My Credit Plan Blog

How a Bank Failure can Lower Your FICO® Credit Scores

Fri, 31 Mar 2023 23:55:38 GMT

Bank failures have captured the headlines over the last few weeks. Silicon Valley Bank and Signature Bank along with a few others have been taken over the U.S. government. How does that impact you when you have an account with one of these failed banks. It can have a huge impact – almost always lower – on your lender’s FICO Scores.

There are three concerns from when a bank fails in how it can impact your credit scores. I will walk through them.

Loans being transferred to High-Risk Lenders
Credit Cards being Closed
Credit Cards Lines being Reduced

Loans Being Transferred to High Risk Lenders

When banks go under, their personal, auto and other types of loans have value. They are usually sold off to other lenders. Most of the time, they are sold to other banks or depository institutions. Periodically, they are sold to higher risk lenders who are willing to pay a higher premium for those loans. However, for consumers, the damage to the FICO scores can be for up to ten years after the loans are paid off.

To the consumer, you have done nothing wrong. However, the damage is very extensive for years.

Credit Cards Being Closed

Fellow banks and other depository institutions are usually the first in line to purchase credit card accounts. They are not however so willing to keep those lines open all the time. Depending on the quality of credit cards issues by the failing bank, the new bank could simply close down the line of credit. How does that impact FICO Scores?

If someone has a credit card balance of $2,000 with a credit limit of $5,000, that person would have a utilization ratio of 40%, not ideal but not suffocating to the scores either. If the new bank drops that line of credit down to $0, now it appears the person is overdrawn by $2,000. That is not good. It will drop FICO Scores 40, 50 points and even more real quick.

You will also lose any depth to your credit history as a credit card is closed. Many credit cards have been opened for many years. If the new bank closes that credit card, you have lost that depth.

Credit Lines Being Reduced

In the previous example, if the new bank dropped the credit line down to $2,000 – which is a common occurrence – the utilization ratio goes from 40% up to 100%. That is not a good thing.

How to Protect Yourself?

It is always wise to have your credit cards with different lenders. In this case, if a lender has a problem, they do not totally tank your FICO Scores. You would have other credit card that could stem any real impact to your credit scores.It is always best when you first open any credit card. Spread them out with different lenders. Don't wait until there could be an issue. Better to do it now than wait to do it later when it is a bigger problem.

Many Medical Collections will Fall Off Credit Reports

Fri, 18 Mar 2022 22:55:58 GMT

Millions of consumers have been surprised to pull up their credit report and find a collection from a doctor showing up on their credit report. In a historic change, many of these past due bills will no longer show up on a credit report.

Back in 2015, the three major credit bureaus, Equifax, Experian and TransUnion, mandated to collection companies that they had to wait at least six months before they could report a medical bill to a collection company. That is the federal guideline, but medical collection companies were pushing collections on consumer credit report within a few months after a service had been rendered.

Today, there are $88 billion in unpaid medical collections showing up on 43 million American consumer credit reports – roughly 22% of all credit reports. The impact to a credit score from one collection is dramatic, no matter the size. A consumer can expect a drop of upwards of 100 points to their credit scores from the first collection.

Under an inquiry from the Consumer Financial Protection Bureau, the three major credit bureaus have elected to remove 70% of all medical collections. The process to remove these medical collections will start in July of this year, 2022. Some will not be removed until the first part of next year.

This is an outline of the collections that will be removed.

Any medical collections that have been paid will be removed.
New unpaid medical collections cannot be sent to a consumer’s credit report until one year removed from the time of service.
Any medical debts under $500.

What is the downside of this change? Medical service providers will have one less means to collect a debt from a consumer. It is a common understanding that around 30-40% of all patients do not pay their medical debts outside of insurance coverage. This number varies from state to state. But it is a substantial number.

For this reason, doctors, hospitals and other medical specialist will probably demand payment before services are rendered. It may mean a delay of services provided or even a possibility of having services denied. There is always an unintended consequence. Medical services will be tougher to attain in some situations.

Just a heads up when you go to the doctor or hospital in the future.

