FICO's new scoring model likely widens gap between borrowers

Fair Isaac Corp. says the latest update to its widely used credit scoring system will likely widen the gap between the number of borrowers with sterling credit and those with spotty records.

Though FICO says the changes will be modest for most consumers, it could mean added pressure on subprime borrowers while customers with FICO scores above 680 will likely see a boost in scores.

https://www.autonews.com/finance-in...ing-model-likely-widens-gap-between-borrowers

 

Yea, the timing sucks a little for me. I was in the upper 700's and took a temporary hit. I paid off a small student loan on my son in December and my home in January. Which means I will have a lot less going out and between my wife and I got about $200/month raise in January. I find out a week ago that my score went down slightly.

We always run up a little CC dept around Christmas, but pay it off by March. In fact we will be completely debt free by summer. The way the new scores are calculated that CC debt carries a lot more weight than paying off the loans. I'm not terribly concerned, the cards will be paid off next month and we aren't planning on borrowing any money anyway. My score will go back up shortly, probably higher than before.

 

You paid off the loans and that's why your score dropped.

Don't live for a credit score. The scoring model IMO is highly flawed. A guy I know brags about his credit score, but we all know he's over extended.

 

There’s nothing Fair about Issac whatsoever! Don’t get me wrong, my credit score is fine, and so is the wife’s...but there’s certainly MAJOR issues with the whole process. Sadly, it’s the rules we must live within if we need credit.

First time I realized how flawed the system was, my wife was a stay-at-home mom. While she didn’t earn much money at all for several years, she still used the credit cards she’d opened before we got married. I paid them (all on time) as I was the primary money earner.

When we went to buy my first new Taco (many moons ago now), her credit score was actually higher than mine by almost 30 points...and the woman earned less than a few thousand dollars over the previous 6-7 years. I’d been paying for virtually everything.

Because her credit score was higher, we actually saved money on the interest rate for the truck loan having her appear first on the title and loan app...even though she hadn’t had a job outside of the house that earned much money at all for years. That was proof enough for me that the credit bureaus and LexusNexus’s of the world are a guess at best, and very likely a complex scam.

 

Lately it seems like if you do the right thing you get screwed big times as a little guy while all them poop noses in Dc get richer by the minute. Maybe it always was like that and I never caught on because I was younger and never gave a Rats Bum about it but now it bugs the heck out of me.

 

Yea, I got a notice from the bank that one of my CC's is on and they gave a more detailed explanation of the changes and that was the primary reason. I don't worry a lot about my score, It's always good enough, but I get notices from 2 different CC companies monthly and keep up with mine. It always takes a slight dip as we take on a little debt around Christmas, but goes back up in a couple of months when the cards are paid off. This is the biggest drop I've had though.

But where it bites is that insurance companies base the rates you pay at least party on your credit rating. They do random spot checks and a couple of years ago it happened during a time when my score and taken a slight dip. My car insurance went up slightly, about $10-$15 monthly on 3 vehicles.

Within 2-3 days of my insurance going up my credit score was reevaluated and went up significantly. But that was AFTER the insurance company looked at it. And once they go up on rates they never come back down. This is my only worry, if my insurance company does a spot check before my score goes back up I may see another rate increase. And if I do, I may look for another insurance company.

 

I would like someone to try an explain the link between a credit score and how a person drives. Having done other reading about the scoring I have seen use your credit and your score goes down because of a higher utilization factor. Don't use and any your score goes down because you have all the credit line available to use .

 

The way it was explained to me:
Insurance companies use credit scores to see what type of person you are. Do you pay your bills, pay your debt, etc. I would say most people who pay their debt and pay on time are considered "responsible" in the eyes of the insurance companies.

 

Credit scores have nothing to do with income. Your credit score is made up of many variables; type of debt, how you utilize it, balance vs available limit and age of credit.
If your score dropped after paying off debt, it might be because it closed a longer obligation and shortened your history on open accounts for reporting. My .02.

 

My wife and I were consistently in the 810s-840s when we paid our mortgage off in February. Only a couple of CC which we never carry a balance on. No other debt except for utilities and taxes.

Our FICO score have been dropping ever since. 790s, I expect it to continue to hit the crapper.

 

Man, no mortgage. Sounds great! I got maaaany years to go.

 

As mentioned before, income has nothing to do with your credit score.

Glad I paid the house off a few years ago, I don't need credit anymore

With that being said, I'm always surprised at some of the things people have on their credit report; I'm running them everyday and getting people loans.

 

The ones that never cease to amaze me are those with over 100K in student loans and making less than 75k per year.

 

"Credit score" is a misnomer - they should really be called "profitability score" because they are not so much about your credit worthiness as they are about how profitable you can be to lenders.