FICO

[airplaneman]

I recently got a notice from my credit union that a review of my credit warranted a change in the rate on my credit card from 8% to 12%. Not being happy with this I went back to my credit union and was told my FICO score was 757 and I needed 760 for their best rate, that there was nothing I could do about it and maybe my FICO would increase in six months and they might lower my rate then. I do a crash course on FICO and get a copy of my credit report that looks flawless and no FICO. Find out if you want your FICO score disclosed it will cost you $20 per month each or $60 per month to get all three - what a racket they do nothing and you have to pay to find out what it is NOT on my list of things I am willing to do. A coworker says I am getting my 3 FICO for $13 per month shows me and I read the fine print its not the FICO its an estimate of what the FICO might be. Next trip to the credit union I let the teller know I am very unhappy with them she puts me in contact with a higher up person. She makes the BS statement - even our CEO gets treated the same as you (I don't believe their CEO doesn't already know all the tricks and games the bank is already playing and would obviously not let them snow him anyway.) I keep arguing that I am still unhappy and I did not even know why my FICO score was under 760 and it would cost me just to get the credit reporting agency to tell me anything to get my FICO score. Now I get real story. The 757 score was not my real FICO but an estimate of what my FICO might be. I continue to argue that this is an unacceptable way to treat your customers so the next statement. So you think your real FICO score is actually better than 757 then I will check it right now but only if you give me permission to check. Permission granted and the score is over 760 so she says I will fix your rate back to 8% right now. What a racket. The banks could level with you and tell you your real options or they could try to screw as many people as possible by being deceptive and deceitful. I just got lucky because I happened to ask the right questions to corner the right person and they happened to tell me the very well kept secret details. I could have easily been snowed again.
I hope my story can help someone else beat their bank also.
-Airplane

[Agschmid]

1. I get my score three ways...

- My bank tells me if I ask nicely (this way is free).
- My Discover Credit Card provides it for free now.
- I do pay $9.99 a month to have full access to all three reports, to me it's worth it.

[airplaneman]

4. be sure to read the fine print

I was stunned to hear about the FICO estimates both my coworkers "3 FICO scores" and my credit union were using them and they were not the real FICO scores kept by the three credit agencies.
-Airplane

[okaawhatever]

16. Not only that, the score is calculated differently for different purchases. A company who orders

credit for car loans orders the score weighted differently than one issuing credit cards. In the case of an auto loan, there will be a greater emphasis on auto and installment loans. A credit card score will focus more heavily on revolving debt and available credit.

[okaawhatever]

2. For those who want to better understand how their FICO score is calculated here is the website for

FICO:
http://www.myfico.com/CreditEducation/articles/

For the home page:
http://www.myfico.com/

I suggest people spend a few minutes looking over the basics so they will know in the future how their decisions affect their score, and ultimately their interest rate and ability to borrow on the most favorable terms.

p.s. I've been in lending (auto loans/mortgages/small bus. etc) for about 20 years. If anyone has a question they'd like answered ask me. I'll gladly help.

[Agschmid]

6. +1

Great websites.

[airplaneman]

7. I actually found your links in my crash course on FICO.

I have always been responsible with credit. I have always lived below my means. I have never been late on any payment (nothing ever). I expect to get the best rate and I wont accept a variable loan or a loan I cannot pre-pay. I always pay extra on any fixed loan. I have only one credit card now but had 3 in the past. I remember when I asked to have a credit limit increased on a CC years ago from 8K to 10K and I was told NO without an explanation. Then 90 days later my rate is increased to 20K they don't even ask if I want it. I have had a number of very unpleasant experiences with BofA that would make your hair crawl. Its like they sit in board rooms and figure out how they can screw their best customers and they never quit trying to do something new. It used to be dancing due dates I am on time one month the 25th but I will be late the next month on the 16th because the due date bounced to the 15th. This experience has soured me on using the CC much any more. I will keep it and use it occasionally but I am going back to cash and checks most of the time. I know that just allowing the credit union to check my credit score reduced my rating. My credit rating is about 800.
-Airplane

[okaawhatever]

12. You might want to consider having more than one credit card. The reason being that your credit

score (especially when you get into the 700's) is highly dependent on % of available credit. Typically, your credit score is dropped when you hit 30% of available credit being used. Another ding at 50% and yet another at 70%. What most people don't know is that it doesn't matter if you make a million dollars a year and have one credit card with a $2,000 limit. If you have $600 charged on that card, your credit score will drop. Yet, if you make 50k per year and have 40k in available credit with 10k charged on it your credit score won't be dinged. The FICO model (all 3 scoring models, actually) don't have income or available assets to use in their calculations. Instead, their assumption (and statistically it proves out) is that an individual who is using more of their revolving credit is at higher risk for default. What the model doesn't take into account is people who have cancelled most of their cards and their total available credit is exceptionally low for their income/assets and borrowing history.

