The Credit Thread

Every month there is at least a handful of posts here that include erroneous perceptions, opinions or information about credit.

This thread is intended to address questions and facilitate discussion about credit reporting, credit scoring, and any other general credit-related matters.

All credit questions, and all informed opinions and answers, are welcome.

To get the thread started, here are a couple of items that come up on LH from time to time.

How does my income impact my credit score?

It doesn’t.

A credit score is generated from the data that is reported to your credit file with one of the credit bureaus. Your credit reports do not contain salary/income information.

Why is the credit score that the dealer pulled different from the one I got from [Credit Karma, my credit card company, etc.]?

There are dozens and dozens (if not hundreds) of credit scoring models, and they all calculate scores based on different algorithms that measure and weight various attributes of your credit file differently.

When you apply for credit the lender uses a credit score to measure the risk of defaulting on that particular credit transaction, and there are scores that specialize in predicting risk for specific types of credit.

It isn’t particularly useful for an auto lender to know how likely you are to default on a mortgage, which is why many auto lenders use auto-enhanced FICO scores.

Next, sources like Credit Karma give away “educational scores,” which aren’t used by a meaningful number of credit grantors to make credit decisions. The most common type of educational score is the Vantage Score.

It doesn’t do you any good to know that your TransUnion Vantage 4 is 744 when the auto finance company is using a TransUnion Auto-Enhanced FICO 8 – and yours is 607.

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Well since the site is called leasehackr going to add a couple of hacks on getting some legit FICO credit scores. Not the FAKO vantage scores credit karma and the likes give you…

Hack #1
Download the Experian App. It will allow you to create a free account that will give you your Experian FICO 8 score free once a month. The Hack here is that it will allow you to sign up for the Credit works Premium plan for a free 30 day trial(as soon as you sign up for it remember to cancel it so you won’t have a chance of being charged after the 30 days). That will give you your free FICO 8 scores for Transunion and Equifax for free and daily Experian Fico8, Auto8, Auto2, Bankcard8, Bankcard3, Bankcard2, and mortgage2 scores for free during the trial period.

Hack #2
After your initial 30 day free trial you are able to continue to get the creditworks premium plan for just $1 for a 1 week trial(its actually for 10 days) cancel rinse and repeat every 11th day. Best way to do this is on a desktop, the option will pop up after you log in. This will end up costing $3/month instead of the regular cost of $20-$25/month they charge for an actual membership…

Hack #3
If you want pretty much every FICO score that there is use the MyFico.com service. It cost $59.95 for a 1 time pull and gives you 28 different scores for the 3 credit bureau’s. The hack to get this cheaper is sign up for the $29.95 membership for quarterly updates and just cancel before 30 days… if you want the most accurate score do this right before you apply for credit, will give you the information you need just in case a Finance Manager tries to screw you on Interest/MF rates…

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In the US there are 3 credit bureaus: Experian, Equifax (:fu:t2:), and Transunion. To them, your data is the product they sell to creditors. When you borrow money, the lender reports it to 1/2/all bureaus: when it opens, how much you borrowed, and the term. They report the payment history, and when the account closes. It’s unlikely that all three of your bureaus match exactly.

When you “get your score”: an actuarial model (as @trism pointed out there are lots and lots) is fed the transactions from one of your bureaus as input, and your score is the output. It’s one way to score the risk that you pay your loan back on time.

Your A-Tier isn’t always my A-Tier

Different lenders choose to use different models fed by different bureaus for different reasons (not worth expounding here). NOBODY AT THAT DEALERSHIP C

For example: two different VW dealers in two different states, both using VWFS as the captive, could

  • both use the same bureau and scoring model
  • use the same bureau (eg Transunion) but use different models (eg FICO v2 vs FICO v8)
  • use different bureaus and different models

It’s not up to the finance person which model to use or which bureau to run, but they usually know what they use.

Fool-Proof Strategy for A-Tier

Your best strategy is to know your 3-bureau score is 750+. Lower may get you A-Tier but see other posts about score variability.

If one of your scores is significantly lower than the others, ask F&I what they use before they run your credit. Don’t spend time and effort working a crazy-good deal to learn the dealer is getting your score from the one bureau that remembers you defaulted on that craftmatic adjustable bed or your QVC card.

Is my credit score the ultimate decider?

It carries the most weight, but other factors can also play into your lending:

  • Chase has an internal credit score for their customers. For captive lenders who use Chase (eg JRL, Mazda, Subaru) a buyer at Chase can prefer an internal Chase score to an external score if it’s in your favor, and the F&I manager asks and can get it approved
  • The finance manager can appeal to their credit analyst/buyer in some cases if you are automatically declined or approved to a lower credit tier. They will usually ask for more information/documentation/justification.

Both of these are truly exceptions and not the norm, but can happen.

If your credit isn’t perfect, be nice to the person who is trying to sell you a warranty. They are one of the few people at the dealership who can broker peace between the lender and the dealership selling the car if your deal is messed up.

Income definitely affects credit, but not your specific credit score, as I learned yesterday

Your credit history shows how you’ve handled previous credit obligations.

You can have a trillion dollars and terrible credit. You can be penniless and have a flawless credit history.

Credit history is about past behavior, not income.

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I think what @surfer may be confused about is: the credit app for a car loan asks your income, which (as @trism said) has nothing to do with your score.

Both your income (debt-to-income) and your credit score may be part of the decision to give you a loan/lease, but they are independent variables.

Truer words never spoken. Where F&I managers can personally make the most money is on rich folks who pay sloppy. You would probably fall down dead if you knew how many people make $1M+, don’t live hand-to-mouth, but have 650 credit scores because they can’t seem to pay their Nordstrom card or their Macan lease on time.

