Credit Report Puzzle

[cantlogin]

Quote:

Originally Posted by jonat There are, literally, hundreds of different "scores" available from the credit bureaus, each with slightly tweaked formulas. Also, the report you as a consumer get isn't the same as what the bank gets. How badly does your friend want this particular card? If not so much, there are other card offers out there, maybe from a bank that is more willing to look at evidence. If this had happened to me I would simply write off that bank forever.

This situation really is very little more than a brain teaser / mystery exercise because the application has finally been approved on appeal.
Due to the applicants long history with the CC bank, the deposits on account at that bank, and the credit score, Underwriting Management granted an "exception" to the absolutely, positively inflexible DTI requirement.

[meierlde]

Quote:

Originally Posted by Scuba I find credit scores frustrating at times. We had an excellent credit score, utilize less than 10% of available credit, and pay everything off in full except our mortgage & HELOC and one 0% credit card every month. Then we decided to get the Amazon VISA and the Target credit card to get 5% off those purchases. We also transferred a balance from one zero % card that was about to come due to a new 0% card with no balance transfer fee to take advantage of using OPM (other people’s money) for free. This balance is relatively small, and we reduced it by $3K or so when we did the transfer, so in total, our balances outstanding actually declined. Solely as a result of getting 3 new cards in a relatively short period of time, our score declined by about 50 points. All of the other factors (use of credit, payment history, etc.) are rated “excellent” but because of the 3 new cards, our scores went down. Oh well, we aren’t planning on taking out any major loans so I suppose we just have to wait a bit and it will go back up. Do others who take out new cards to take advantage of free stuff (cash bonuses, discounts, or mileage credits) experience a hit to your credit score? How long does it usually take for your score to go back up, or do you not care what your score is?

I just got 1 new card and the score went down about 20 points but a year later it has recovered.

[king smoothie]

Quote:

Originally Posted by Scuba I find credit scores frustrating at times. We had an excellent credit score, utilize less than 10% of available credit, and pay everything off in full except our mortgage & HELOC and one 0% credit card every month. Then we decided to get the Amazon VISA and the Target credit card to get 5% off those purchases. We also transferred a balance from one zero % card that was about to come due to a new 0% card with no balance transfer fee to take advantage of using OPM (other people’s money) for free. This balance is relatively small, and we reduced it by $3K or so when we did the transfer, so in total, our balances outstanding actually declined. Solely as a result of getting 3 new cards in a relatively short period of time, our score declined by about 50 points. All of the other factors (use of credit, payment history, etc.) are rated “excellent” but because of the 3 new cards, our scores went down. Oh well, we aren’t planning on taking out any major loans so I suppose we just have to wait a bit and it will go back up. Do others who take out new cards to take advantage of free stuff (cash bonuses, discounts, or mileage credits) experience a hit to your credit score? How long does it usually take for your score to go back up, or do you not care what your score is?

Usually each time you apply for a credit card your score dips a bit, maybe 10 to 15 points. Multiple new applications magnify the dip, although how much depends on the super secret formula. It generally takes about 6 months for full recovery. People who churn credit cards watch this closely. When you close an account there is a similar impact. I care about my score, but I don't sweat a 20 point swing. 50 is more than I prefer. Note that many financial institutions offer a free credit score that is a Vantage Score, which most lenders don't use and can be off of the FICO score by as much as 30 to 50 points. There are different versions of the FICO score as well. Lenders may use a different one - which weights your debt history differently - based on the type of debt you are applying for.

[gayl]

Quote:

Originally Posted by meierlde I just got 1 new card and the score went down about 20 points but a year later it has recovered.

I paid off my car & mine also went down [emoji107] 20 pts. Hasn't recovered and experian says it's bc I have no debt. I can live with that

[Scuba]

Quote:

Originally Posted by king smoothie Usually each time you apply for a credit card your score dips a bit, maybe 10 to 15 points. Multiple new applications magnify the dip, although how much depends on the super secret formula. It generally takes about 6 months for full recovery. People who churn credit cards watch this closely. When you close an account there is a similar impact. I care about my score, but I don't sweat a 20 point swing. 50 is more than I prefer. Note that many financial institutions offer a free credit score that is a Vantage Score, which most lenders don't use and can be off of the FICO score by as much as 30 to 50 points. There are different versions of the FICO score as well. Lenders may use a different one - which weights your debt history differently - based on the type of debt you are applying for.

Thanks for this explanation. We aren’t planning on applying for any credit anytime soon, but I have to admit I was surprised that 3 new cards within a few months, all with relatively low limits, would cause such a drop for us. Our score dropped 40-50 points.

[WornOut]

I used to be an underwriter. The bank will calculate an estimated payment for that account that does not currently have a balance. It doesn't have a balance now, but it will at some point, so that needs to be factored in somehow. They are taking a % of the total balance and inputting that as the monthly payment. They do that with deferred student loans also. The % they use depends on how their risk people view that type of account. The monthly payment they calculate could be much higher than what it will be in real life.

[RunningBum]

I just got turned down on an AA mileage card from Barclays for the same reason, "Debt to income ratio too high". They used TransUnion. I was scheduled to get my annual free report for them in 5 days so I did it today, and see nothing unusual. I guess it's because I have a few cards with high limits. My credit score is 779.

[cantlogin]

Quote:

Originally Posted by WornOut I used to be an underwriter. The bank will calculate an estimated payment for that account that does not currently have a balance. It doesn't have a balance now, but it will at some point, so that needs to be factored in somehow. They are taking a % of the total balance and inputting that as the monthly payment. They do that with deferred student loans also. The % they use depends on how their risk people view that type of account. The monthly payment they calculate could be much higher than what it will be in real life.

That insight from the inside is really helpful, and the banks position on a loan or line of credit is understandable.
The loan account in question does have a large balance, definitely not zero.

The thing that makes this credit card issue distinct from the circumstance in your description is that the loan is secured by certificates of deposit at the credit union that has provided the loan. There are no monthly payments on that balance. There will NEVER be any payment on that loan that isn't covered by funds already held by them.