It takes a Lot Longer Now to get Your FICO® Credit Scores

Sat, 26 Feb 2022 01:11:59 GMT

It takes a lot longer now to get FICO scores to show up after opening the first new account. A change in recent times from FICO requires a longer wait before a person can generate FICO Scores.

In times past, a 18 year looking to get credit, get do a couple of things and within 60days, that teenager would have a FICO Score. Even though the score would always be around 680, it still gave that person the opportunity to take out a loan.

As long as a person had a couple of credit references, even though they would be only 90 days old, would give that person a FICO credit score. In many situations, that person could turn around and take out a mortgage, or purchase car. We have done this many times for the last 15 years.

A recent subtle change by FICO has made those days long gone. FICO does not usually report any changes to their algorithm that calculates the FICO credit scores.

FICO now requires at least six months of account history before the 3 Classic FICO scores (including the FICO 8 scores) will show up in a credit report. If a person opens a credit card in January, it will take until at least July before a FICO score will be calculated.

That means no quick fixes for millions of consumers. It requires better planning. Consumers can’t wait until the last minute and open an account and expect FICO Scores to show up within a couple of months. They have to plan ahead now.

Also, consumers cannot be fooled by those consumer Vantage Scores. They will generate within 30 days after a new account has been established. This can fool many people. They will see those Vantage Scores somewhere else, and then go to a lender and realize they have no FICO Scores.

If anyone is looking to purchase a house, a car, and planning on taking out a loan, it is critical to get some credit references in your credit report now. Otherwise, you could be waiting a few more months.

Going from What You Thought was an “A” to a “D” in Understanding Your Credit Scores

Fri, 18 Feb 2022 21:46:40 GMT

When reviewing a credit situation or teaching a class on credit scores, it is always interesting to get feedback. People always state that they know a lot and are an “A” student in understanding their credit score. After a review is complete however, they quickly discover that many important points have been completely overlooked, and their credit score understanding is more like a “D”. As one professor put it, “The vast majority of individuals do not even have any fathom idea of all the factors impacting their credit scores.”

No one wants to be told that they don't understand something. But I hear this a lot when completing a credit review, “I thought I was an ‘A’ in understanding my credit score when in actuality, I am really a ‘D’.”

The Missteps

Most individuals are always looking at utilization ratios, collections, late payments and inquiries. I hear it all the time; “This company pulled my credit report and my scores dropped 35 points.” Or, “I am getting my utilization ratio on ABC Bankcard under 30%.” They fail to realize a balance with a car loan, the deferred student loans, or a missing account with a certain type of lender. There are always points missed in a every review I have seen.

Executive Director of the Consumer Federation of America Stephen Brobeck stated several years ago, “Consumers are not as knowledgeable as they think. This increases the costs of their credit and insurance, (and) also reduces the availability of other services.

This is absolutely true!

The 5 Critical Questions to Ask Yourself

My questions I pose to everyone:

What credit score model are you following?

Is it the Classic FICO Score used in most lending?

Where can you access the Classic FICO Scores?

Do you know where to go to access them? Their availability is limited.

Do you know how many grades a mortgage lender or an auto lender uses to grade your credit score qualifications? Do you know what your credit score grade is?

There can be upwards of almost a dozen different grades. Most everyone does not know this because of the complexity.

Do you know the added costs if you are not an “A” credit score?

There are always costs that can cost you several thousands of dollars. Again, the complexity makes it difficult to know this.

Do you know one step you can do to improve your FICO Scores?

Do you have to close an account, open an account, pay down an account, or use

a certain credit card?

Do you really want to know?

Or do you want to think you have a grade “A” knowledge with less than stellar understanding? One husband emails me a few weeks ago to ask for help with his wife’s credit score which is 603. Then he emails me a day later, “I understand credit and there is nothing you can do to help us out.” That is the type of thinking that will cost you a lot of time and money!

Mr. Brobeck is right! The less each consumer knows, the more that person will pay in extra fees – and it is a lot more than everyone realizes.

For this reason alone, it is worth becoming more knowledgeable – it will save you a lot of money!

