Jon, FICO question

Hi Jon, I used the Fair Issac site to check on my FICO score. Everything is fine, except that it says a top negative factor is the amount of revolving credit accounts. However, a review of my file showed correctly that I only have three active accounts. The rest were closed or were due to lost/stolen cards.

Do you know if Equifax can remove them from the record (some of them date back like 15 years ago) so that I can get a higher FICO score?

Oh, I finally figure out why people keep a 0 amount and don't use their credit cards before applying for a morgage. It seems that even if you pay off the due amount each month, the credit report will still show an amount due, which affects the FICO score.

Thanks Jon.

<< Everything is fine, except that it says a top negative factor is the amount of revolving credit accounts. >>

Hey Dave,

The total n number of accounts is never an issue when scoring
a bureau. The total n number of "inquiries" is a killer, as is
total "revolving debt" - the percentage of revolving credit
remaining "available"...

Thanks Jon.

I appreciate it.

Originally posted by DaveN323i
Hi Jon, I used the Fair Issac site to check on my FICO score. Everything is fine, except that it says a top negative factor is the amount of revolving credit accounts.

Dave, one thing to keep in mind about the "negative factors" is that even if you score in the 720-800+ range, they still list negative factors. I remember laughing when my wife and I checked ours before applying for the mortgage for our house last year. For both of us, the top negative factor was "insufficent length of credit history" (or something to that effect). The longest open account on my report was 13+ years and my wife's was 10+.

WRT raising your FICO score, IIRC (someone please correct me if I'm wrong) a score of 720 or above qualifies you for the lowest available rates for nearly all types of legitimate, good faith loans.

720 is correct (for the vast majority of creditors).

--SONET

Originally posted by DaveN323i
Oh, I finally figure out why people keep a 0 amount and don't use their credit cards before applying for a morgage. It seems that even if you pay off the due amount each month, the credit report will still show an amount due, which affects the FICO score.

There are always going to be negative factors listed, no matter how high the score. Not using your card for a few months prior to applying for a loan is also a dangerous thing.

From what I have read (since the actual formula is top secret), FICO looks heavily on the last 12 months prior, and takes into account things such as average spending from month to month as well. An unusual shift in your spending habits could actually raise a red flag as well.

I haven't checked back recently, but last I heard, Fair Issac was going to offer a service that would offer you specific items that you should do on a short term to raise your credit score (based off your exist credit history).

Originally posted by alee

From what I have read (since the actual formula is top secret), FICO looks heavily on the last 12 months prior, and takes into account things such as average spending from month to month as well. An unusual shift in your spending habits could actually raise a red flag as well.

The types of credit are also factors. Having an on time history with multiple types of credit (ie mortgage, auto loan, credit card) will score you higher than if you only have one type (auto loan only). Also, some types of credit count more than others (both good and bad). Having an on time mortgage for 12+ months will push you towards a higher score than an on time record with just a credit card for the same time. Conversely, a late mortgage payment will hurt you more than a late credit card payment.

As Jon mentioned, inquires can hurt, but not all types incurr a penalty. Getting a copy of your own report doesn't count against you. All of the unsolicitied credit offers you get in the mail are based on inquires that also don't hurt you. Inquires based on loan applications will hurt you. However, multiple applications for a mortgage in a short time frame (I think it's thirty days) only count as one inquiry, but that is a relatively recent change.

Another thing to keep in mind is that each reporting agency alters the formula slightly so each agency will score you slightly differently. Generally, for things like mortgages, the lender will look at all three reports and average the three scores, but every lender has their own policy.

Before you go looking for a loan, you should get a copy of your credit report from each agency and make sure that there are no errors. If there are errors (and there are way too many of them), get them straightened out before applying for your loan. Getting errors fixed can be like pulling teeth, and they have a habit of showing up again years later (ask me how I know ), although they're usually easier to fix the second time around. Also, it's usually a good idea to verify your reports for accuracy once a year or so. If you find errors, it's easier to get them straightened up sooner than later.