So my Equifax score has been 720 for quite some time now, and I recently paid off an installment loan balance of a measly $600. The zero balance just hit my reports today, and low and behold my score dropped from 720 to 712. For paying an account off that wasn't even revolving. What a scam.
I don't get FICO either. It bugs the heck out of me. I had a 2 1/2 year old collection account deleted and my score went up 1 point.
Re: Re: I hate FICO FICO works differently for different people I guess. I just paid down my credit card dept to under 16% utilization, and my new auto loan just showed up. what happened? well, my score went from 718 to 735. So I guess I can't complain
Lets stop looking at the FICO score as an indicator of credit worthiness because it is FICO is not designed to indicate credit worthiness but is used to determine relative credit risk based on a miriad of factors that are compared to a variety of national averages. If you think of this in terms of statistics, the score reduction makes sense (does it mean we like it). I know, you think I am off the deep end but think about this and with consideration for human nature. I am pretty sure that the statical models that Fair Issacs uses purport that consumers are less likley to go on wild spending sprees when they maintain some magical ratio of credit balances (debt) to available credit (seems to vary from person to person as well as geographic area also) which would be in the neighborhood of something like 24-26% credit utilization (for me at least). So now that you have paid the balance on the account to $0.00, despite your assumption that this would make you more credit worthy, from the standpoint of credit risk, I am pretty sure that the FICO scoring model considers this a negative because nationwide, people are statistically more prone to go out and charge that account back up above the previous level (my own historical spending/credit habits bear this out) than to let the account sit at a zero balance. Now I can not guarantee this, but I think that you may find that if you close the account now that it is at a 0 balance, although your score may initially fall a couple more points, it should then rise again slightly above its original point (maybe) in month or so!
If this was a revolving account, I would agree with that assessment. However, this account was an installment account, and I don't have access to the credit any longer. The account is zero balance, but for all intensive purposes, its closed now. FICO weighs revolving accounts very heavily, for some of the reasons that were stated, but if a static, installment account with an original balance of $4200, gets paid off from a balance of $600 (after paying on the account since 8/99) you would think the FICO score would not be affected, or would at least be affected positively. It's a crock. I guess I'm not concerned, since all I need to do is pay down one revolving account to get my score up around 780 or so, but it is still very annoying. I want those 8 points back!
My credit limits total 60,000 on credit cards. My smallest is a 2000 limit that gave me a 0% bt offer. I used it and when it posted today, I dropped from 744 to 702. Never mind the fact I have 8% utilization of my $60,000. I have a close to maxed out 2k credit card, so I lost 42 points. Absurd.
Re: Re: I hate FICO You have a better chance playing Russian Roulette with a shell in every chamber than you do with credit scoring ! The END ************************* LB 59
Re: Re: I hate FICO Yes it is absurd. Especially considering that your post suggests that the scoring model considers you now to be a greater risk with an 8% utilization than if you had a 15-25% utilization. Like i previously posted, I am convinced that the scoring model's statistical data is based on the rational that a person is more likely to spend and get overloaded in terms of debt when they carry lower balances than with higher. Nor does the model take into consideration the fact that someone who goes through a lengthy period of time wokring to pay down debt, is far less likely to allow such a situation to re-develop.
Re: Re: I hate FICO Yes I agree 100%, it is a crock! But statistically it does tend to make you a higher credit risk since now you are once again in a position to take on more debt! This all seems to indicate that the risk models used, offer less weight too an individuals payment hisotry than they do to the risk of debt load factors. In simplest terms, the more debt (up to apoint) that a person is responsible for, statistically, the less risk of that person getting deeper in debt (but we all know differently). Alternatively, the less debt that a person carries, then according to FICO statistics, apparently the higher the risk of the individual taking on too much debt and getting in over their head! Fortunately, I think when it comes to the important purchases (house, auto), unless you use an automated application process, the lenders tend to pay more credence to the facts than the figures (at least in my experience).
Re: Re: I hate FICO 1*Lets stop looking at the FICO score as an indicator of credit worthiness 2*FICO is not designed to indicate credit worthiness but is used to determine relative credit risk ms6073 =================== Neither one or two is the function of FICO 1*I never did look at it in that way as I have always seen it for what it reallay is which is a profitability guage measuring neither Credit worth or lender risk. The END ************************* LB 59
Re: Re: Re: Re: I hate FICO Well, whether we like it or not, FICO does cost us money. rackt3== ===================== Who are you replying to here ????????????????????? The END ************************* LB 59
Re: Re: Re: I hate FICO Well, whether we like it or not, FICO does cost us money. rackt3== ===================== Who are you replying to here ????????????????????? The END ************************* LB 59
Re: Re: Re: Re: I hate FICO FICO is a racket. If you sat several CEO's and CFO's from the insurance and banking industry around a table and asked them to come up with a system to legally gouge the consumer, I would wager that none could come up with a better formula than Fair Isaacs. It presupposses things about you based on unrelated factors. If their scoring model is so accurate, why was it shrouded in secrecy for so many years? Maybe they are afraid that when we pull back the curtain, the great Wizard of Oz, will be exposed as nothing more than a sham.