The Differences to a Drop in Credit Scores from a Late Payment

Fri, 25 Sep 2020 23:34:00 GMT

No one wants to have a late payment show up on his / her credit report. Nevertheless, it happens. Due dates or recent charges are easily forgotten and before you know it, a 30-day late payment appears on your credit report. Your FICO credit scores suddenly decline and you are left wondering, “What factors from a late payment drop your credit scores?”

FICO state that 35% of your FICO® scores are based on payment history. There are several weighing “Late payment” factors that will decide the total drop to your FICO scores. Do you know them? Unfortunately, “experienced” credit counselors and loan officers are largely unaware of these factors that weigh down your FICO scores from a late payment. Let’s identify them. There is some complexity here.

There are two consumers who both have a 30-day late payment. The drop to their FICO credit scores will be different because it is based on several weighing factors. One could see a drop of 20 points after a late payment while a second consumer could see 120-point drop from a late payment.

These late payment factors are

The amount past due
The outstanding balance
How late was the late payment
How recent was the late payment
The number of accounts that have had a late payment
How recent was the loan opened
The utilization ratio of the loan / line of credit.

The Late Payment Factors

Obviously, any loan with an amount past due will drop FICO scores. A loan with an amount past due of $10 will have less impact to lower scores than an account that has $2,500 past due. The greater amount past due, the lower the FICO scores.

A late payment on a mortgage will almost always lower FICO scores more than a late payment on a $100 credit card. The reason? The balance on the loan that had a late payment helps determine the extent FICO scores will decline. The larger the balance – such as an auto loan or mortgage, the lower the FICO scores from a late payment.

How many payments past due is another determining factor into your FICO scores? A 30-day late payment (or 1 payment behind) will drop FICO scores -- say 40 points. A 60-day late payment (or 2 months behind) will drop FICO scores more than a 30-day late payment – say 80 points. A 30-day late payment could drop FICO Score 40 points while a 60-day late payment could lower FICO scores 80 points. (This is a hypothetical example to show the difference in impact from a 30-day and a 60-day late payment).

If there is only one account with a late payment, the drop to FICO scores will be less severe than if there are two accounts with a late payment. The number of accounts with a late payment is a real factor in FICO scores. If most of your accounts in your credit report have had at least one 30-day late payment, the drop to your FICO scores will be substantial for an extended period of time – up to seven years.

Has the loan with a 30-day late payment been opened two months or ten years? Any newly opened account with a late payment will drop FICO scores more than an account that has been opened for ten years and has a late payment. New accounts have less payment history and are considered more risky. Any new loan with a late payment will drop FICO scores a lot more. A new loan is anything considered opened within the last 12 months.

Finally, the utilization ratio also plays a factor in determining the drop to FICO Scores. You have a credit card (Credit Card A) with a $1,000 credit limit and a balance of $1,000. A 30-day late payment will lower FICO scores far more than if a second credit credit card only had a $50 balance (Credit Card B). Credit card A has a utilization ratio of 100% while credit card B has a utilization ratio of only 5%. Any late payments on credit cards with high utilization ratios will drop FICO scores much further. There is much more risk of default from a higher utilization ratio.

Two Different Examples

If Tom has a late payment on a credit card with a current balance of $100, the credit limit is $10,000 (utilization ratio of 1%) and the late payment occurred six years ago, the drop to the FICO scores will be minimal – say 20 points.

If April has a late payment of $1,500 that is currently past due, on a loan amount of $250,000, and it is the only loan in her credit report that has a late payment, along with the fact the loan was just opened two months ago and the utilization ratio is 100% (Initial loan amount $250,000 with the current balance of $250,000), and two other loans are just reporting their first 30-day late payments, the drop to her FICO scores could be upwards of 100 to 120 points.

If you have late payments on your credit report, you can create a better strategy to counter some of the drop to your FICO scores. Knowing how FICO determines the drop to FICO Scores can help all consumers know what to do when there is a late payment reported on your credit report.

This Issue Can Drop Your FICO® Scores for 10 Years

Fri, 12 Jun 2020 22:14:00 GMT

It is having a finance company as one of your lender’s in your credit report.

