report through a mortgage broker...and here's the scores: New Empirica: 653 Beacon: 593 Fair Isaac: 557 All three had the same comments regarding delinquincies, collections, etc. They also say that my balance to limit ratio is too high on credit cards. Most of us know that the baseline debt to income ratio is 30%. Heres my theory: If you carried a balance on your credit cards of exactly 30% of your limit, you should score higher. Im going to test this theory in the coming months since I have current scores to use as a base. The mortgage broker told me that Id have to pay off all collections before escrow will close on a house, so im going to do that. Then Im going to make sure my credit cards are at exactly 30% of their balances and see how I score then. This may take awhile, so if anyone out there has the ability to test this theory sooner, please let me know how it turned out!! Thanks
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| | Friday, January 19, 2001 - 01:34 pm Creditcriminal, I just spent the last 15 minutes moving your posting from NextGen scores to a new topic. What you posted has NOTHING to do with NextGen scores. Because I think it's always good to see the wide variety of scores on the different bureau reports I went through the trouble. Your posting SHOULD have been in the unmoderated area because I won't have time to respond to your posting while I'm on the road and I want to make sure that readers don't try what you're doing here. It's not going to work. I doubt it will make even one point difference whether you're at 29%, 30%, or 33%. FICO Credit Scoring has NOTHING to do with underwriting. I have NEVER heard of any 30% figure in underwriting either. I'm sure you didn't read that at BayHouse. Also, what you refer to as "Fair Isaac score" is technically the FICO score and all 3 scores are Fair Isaac scores, just named different for each bureau. 1) I highly recommend that you pay down your balances as much as possible. 2) The new balances may take 3 months to be reported to the bureaus. Essentially this means that you'll have to subscribe to a credit report monitoring service for all three reports with UNLIMITED ability to get new and CURRENT reports. Recommendations/reviews of monitoring services will be much appreciated, please start a NEW topic for every company. 3) Every time you run that tri-merged report you'll get new inquiries lowering your credit scores. It is NOT possible to test anything the way you're going about it. The only real test I've ever seen is at FICO is FRAUD where no new inquiries were incurred and NO changes were reported. Please let us know how it goes!
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| | Friday, January 19, 2001 - 05:24 pm Never heard of the 30 percent number? Not possible that he could've heard of that figure on Bayhouse anywhere? I seem to recall it having been mentioned. I think it will be an interesting experiment. Of course it's hardly scientific because we can't control for other factors such as length of credit history, time since last delinquency, number of inquiries, etc.
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| | Friday, January 19, 2001 - 07:19 pm Credit criminal wrote: Most of us know that the baseline debt to income ratio is 30%. Heres my theory: If you carried a balance on your credit cards of exactly 30% of your limit, you should score higher. INCOME is NOT used at all to calculate credit scores. Shylock wrote in the old BayHouse Credit Forum: I guess the mystery is solved. Seven is the correct number of credit cards to have, one is the correct number of inquiries and if you use more than 30 percent of your credit rating you are not sufficiently conservative in your credit use. I don't even know if creditcriminal read this posting. But, it really has NOTHING to do with getting a mortgage. Shylock, why did you post that link? You drew some conclusions about Fair Isaac statistics that don't mean a whole lot and really say NOTHING. I didn't think you were serious when I read that posting in May 1999, thought your conclusion was sarcasm. I would say that if creditcriminal has unlimited funds he should pay ALL revolving debt and if he doesn't, he should discuss with his mortgage broker how to best utilize his funds. Is there a Fair Isaac reason code for "Insufficient Revolving Debt?" Is there a Fair Isaac reason code for "Insufficient Inquiries?" When you say that "one is the correct number of inquiries" you indicate that ZERO is the incorrect number of inquiries. That's bizarre. I don't want people opening or closing accounts, adding an inquiry and possibly even debt based on your completely unsubstantiated and I think rather ridiculous conclusions. So, I hope everybody can understand that I rather shut the forum down for a few weeks than leave it unmoderated.
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| | Friday, January 19, 2001 - 07:27 pm And for the new or occasional readers who might be wondering, Shylock used to post as Sean.