Another issue you run into is this: Many people like you pay their cards off every month, or close to it. The credit bureau doesn't necessarily see this. Your bank or credit union does a data "dump" once per month. If their data dump comes a few days before your bill is normally due you will be reported as having a balance of whatever you have purchased that month. Let's say you buy a new whiz bang widget for 8k and put it on your credit card for You pay the bill in full when due, the 15th. Problem is, the credit union does their data dump on the 12th, so on the 12th they told the credit bureau that your balance was 8k out of a total 20k available credit. You've hit the 30% and your score will likely be dropped. Most of the time that won't affect anything. If it happens to be during a month where you undergo a routine check for existing accounts you've now triggered the "credit score below limit for program." It doesn't matter that you're going to pay off the widget, or already have. The credit score models don't account for such things. The bank's info was correct when they gave it to the credit bureau, and that satisfies all the laws. This is why it's important to have wiggle room. The stakes are too high to risk having an anomaly affect your interest. You mentioned your credit score used to be in the 800's. The difference may very well be that your "credit usage" was much lower when you had 3 cards. Also, look back at your credit report and see if you've had previous loans drop off. Having long term accounts drop off affects your "average age of accounts" and that could hurt your score as well. Make sure you don't have loans now closed on your report that will be falling off in the future and leaving you with little or no "tradelines". As people get older they don't take out as many loans and can sometimes fall into a situation where their old loans have come off their report and they haven't taken out any new ones. People in your score range, especially someone as diligent as you, usually only have three problems that affect their score. 1. Not enough tradelines 2. Percentage of available credit (usually due to cancelling or consolidating cards) 3. Average age of accounts. The last one can especially be true if an individual moves their credit card accounts around to get better deals or 0% interest.

As to the situation with the banker who wouldn't approve an increase. I'm going to take a stab at what I think happened. There are two different criteria for banks/credit unions approving loans. One is for human approved transactions and the other is for computer generated transactions. The human guidelines usually favor a situation like lack of credit or negative credit. An individual can make a judgement call and the in-person loan guidelines are designed to allow bankers to approve those things the computer model isn't taking into account or have mitigating circumstances. Example: a customer's debt-to-income level is too high for approval, but the customer got a divorce and his/her ex's car payment is still showing on their credit report. With documentation that the ex is making the payments and there is a court order backing up who is supposed to make the payment we can manually remove that from the DTI calculations and make the loan. The computer generated model doesn't take into account a number of things a person would, but is more forgiving in other areas, such as income. Most banks/CU have a model where a loan officer will look at something and if it's turned down it will go for a computer review in about 30 days. If the LO knows that you'll likely be approved by the computer they won't get too much documentation or explanation because that could actually stop it from qualifying for computer review and in the end hurt the customer.

Sorry for the lengthy explanation, just wanted you to understand the process. A couple of percentage points on a car or credit card can be a bunch of money. I don't want you to have to spend too much time fighting to get what you deserve next time. If you can avoid letting your credit score temporarily drop it will be worth the effort.

[okaawhatever]

15. Absolutely. I had the same thing happen with someone trying to hack my debit card. They weren't

successful, and it was the place they were trying to buy something from that alerted my bank, but they closed the card anyway. A lot of Target card holders were in deep doo doo because Target had that deal where they linked to a person's debit card. That inconvenienced a lot of people. Not to mention you might lose a card.

[grahamhgreen]

10. Yes is it better to have a renter, or have the tenant on lease-to-own?

[okaawhatever]

17. I think you posted this to the wrong thread. Renters aren't mentioned in my post. If you would like

my opinion on renters I will gladly give it to you. My opinions are free but usually quite wordy. lolz.

[grahamhgreen]

18. Yes!

What I'm asking is what is more favorable for your credit, having a house that you rent or having a house that you have a lease to own contract with the occupant?

Kind of esoteric, but there it is

[okaawhatever]

19. Neither of those situations affect your credit report or score. If you meant credit generically, as

in "ability to purchase something on credit" then it would have an effect on income and debt-to-income calculation. For both of those situations the income and DTI will be calculated the same way but there could be some minute differences based on the situation. If you did mean the generic credit when you asked your question let me know and i'll explain how the income calculations and DTI are done. If you know the propoed or actual rent that would be received and the amount of the mortgage payment I'll tell you exactly how it will be calculated. If not, i'll use an example. Sorry it took me so long to respond.