John was taking out a mortgage and had a 717 FICO Score. He wanted to get above 720 so that he could save over $2,000 in loan fees. He noticed a finance company as one of the factors lowering his FICO Scores. He tried without success to identify the lender and remove it. It was a loan associated with his Toyota truck. AS a result, he had to pay more money for his mortgage because of this issue.

How Does It Impact Your FICO Scores?

FICO often lists this as one of the issues lowering your FICO Scores; “Too Many Consumer Finance Company Accounts.”What is a finance company, how much does a finance company lower your FICO Scores, and how long does it lower your FICO scores? Let’s walk through this.

What is a FINANCE COMPANY?

A finance company account is usually a high-risk lender that lends to those with below average FICO scores. However, they are often found in your credit report even if you have a 750 or an 800 FICO score. Finance Companies can be pay day lenders, a lender which offers 90, 180 day and even one year same as cash options for retail stores, or many small auto dealerships that have an inhouse lender tailored to help finance auto loans for consumers with low FICO scores. Some examples include Wells Fargo Finance, Main Street Finance (formerly Citifinancial) and Security Finance.

Identifying a finance company is hard. It is the three credit bureaus that classify a certain lender as a finance company and those lender classifications are kept confidential by the credit bureaus. So, in many cases, we do not know which lender is a finance company. FICO will just say there is a finance company in our credit report that is lowering our FICO scores.

How Much / Long Does a Finance Company Lower Your FICO Scores?

Up to Ten Years. The impact to your FICO Scores depends on each individual report and there is some variance. Nevertheless, a finance company will lower FICO Scores between 12 to 15 points on average the entire time that lender account remains on your credit report. If you have a 750 FICO Score without a finance company in your credit report, it will be 735 with a finance company in it.

How Can You Avoid a Finance Company Account?

This is the most difficult task because of the lack of information readily available to you and me. It is best to get loans through banks and credit unions, or other reputable lenders such as a store account, like Home Depot, Lowes, Macys, or Walmart. Do not take offers to have the dealership self-finance an auto loan. Work to get an auto loan (or any loan) through a reputable auto lender.

Finally, avoid pay day lenders. Such lenders as mostly classified as a finance companies and will do a lot of harm to your FICO Scores.

Know This Before You Elect to Skip a Mortgage Payment

Sat, 28 Mar 2020 00:19:00 GMT

During the Financial Crisis of 2008 and beyond, many homeowners found themselves upside down in their primary residence: they owed more on their mortgage than the value of their home. Lenders came up with a possible solution to offer consumers a loan modification. How did a modification impact their FICO® scores and their finances? There is something critically important to know before anyone goes down this path.

Hundreds of thousands of homeowners were offered a loan modification in hopes of keeping their payments on-time. In most cases, a loan modification allowed homeowners to lower their payments for a period of time or even skip a few payments until the end of the loan.

There was a big problem that many homeowners did not know until months and years later. There are two factors in calculating FICO scores that will drop FICO scores 50 to 60 points on average. In addition, past loan modifications had a great impact on such homeowner’s ability to get a mortgage for several years.

What Happens to a Mortgage When Payments are Skipped or Modified?

If someone has a mortgage payment of $1,500 and he / she runs into employment or other financial problems, such person is encouraged to complete a modification application with the mortgage lender. This can take several weeks and even a few months to gain approval. If approved, a lender grants a modification to the loan payment. In this example, the lender drops the loan payment to $1,300 for 12 months.

Or you notify the lender that you lost your job. You ask the lender to skip a couple of mortgage payments and add them to the end.

Both situations sounds workable – right? However, there’s a bigger problem looming that can impact FICO scores and finances for years to come. Many consumers have later discovered that if they would have known the true impact to their finances from a loan modification, they would have never agreed to it.

The Difference Between a Satisfactory and a Derogatory Account

The credit bureaus classify a satisfactory account as one which a consumer has made payments on time over the last seven years. A derogatory account is an account when a consumer has had at least one 30-day late payment, payments have been made less than what was originally agreed in the loan documents, or any changes to extend the payments on the loan.

