Comments on: Understanding FICO Credit Scores http://www.bargaineering.com/articles/fico-credit-score.html personal finance blog with anecdotes, advice and commentary. Sun, 22 Nov 2009 04:50:49 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: dilbert69 http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307540 dilbert69 Fri, 26 Jun 2009 15:22:08 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307540 This URL says that manual underwriting doesn't exist. It's about a year old. http://www.mortgageprocessor.org/mortgage-loan-processor/2008/04/myth-of-manual-underwriting.html Also, I have an 800+ credit score and carry no debt. You can build up a credit score by using credit, not by carrying debt. I think Dave Ramsey is just wrong. This URL says that manual underwriting doesn’t exist. It’s about a year old.

http://www.mortgageprocessor.org/mortgage-loan-processor/2008/04/myth-of-manual-underwriting.html

Also, I have an 800+ credit score and carry no debt. You can build up a credit score by using credit, not by carrying debt. I think Dave Ramsey is just wrong.

]]> By: wizardprang http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307295 wizardprang Thu, 25 Jun 2009 20:46:25 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307295 "Contrary to popular belief, you don't need a credit score to get a mortgage, Ramsey says. Granted, four out of five lenders now base your credit worthiness on your FICO score, but it's still possible to find lenders that do "manual underwriting." Basically, this means that the lender researches your financial history, instead of simply reading your credit reports. This will not negatively affect your interest rate or the terms of your loan." Source: http://tinyurl.com/apdwh (http://www.cbsnews.com/stories/2005/10/18/earlyshow/living/money/main951008.shtml) “Contrary to popular belief, you don’t need a credit score to get a mortgage, Ramsey says. Granted, four out of five lenders now base your credit worthiness on your FICO score, but it’s still possible to find lenders that do “manual underwriting.” Basically, this means that the lender researches your financial history, instead of simply reading your credit reports. This will not negatively affect your interest rate or the terms of your loan.”

Source: http://tinyurl.com/apdwh

(http://www.cbsnews.com/stories/2005/10/18/earlyshow/living/money/main951008.shtml)

]]> By: dilbert69 http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307292 dilbert69 Thu, 25 Jun 2009 20:32:29 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307292 No one is going to underwrite a mortgage without taking into account your FICO score, regardless of your down payment and payment record. If your FICO score is low, you'll pay more even if you're approved. My FICO score is over 800, and I recently got a 30-year fixed-rate mortgage (refinance of existing mortgage) of $500K (80% LTV) for 4.875% and no points, and about $3K of closing costs. No one is going to underwrite a mortgage without taking into account your FICO score, regardless of your down payment and payment record. If your FICO score is low, you’ll pay more even if you’re approved. My FICO score is over 800, and I recently got a 30-year fixed-rate mortgage (refinance of existing mortgage) of $500K (80% LTV) for 4.875% and no points, and about $3K of closing costs.

]]> By: wizardprang http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307288 wizardprang Thu, 25 Jun 2009 20:00:57 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307288 1) You're right. There are exceptions. But that does not mean that the rule is wrong. McDonald's did not put in ATM swipes in every store in the country because they were feeling generous. They put them in because it is extremely profitable. 2) Not a problem if your mortgage lender is a _real_ lender and not just another FICO monkey. Show them 20% down and a solid payment record and watch their reaction. 3) It's easy to get a phone without a FICO score - just give them a deposit, which you get back after a year. An annoyance, true, but it can be done. I am not saying that the FICO is evil, just that is it not as important as some of us make it out to be - just like Wall Street. For those of us who stay out of debt, a FICO score can, at least in theory, be completely unnecessary. Mine is in the mid-700s, but I have never really worried about it. The only time it will ever matter is if I intend to borrow money - and I don't intend to ever do that again (except for a MTG). Therefore it is not important to me. Your mileage may vary. 1) You’re right. There are exceptions. But that does not mean that the rule is wrong. McDonald’s did not put in ATM swipes in every store in the country because they were feeling generous. They put them in because it is extremely profitable.

2) Not a problem if your mortgage lender is a _real_ lender and not just another FICO monkey. Show them 20% down and a solid payment record and watch their reaction.

3) It’s easy to get a phone without a FICO score – just give them a deposit, which you get back after a year. An annoyance, true, but it can be done.

I am not saying that the FICO is evil, just that is it not as important as some of us make it out to be – just like Wall Street.

For those of us who stay out of debt, a FICO score can, at least in theory, be completely unnecessary. Mine is in the mid-700s, but I have never really worried about it. The only time it will ever matter is if I intend to borrow money – and I don’t intend to ever do that again (except for a MTG). Therefore it is not important to me. Your mileage may vary.

]]> By: dilbert69 http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307281 dilbert69 Thu, 25 Jun 2009 19:16:14 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307281 Just because _people_ who use credit spend more than _people_ who don't doesn't mean that _you_ would spend more if _you_ used credit. Also, a FICO score is very useful if you are planning to buy a house (which almost no one can afford to pay cash for) or get a non-prepaid cell phone. Just because _people_ who use credit spend more than _people_ who don’t doesn’t mean that _you_ would spend more if _you_ used credit. Also, a FICO score is very useful if you are planning to buy a house (which almost no one can afford to pay cash for) or get a non-prepaid cell phone.