[grahamhgreen]

21. Wow, you are the coolest!

Here's my situation:

I co-own a rental house with a partner.

The entire debt is showing up on both our credit reports, but only half the income.

In exact terms:

- mortgage is $1,720/month.
- rent recieved is $1,950/Mo

My credit report shows my debt to be the entire $1,720/mo, but my income to only be half of the $1,950 ($975). So it looks like I'm losing $745 month on the report. (And it's the same for my partner)

How can I clear that up?

I guess this turned into 2 questions:

The tenent would like to buy the house. We'd like to sell, but they are having a hard time coming up with a loan (they have an unusual business in Colorado).

Would it look better on our credit to sell the house to them as a lease-purchase at 4.5%, or to continue it as a rental?

Hope that makes sense, thanks so much for your help!

[okaawhatever]

23. You see, the basic issue here is that a lease-purchase won't change the credit report at all so

it won't eliminate your issues. There may be ways to do that, though. I have some questions for you. Since i'm not currently a loan officer I can't give you exact, detailed, professional advice, but I can give generic information that should prove useful. Before I can even point in the right direction i'll need just a couple more things:

1. You state that the credit report shows you only receive half the income from the rental. The credit report doesn't usually show that, what it does show is a joint account and a loan officer may only be giving you half the credit for the income. When were you told about the half the income situation? Was it while you were applying for some type of loan or was it from a tax adviser?

2. You say you own the home with a partner, how is the rental property income and expenses accounted for on tax returns?

3. The unusual business, I wonder what the issue could be there? What is important is that if you're going to continue to rent to them with the idea that they will purchase you have to make sure that either the renters situation will change or the lending guidelines will to allow them to purchase down the road. (if that is what you want, if you just want to keep it rented it won't matter). If you don't want to put the info out publicly you can send me DU mail.

[DrewFlorida]

3. Good job, congratulations on getting that straightened out.

The damn banks and all big corporations know that the vast majority of people, either won't know how to go about getting their fraud figured out, or they simply won't have the time. Therefore they know they can get away with this type of deception.
It's nice to hear of someone calling them on it and being successful in making them change it.

[airplaneman]

9. Thanks for the encouragement.

This has been quite depressing to me. And I wounder and care about someone less fortunate than me and living on the edge. I wish our society would be people first and not money first.
-Airplane

[wercal]

5. I've got my score for free from Credit Karma

With a score as high as yours, you should be getting a better rate rhan 8 percent.

[airplaneman]

8. Credit Karma uses their own scoring formula.

Credit Karma does not, I repeat NOT tell you your real FICO score.
It is their own formula and it is an estimate of what your FICO might be.
You have to pay good money to get your real FICO score.
-Airplane

[wercal]

20. Interesting

Like another poster here, Discover Card has been giving my number too. Is that the same estimate.

[grahamhgreen]

11. I remember Pelosi trying to get the banks to give congress the exact data on how credit scores were

Determined.

They refused claiming the algorithms were proprietary.

[Vestigial_Sister]

13. 8% ????

Your CU is still hosing you. I have a Visa Platinum card at my CU with a 3.68% rate. Find a friendlier CU.

[grahamhgreen]

22. As a side note it is the LAW that each credit agency must provide you one free credit report/year:

The Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s credit reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to credit reporting companies.

A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued or have filed for bankruptcy. Nationwide credit reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

Here are the details about your rights under the FCRA, which established the free annual credit report program.
Q: How do I order my free report?

The three nationwide credit reporting companies have set up a central website, a toll-free telephone number, and a mailing address through which you can order your free annual report.

To order, visit annualcreditreport.com, call 1-877-322-8228. Or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. Do not contact the three nationwide credit reporting companies individually. They are providing free annual credit reports only through annualcreditreport.com, 1-877-322-8228 or mailing to Annual Credit Report Request Service.

http://www.consumer.ftc.gov/articles/0155-free-credit-reports

[airplaneman]

24. Yes I got my free credit report.

But there is no mention of FICO in that report. The credit union was changing my interest rate on my Credit Card because they got an estimate of my FICO from Experian who told my credit union my FICO was 757 when it actually was just about 800. With that information my credit union tried to up my Credit Card interest rate from 8% to 12% because they only give their best rate to people who have 760 or better. I find it very fishy that Experian is doing what they did and my credit union is not disclosing what is going on. It took a lot of complaining to get to the bottom and get it fixed.
-Airplane