The lender does not have to report a 30-day late payment to show the account as a derogatory account.

Why Does this Matter?

FICO has two issues from a loan modification that most always lower a consumer’s FICO Scores. They are, Number of Accounts with Delinquency (FICO #18) and Amount Owed on Delinquent Accounts (FICO #34).

Number of Accounts with Delinquency

How many is too many that it will drop your FICO Scores? One.

So having a mortgage skip a payment (even though it is agreed to by the lender) will most likely lower your FICO scores from this issue – even if there are no 30-day late payments reported. Having not make the same payment that were agreed upon when the note was signed classifies this loan as a derogatory account. The drop to FICO scores from this issue can be 20-25 points.

Amount Owed on Delinquent Account

How does this factor impact FICO Scores? Whenever a derogatory account has a balance, it lowers FICO scores. A mortgage is usually a large balance. The drop to the FICO scores from this issue can be 25 to 30 points.

The Drop to Your FICO Scores

Add both issues up and you can easily see a drop in the FICO scores of 50 to 60 points from a loan modification with a mortgage.

A Second Future Concern

Many consumers who had a modification soon discovered that they were ineligible to refinance their mortgage to a lower interest rate. Most mortgage lenders prohibited a new mortgage from anyone who had a past loan modification.

In addition, the borrower was ineligible to purchase another home and taking out another mortgage.

This problem went on for four to five years after the modification. Such consumers were basically stuck in tehri mortgage unless they wanted to sell their home and rent. It was not until about 2016 / 2017 that mortgage lenders started dropping their restrictions on past mortgage modifications.

What to Know?

If you have no choice but to skip a mortgage payment, take advantage of this opportunity. Ask the lender for a letter certifying that skipping a mortgage payment will not impact your credit. This can give you some possible protection in case you discover your credit has been damaged.

Get documentation if you can from the lender protecting your credit!

If you can still make your payment, you would be wise to most likely protect your financial opportunities – and your FICO scores.

This is something you need to consider before you opt to skip a mortgage payment or modify your mortgage payments.

One Credit Score Goes Up, All Credit Scores Go Up - Right?

Thu, 23 Jan 2020 00:42:00 GMT

Many incorrectly believe as long as your Credit Karma (Vantage) and other consumer scores go up, your FICO Scores improve. That seems to make common sense. However, in a U.S. government survey, it was determined that Vantage Scores go up quite often while FICO scores go down. It has been documented many times to see there are substantive differences that show Vantage Scores improving while FICO scores decline, and vice versa. This issue makes the Vantage Score and other consumer credit score models unreliable for consumers.

How is that? The differences fool many consumers.

FICO Scores versus Vantage Scores

There are some similarities.

Have a 30-day late payment, both Vantage and FICO credit scores will decline.

Have a lender’s “hard” inquiry and both Vantage and FICO scores will decline.

Pay down $1,000 on a $10,000 credit card balance and Vantage and FICO scores will both improve.

There are many instances however when the FICO and Vantage scores go in different directions

Open a new loan and a Vantage Score can decline, while the FICO score increases.

Pay off a Discover $100 credit card balance and your Vantage Scores increase, but the FICO scores decline.

Using the Same Credit Information

Vantage Scores state they use the same credit information as FICO Scores to determine their Vantage Scores. As you can see, this is a half-truth.

Vantage Scores are based on your Experian credit report for your Experian Vantage Score, based on Equifax for your Equifax Vantage Score, and based on TransUnion for your TransUnion Vantage Score.

FICO Scores also use Experian, Equifax and TransUnion credit reports to determine your Experian, Equifax and TransUnion FICO Scores respectively.

That is where their truth ends to state that Vantage Scores use the same credit information as FICO credit scores.

FICO Credit Scores also look at additional information in your credit report that Vantage Scores do not consider. FICO credit scores look at your credit card usage with banks and national credit card companies, and loans with high-risk lenders such as payday lenders and finance companies. FICO Scores measure medical collections differently than Vantage Scores.