]]> By: wizardprang http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307271 wizardprang Thu, 25 Jun 2009 18:43:29 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307271 Ryan, you MUST be a fan of Dave Ramsey; you sound just like him. :) My main problems with the FICO are a) how horribly mis-used it has become (mainly because it's cheap and easy), and b) how the absence of a FICO score is assumed to be bad news... when I emigrated here from England in 1994, I had a good job here, thousands in the bank, and a CC with a $50k limit (drawn on a British Bank) in my pocket, but without the almighty FICO nobody would touch me with a barge pole. Nowadays the lending industry has turned into FICO monkeys who run the score instead of actually checking if you are earning money. The only debt that most of us _need_ is a Mortgage. And I would run from any Mortgage Lender who bases their entire financial investigation on a FICO score... Ryan, you MUST be a fan of Dave Ramsey; you sound just like him. :)

My main problems with the FICO are a) how horribly mis-used it has become (mainly because it’s cheap and easy), and b) how the absence of a FICO score is assumed to be bad news… when I emigrated here from England in 1994, I had a good job here, thousands in the bank, and a CC with a $50k limit (drawn on a British Bank) in my pocket, but without the almighty FICO nobody would touch me with a barge pole. Nowadays the lending industry has turned into FICO monkeys who run the score instead of actually checking if you are earning money.

The only debt that most of us _need_ is a Mortgage. And I would run from any Mortgage Lender who bases their entire financial investigation on a FICO score…

]]> By: Ryan http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307249 Ryan Thu, 25 Jun 2009 17:48:47 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307249 The truth is that most of the richest people in the world do not advise getting into debt. That's really not how you win with money, regardless of what broke financial people might say. And a FICO score is utterly useless if you're planning on buying things you can actually afford, rather than borrowing to get them. Also, considering that people who use credit spend 12-18% more than those who use cash (even if they pay it off every month), I wouldn't say the 2-3% reward is worth it! You're still 9-15% in the hole! The truth is that most of the richest people in the world do not advise getting into debt. That’s really not how you win with money, regardless of what broke financial people might say. And a FICO score is utterly useless if you’re planning on buying things you can actually afford, rather than borrowing to get them. Also, considering that people who use credit spend 12-18% more than those who use cash (even if they pay it off every month), I wouldn’t say the 2-3% reward is worth it! You’re still 9-15% in the hole!

]]> By: Jim http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307065 Jim Wed, 24 Jun 2009 21:58:11 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307065 Well technically that wouldn't improve your score because the card issuer wouldn't report a balance. :( Well technically that wouldn’t improve your score because the card issuer wouldn’t report a balance. :(

]]> By: wizardprang http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307057 wizardprang Wed, 24 Jun 2009 20:45:53 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307057 "You could make a payment and THEN charge something. No debt, not a penny, not for a minute, and you build up your credit score over time." Good point, and a good approach... But how many people do that? "However, anyone with that extreme an aversion to debt may want to seek psychological help." Tell that to Dave Ramsey. "What possible harm can result from my purchasing a tank of gas with a credit card..?" No harm... unless you lose your job, or you don't get paid and you have no savings... or your payment is late and they hit you for a $35 fee. Or you get hit by a truck and end up in a coma and... Oh sorry, where was I? And who are you? :) I used to have a 5% Discover gas card. Then they limited the reward to $60/year, so I used it for the first 3-4 months of the year, got the reward and stopped using it. Then they got wise to that and further limited the reward to $5/month, payable in $20 chunks. At that point I decided that it wasn't worth $5/month to me and I said "bye-bye" "I have the money today, both in my wallet and again in my checking account... while I’m “in debt” in the purest sense, that’s a mere technicality." Nothing wrong with that... but if you already have the money you don't need to be using a CC! So you are borrowing (yes, it is a technicality, but it is still "borrowing") money that you don't need to borrow in order to raise up your FICO score. Lunatics, the Asylum takeover is now complete :) It just strikes me as odd that the only people who can really benefit from a CC are those who don't need one. I do not consider Credit Cards to be inherently evil (though a good friend of mine does), but they seem to be marketed directly at people who can't afford them or don't know how to use them properly. I wonder how much of this "playing-games-with-money" mentality landed us in the sorry mess in which we find ourselves now... “You could make a payment and THEN charge something. No debt, not a penny, not for a minute, and you build up your credit score over time.”

Good point, and a good approach… But how many people do that?

“However, anyone with that extreme an aversion to debt may want to seek psychological help.”

Tell that to Dave Ramsey.

“What possible harm can result from my purchasing a tank of gas with a credit card..?”