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The dealer ran my credit seven times (or I went to seven different dealers and they each pulled my credit once) – and my credit score dropped 50 points.

The truth is that credit inquiries make up a very small portion of your credit score, and credit scoring algorithms recognize how common it is to rate shop, or to shop at multiple dealers.

For this reason, multiple inquiries of the same type within a reasonable period of time (generally 14-30 days for auto financing, depending on the score model) are scored as a single inquiry.

This may or may not cause a small drop in your score, generally in the single digits, which is temporary.

Most people do not check their scores immediately before and immediately after an inquiry, either, so if you note a 50-point swing in your credit scores the week after your auto lease application, but you last looked at your score 30 days ago, there were also ~40 days’ worth of other changes in your credit report.

Also, this may be obvious, but comparing your post-rate-shopping score to a pre-rate-shopping score that was derived from a different score model is a useless comparison.

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Credit thread - credit score tracking question:

I’m getting sick and tired of Credit Karma, how big, diverse and expansive they are getting. I don’t need, nor want, to scroll all the options and adds they get me to. I want to cut my link with them before they grow to be an even bigger monster. So I’m looking for a new app to check my score with following criteria:

  • android support (no biggie)
  • ability to weekly/monthly check my score, history, inquiries, total balance etc
  • new inquiry/credit check notification - CK app usually gets me notification at the dealership the moment the sales guy runs my credit - I like that feature and would like to keep it
  • limited number of adds/offers - I can find myself a product I want
  • insurance, car, mortgage used score models options would be a great bonus

Any recommendations?

Aren’t big banks starter offering that as a part of their product?
I know I can check my score monthly with chase. I think Discover gives you that ability to see your score.

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My AMEX card provides a free FICO 8 score, based on Experian credit report data.
My Citi provides a FICO Bankcard 8, based on Equifax credit report data.
CapitalOne provides CreditWise, which is kind of like Credit Karma as they use their own formula in conjunction with TransUnion VantageScore. I think anybody can use it, but I haven’t tried it myself.
Chase also provides a “Credit Journey” which is almost the same as Credit Karma; not a real score but a good gauge.

Banks have been doing this for years now.

AMEX, Chase, Citi, Discover and BOA all give me credit scores. Some are monthly, others are weekly.

When I last leased, the Bank Of America Credit score was within 2 points that showed up on the dealerships credit pull.

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I already get free vantage score 3.0 from my bank. I have AMEX so I can get Experian credit score.

Banks already offer these services. No need to use credit karma at all.

I agree but still use credit karma as a tool for other uses. I’ll use the scenario again but when I last leased a car, I received a notification from the credit karma app almost instantly when they ran my credit. I was truly impressed. Also lets you know in more detail about all current accounts even though not always up to date, gives a very good idea of where you stand on all accounts. The credit score on the other hand is almost useless in the real world as almost all other lenders use different scores. However, if the Credit Karma credit score is going up over time, most likely all other credit scores are going up too.

For a routine understanding of your creditworthiness I generally recommend using the standard FICO 8 as the reference point, mostly because it’s so commonly encountered in real life.

Experian has a free app that provides regular FICO 8 scores, as do a number of credit card companies. Barclays and Discover provide a TransUnion FICO 8 approximately monthly. There are others. Equifax is more difficult to find.

For a specific transaction, though, as discussed previously, the only bureau/model combo that matters is what the specific company uses for decisioning.

If you can mentally divorce your score needs from your monitoring needs, just use CK for the alerts. Most of its competitors offer alerts as well.

I requested a limit increase on one of my credit cards last week, and I immediately got 5 or 6 alerts from various free services, including Kredit Carma.

Edited to add: Digital Credit Union in MA offers a free monthly Equifax mortgage FICO score to their customers, which is unusual.

This is valuable if you are home shopping, because people are often the most unpleasantly surprised when they think they know their scores and then go and apply for a mortgage… the FICO models used for mortgage decisioning don’t go all the way up to 850 like many other score types, to name just one reason mortgage scores are often lower than other FICO flavors for the same consumer.

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Yep, most banks do provide the free check. I have a CC in chase and I’m familiar with Credit Wise, BofA also gives your score once a month. These are very simple and superficial tools unfortunately. They give you the idea of your score (roughly) but only on regular basis and they are tied to certain bank. The instant notification and more detailed info would be beneficial. Experian app would probably be the closest one but I wish it could pull information from all 3 reporting agencies and on weekly rather than monthly basis.

What you want is one of the three-bureau monitoring subscriptions from myFICO.

But after you click the link you’ll probably decide that you don’t want to spend that much.

So then we’re back to what you can get for free, which has limitations.

Should look at my 2nd post in this thread. Experian hack to get all 3 scores for $1 every 10 days or so. Cheapest option if you want all 3 fico8 scores and a few others experian auto+mortgage enhance scores. Just rinse and repeat the trial discount price

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By law you can get 1 free report every year from each of the monitoring agencies

Wall Street Journal just ran an article on credit/FICO scores. Look what changes are coming

Bank accounts
In a program expected to launch to consumers next year, FICO will begin taking into account consumers’ banking habits. Under the free program, called UltraFICO, consumers sign up to allow the program to link to their checking, savings or money-market accounts. Consumers are then rated on factors including the account balances they maintain, how long the accounts have been open and avoiding overdrafts. FICO says the service won’t have access to a customer’s private bank information.
Ted Rossman, industry analyst at CreditCards.com, says all these programs gather “consumer-permissioned” data that might give lenders more insight into behavior and potential risk.
“For example, you may have a 620 credit score but a lot of cash in the bank,” he says. “You can imagine that person might be more creditworthy than a person with the same score with not much in the bank.”

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