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| | Friday, January 19, 2001 - 08:50 pm I had been planning to do something similar to this in the next month. A couple months ago I applied for a Target card and two of the reasons for my denial were: High ratio of debt to available credit High ratio of bank revolving account debt to available credit. What's funny about those reasons is that I only had one credit card being reported and that was my Capital One card that doesn't report even my credit limit! Since then I've gotten an FCNB card and maxed out and paid down my Capital One card. I'm planning on trying Shylock's other advice of waiting until shortly after my report gets updated (FCNB hasn't reported since 11/30/2000 in spite of their website claims to report every month). I'm planning on trying for about a 20% balance on both of my cards. Of course all of this is guess work and unsubstantiated theory. But just think, in a few months we will be able to order our credit reports with scores and without inquiries. That is when the scientific experiments will really begin.
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| | Friday, January 19, 2001 - 11:57 pm Erik, you're right about paying down your balances, and OBVIOUSLY getting another month of reported history will also help, especially since you just opened the account. Makes perfect sense to me, although you now have another inquiry and another new account, both negatives. "High ratio of bank revolving account debt to available credit." "What's funny about those reasons is that I only had one credit card being reported and that was my Capital One card that doesn't report even my credit limit!" Even THAT makes sense to me. It indicates that FICO scoring DOES count the NOT reported limit as EQUAL to the amount owed or ZERO. Which, as you just found out, LOWERS your score. I think this definitely excludes the possibility of FICO scoring IGNORING the ratio on those accounts. Is there anything wrong with my conclusion that Citibank and Capital One are LOWERING your credit scores just by having these cards? And if I were you I wouldn't apply for anything until we can get the Scores directly from the bureaus. THEN we can do some at least semi scientific research.
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| | Saturday, January 20, 2001 - 05:01 am "Is there anything wrong with my conclusion that Citibank and Capital One are LOWERING your credit scores just by having these cards?" For most of their customers I would say this is probably true. And definitely true for the first month they report to the CRAs. I don't believe they consider your existing balance to be your limit. More likely they use the high balance (which of course might be equal to your existing balance).
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| | Saturday, January 20, 2001 - 11:57 am Please continue any discussion of the unreported credit limit at Citibank and Capital One are NOT reporting credit limits and how it affects one's FICO scores where I just reposted the last 3 postings.
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| | Saturday, January 20, 2001 - 06:27 pm Quoting from above: "Heres my theory: If you carried a balance on your credit cards of exactly 30% of your limit, you should score higher." Funny, that was my theory too. I merely assumed that the debt-to-income ratio was a typo based on his follow up statement. I had never heard that there was an ideal debt-to-income ratio. I assumed that the lower the debt-to-income ratio the better you would do from the standpoint of a conventional underwriting. I was just amused that you claimed there was no way he could've heard that 30% number from Bayhouse. I have no conceits that I'm the sole source of the 30% theory I just chuckled. At the time I posted that information I truly believed it. Now I no longer do. All this discussion may well be moot with the new FICO model coming out.
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| | Saturday, January 20, 2001 - 08:31 pm I'm glad we clarified that and we all agree now. I could have written the Qspace complaint/review in the time it took to accomplish that. I'm very tempted to get rid of the old forum entirely, because there is so much incorrect info. But that's how readers find the site. I'll give it a few more weeks to see if the format changes here get BayHouse indexed.
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| | Monday, January 22, 2001 - 04:09 am I just found this string....Ive been looking for my post where I posted it..My apologies, Christine, for posting in the "wrong" place. The 30% debt to income ratio is something I got from potential creditors over the years. I beleive it is a baseline number to determine your financial ability to afford what youre trying to buy. My mortgage broker also talked about "frontend" and "backend" loans where a "frontend" lender will lend 30% of your income, and a "backend" will lend up to 50% of your income. Now, we all know that if you carry a balance too high on your credit cards, you will score lower. The same is true if you carry no balance at all, because its considered "potential" debt. And Christine, youre right about the scores not being relative to your income. The mortgage broker didnt input my income on the merged report. So I think its safe to say that FICO scores have nothing to do with your debt to income ratio. Securing new lines of credit though, have everything to do with it. Lets say you make 3K a month, and your credit obligations are $1800. Thats a DTI ratio of 60%. I would find it hard to beleive you could secure new lines of credit because the money to repay just isnt there.