No harm… unless you lose your job, or you don’t get paid and you have no savings… or your payment is late and they hit you for a $35 fee. Or you get hit by a truck and end up in a coma and…

Oh sorry, where was I? And who are you? :)

I used to have a 5% Discover gas card. Then they limited the reward to $60/year, so I used it for the first 3-4 months of the year, got the reward and stopped using it. Then they got wise to that and further limited the reward to $5/month, payable in $20 chunks. At that point I decided that it wasn’t worth $5/month to me and I said “bye-bye”

“I have the money today, both in my wallet and again in my checking account… while I’m “in debt” in the purest sense, that’s a mere technicality.”

Nothing wrong with that… but if you already have the money you don’t need to be using a CC! So you are borrowing (yes, it is a technicality, but it is still “borrowing”) money that you don’t need to borrow in order to raise up your FICO score. Lunatics, the Asylum takeover is now complete :)

It just strikes me as odd that the only people who can really benefit from a CC are those who don’t need one. I do not consider Credit Cards to be inherently evil (though a good friend of mine does), but they seem to be marketed directly at people who can’t afford them or don’t know how to use them properly.

I wonder how much of this “playing-games-with-money” mentality landed us in the sorry mess in which we find ourselves now…

]]> By: dilbert69 http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307055 dilbert69 Wed, 24 Jun 2009 20:44:38 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307055 The risk of late payment can be eliminated if you pay online and pay as soon as you make the charge, even before you get the statement. The risk of your employer forgetting to pay you is irrelevant since if that happens you won't be able to meet your expenses regardless of how you pay for them, unless you've accumulated savings, which I'm sure everyone reading this blog has. The risk of late payment can be eliminated if you pay online and pay as soon as you make the charge, even before you get the statement. The risk of your employer forgetting to pay you is irrelevant since if that happens you won’t be able to meet your expenses regardless of how you pay for them, unless you’ve accumulated savings, which I’m sure everyone reading this blog has.

]]> By: wizardprang http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307054 wizardprang Wed, 24 Jun 2009 20:33:26 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307054 Sorry, that was supposed to say [Yoda] Risk? What know you of risk? [/Yoda] but the page removed the angle-brackets Sorry, that was supposed to say

[Yoda] Risk? What know you of risk? [/Yoda]

but the page removed the angle-brackets

]]> By: wizardprang http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307053 wizardprang Wed, 24 Jun 2009 20:32:05 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307053 "...with no special strings attached. Theres no risk and you get an easy 1-2% back on everything you buy..." Risk? What know you of risk Sorry, couldn't resist :) What if your payment does not get through on time? What if your employer goes belly-up and "forgets" to pay you (can we say "Enron"?) ? Perhaps 1-2% is enough incentive for you, but me it is not worth the work for the $10-$20/month this would net me. I prefer to deal in cash or use my Debit card and have one less bill to pay at the end of the month. I guess that makes me weird. “…with no special strings attached. Theres no risk and you get an easy 1-2% back on everything you buy…”

Risk? What know you of risk

Sorry, couldn’t resist :)

What if your payment does not get through on time?
What if your employer goes belly-up and “forgets” to pay you (can we say “Enron”?) ?

Perhaps 1-2% is enough incentive for you, but me it is not worth the work for the $10-$20/month this would net me. I prefer to deal in cash or use my Debit card and have one less bill to pay at the end of the month. I guess that makes me weird.

]]> By: Andrew http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307048 Andrew Wed, 24 Jun 2009 19:50:17 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307048 Thank you. :-) Thank you. :-)

]]> By: Andrew http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307047 Andrew Wed, 24 Jun 2009 19:49:52 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307047 This is not correct. You could make a payment and THEN charge something. No debt, not a penny, not for a minute, and you build up your credit score over time. However, anyone with that extreme an aversion to debt may want to seek psychological help. What possible harm can result from my purchasing a tank of gas with a credit card (getting a whopping 5% rebate by doing so, BTW) tonight and then pay for it on Friday when I get my paycheck? I have the money today, both in my wallet and again in my checking account, but it's my habit to pay off all my bills every other Friday when I get paid. So while I'm "in debt" in the purest sense, that's a mere technicality. This is not correct. You could make a payment and THEN charge something. No debt, not a penny, not for a minute, and you build up your credit score over time. However, anyone with that extreme an aversion to debt may want to seek psychological help. What possible harm can result from my purchasing a tank of gas with a credit card (getting a whopping 5% rebate by doing so, BTW) tonight and then pay for it on Friday when I get my paycheck? I have the money today, both in my wallet and again in my checking account, but it’s my habit to pay off all my bills every other Friday when I get paid. So while I’m “in debt” in the purest sense, that’s a mere technicality.

]]> By: jim http://www.bargaineering.com/articles/fico-credit-score.html/comment-page-1#comment-307046 jim Wed, 24 Jun 2009 19:49:38 +0000 http://www.bargaineering.com/articles/?p=4469#comment-307046 Credit card rewards works just fine if you get cash back card. Amex, Discover & Citibank all have cards that give back cash with no special strings attached. Theres no risk and you get an easy 1-2% back on everything you buy. Credit card rewards works just fine if you get cash back card. Amex, Discover & Citibank all have cards that give back cash with no special strings attached. Theres no risk and you get an easy 1-2% back on everything you buy.

]]>