D/I Increases, But So Does My FICO Score?
Since I last checked my FICO score about two or three months ago, I've added yet another mortgage to my debt to income ratio. Yet my average FICO score has actually increased by 15 points to 716. I would have thought that with this additional debt, my score would have decreased a bit. And since I went through a mortgage broker, I noticed that each of the credit bureaus had between 3 and 5 new credit checks that had been done in the last two months. I was sure this would have driven my score down as well. I'm not complaining, but what's going on? Does anyone understand the logic behind credit scores?
[addsig]
There is no logic to credit scoring. Your score can change from morning to evening of the same day. There are so many variables that affect your score it;'s almost impossible to determine what effect any given varibale will have on your score. One reason your score can change so rapidly is that there are about seven different scoring models in existance today. None of them are the same. You can get a general idea of what could happen to your score if you visit the Fair Issac site -myfico. They have a credit score simulator available on line that will provide you with a "what if " score based on what chnages in your credit file. Other things that can affect your credit score are: account activity, when and how often creditors send reports to the credit bureaus, types of entries in your file ie bankruptcy/collections . In most cases the pulling of credit reports has minimal effect on your overall score. Especially if you are shopping for a mortgage or new auto.
I have had the same experiences with my FICO score. I quit worrying about it and just try to make sound personal financial decisions. Once your score is in the 700's, I don't think there is a whole lot of difference anyway.
I've got a good one for you guys:
I have an investor/client who has financed 4 homes this year. He buys thru an LLC or Trust but is personally named on the notes. NONE of the mortgages show up on his credit reports. He and I are both confused and I'm a mortgage industry professional.
C-
I'm going to go ahead and place this in a topic.
Debt to income is not calculated as part of your credit score, you score would increase if you did not have many trade lines or accounts before you obtained the mortgages. Also if you have timely payment on several mortgages that would help your score. Real Estate debt is rarely a negative on your score, only unsecured debt would bring it down. Also multiple mortgage inquries in a 30 day period don't negatively affect your score, I try to tell people that but they never believe me...