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| | Monday, January 22, 2001 - 04:38 am Don't forget the problem with opening up a new cc to distribute the load is more than just another inquiry. You've affected the: Time since last inquiry Time since last new account Average age of accounts and possibly Account mix
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| | Monday, January 22, 2001 - 10:05 am Creditcriminal wrote: The 30% debt to income ratio is something I got from potential creditors over the years. I beleive it is a baseline number to determine your financial ability to afford what youre trying to buy. My mortgage broker also talked about "frontend" and "backend" loans where a "frontend" lender will lend 30% of your income, and a "backend" will lend up to 50% of your income. You're confusing a few things here. In MORTGAGE underwriting, we look at 2 ratios, called various names such as what your broker called "front" and "back" ratios NOT loans. The first ratio is the percentage of your gross income allocated to your HOUSING expense (PITI) and the second is your housing expense PLUS the monthly payments on all other loans. Example: You make $1,000/month and your PITI (mortgage payment + tax + insurance) is $400. Your car and credit card payments are another $200. So the 1st or front ratio is 40% and the second or back ratio is 60%, or 40/60 There are no specific cut-off percentages. I've done many 43%/45% loans, especially with fixed rates and for young people whose income is expected to go up. Of course it depends on the loan program, the lender, the down payment, and other factors. I just want to make that clear, and it has nothing to do with FICO scoring. Now, we all know that if you carry a balance too high on your credit cards, you will score lower. The same is true if you carry no balance at all, because its considered "potential" debt. NO. THAT is NOT true. There are some B-D mortgages and consolidation loans requiring that borrowers close accounts. It's not very frequent, because the borrower can open new accounts again right after closing. None of my clients ever had to close accounts. Now, as far as credit scoring goes, I only ONCE saw a decline with a reason "Sufficient credit available." That was around 89/90 when I got about $40K+ of new credit within the previous year. Stupidly, I subsequently closed some accounts. That did NOT help at all. I didn't find out about FICO scoring until about 94 when it became mandatory for mortgages. While I've seen a lot of reports with scores, I NEVER saw a negative impact or the reason "too much available credit." I've had clients with $100K to $200K unsecured credit and 720+ credit scores. There are facts, and there is MYTH. The myth is that you can have too much credit and that you should close accounts. Don is correct: "Time since last inquiry Time since last new account Average age of accounts and possibly Account mix" All that and much more goes into calculating the scores. That's why I so highly recommend that people have MANY accounts and do NOT close accounts. The details are at Improving your Credit Scores. Any further discussion about UNDERWRITING and INCOME should be posted in the FINANCE section.
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| | Monday, January 22, 2001 - 11:12 am Fair, Isaac says this about the subject: "In some cases, having a very small balance without missing a payment shows that you have managed credit responsibly, and may be slightly better than no balance at all. On the other hand, closing unused credit accounts that show zero balances and that are in good standing will not generally raise your score." Based on this I agree with Christine that there is nothing about potential debt in FICO scoring. I suppose lenders who actually read the reports may be concerned about potential debt but it shouldn't hurt your FICO scores. Of course that quote also implies that a slight balance (how slight?) can increase your score.
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| | Monday, January 22, 2001 - 11:51 am "In some cases, having a very small balance without missing a payment shows that you have managed credit responsibly, and may be slightly better than no balance at all." Erik, could you save me half an hour and post where exactly Fair Isaac says that? This statement in itself is reason enough to sue Fair Isaac. Not charging shows that you don't manage your credit responsibly? It's irresponsible not to buy anything for a month? It's irresponsible to pay cash? It's irresponsible to use your debit card? Or a credit card that doesn't report to all bureaus or not at all? Of course it's there to get people to CHARGE! Some people might even conclude that they have to carry a balance of 30% of their credit limit and pay 20%+ interest to increase their credit scores. This is so sad. In reality, if you do use your credit cards, you'll never have a 0 balance even if you pay it off in full every month.
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| | Monday, January 22, 2001 - 12:12 pm Sorry about that. Here's the link. Might take a half hour to read the whole page. It's in section 2 "Amount owed", third bullet http://www.fairisaac.com/servlet/SiteDriver/Content/1528
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| | Monday, January 22, 2001 - 01:28 pm Thanks much, Erik. I hate the Fair Isaac site with a passion and avoid it as possible. I guess a search function isn't in their budget.
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| | Tuesday, January 23, 2001 - 05:00 am Many people have the idea that too much available credit will hurt them. This is a pernicious myth that needs to be stamped out at every opportunity. A person that owes $4,000 on credit cards may be turned down if they are close to their credit limits, but add $4,000 more in available credit and the person will score much better even with the same amount of debt.
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| | Tuesday, January 23, 2001 - 08:56 pm There are a lot of myths that "need to be stamped out." I just don't know how. I can't get past the disinformation campaigns.
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