An entire book could be written to identify all the differences between Vantage Scores and FICO Scores.

What Should You Do?

Bottom line: Do not rely upon any Vantage Score movement as an indicator of your FICO Credit Scores improvement or decline. Vantage Scores are just unreliable when trying to track your lender’s FICO Classic Scores – the scores your mortgage (and most credit card and auto) lenders use.

Make sure you track your Classic FICO Scores to get an accurate indicator the direction your lender’s FICO scores are moving. You can access your Classic FICO Scores through My Credit Plan.

Answers to the December Questions on Inquiries and Lenders

Tue, 31 Dec 2019 18:40:00 GMT

Question Number 1 How soon after a lender requests your credit report does the hard inquiry lower your lender’s FICO scores?

FICO scores are very time sensitive. These scores look at months, not days, in determining time for numerous calculations. There is a particular time each time when FICO scores turn the page from one month to another month. It is the beginning of each new month that these calculations are all updated. I call it the FICO monthly transition point.

Why is this so critical? It is when all time sensitive issues are updated for the month. At the beginning of each new month, hard inquiries are updated and impact the FICO scores. There are two points to understand.

1. Lenders have pulled a client’s credit report multiple times within a month. Does that mean if the credit reports are not requested at the same exact day that the lender who pulls the client’s credit report the following day is going to have lower FICO scores?

No. The same FICO score (s) that was requested by the lender the previous day is the same FICO score (s) given the following day. Lenders see this hundreds of times each day. So why didn’t the second lender’s FICO scores drop on the following day? Because the impact from the hard inquiry does not impact the FICO scores until the beginning of the following month (all things remaining equal in the two credit reports).

2. FICO reason code 8 is “Too many inquiries last 12 months”. What is the last 12 months? Is it 12 months from today’s date when your credit report is pulled? Say it is the 10^thof January. Is it all inquiries from January 11^th last year to January 10^th this year? It is the beginning of each month. Your FICO score goes back to the 12 “completed” months and those inquiries impact and lower a FICO score.

The number of hard inquiries is updated at the monthly transition point, or at the very beginning of the following month. This is when the average account age, the number of new accounts, the time since delinquency, the time since derogatory public records and collections, along with other time calculations, are updated in the number of months for FICO scores.

Question Number 2 - Increases in purchasing power (and / or lower mortgage interest rates) are determined by your mortgage lender in increments of how many Classic FICO Score points?

It is 20 points from 580 to 800. The same interest rate is given for example to a consumer who has a 660 and a 679 (not a 680 score), a 680 and a 699 (not a 700 score), and a 720 and 739 (not a 740 score).

Question Number 3 - There are two borrowers on a mortgage application. Borrower A has FICO scores of 650, 681, and 693. Borrower B has FICO scores of 696, 701, 713. Which FICO score is used for their loan approval and interest rate?

It is the lowest middle score of both borrowers. The middle score of Borrower A is 681. The middle score of Borrower B is 701. It is the lower of these two scores, or 681 in this example.

Question Number 4 - An individual is trying to reestablish credit after a period of derogatory marks and no recent loan activity. Which one of the following statements is true about credit cards and FICO scores (Everything considered equal)?

It is opening an American Express credit card will increase FICO scores more than opening Security Service Credit Union credit card. Why? No disrespect to Security Service Federal Credit Union and any other credit union. Bank credit cards hold more value to the Classic FICO score than a credit union credit card. Open an American Express card and it will boost your Classic FICO scores higher than any other card – all things considered equal. It comes from FICO reason code 15 – “Lack of recent bank / national revolving information.”

What Your Mortgage Loan Officer will not Tell You!

Tue, 10 Dec 2019 21:53:00 GMT

A frantic mother called to know why her daughter’s FICO® scores had dropped 30 points within a few weeks. She was told her daughter’s interest rate would be almost ½% higher on a $325,000 loan because of her lower scores.

What happen next is beyond criminal.

Finding out that his client had reached out to a FICO® score expert, the loan officer called and told her that no one would be able to help her raise her scores. Since he himself could not find any way to increase her daughter’s score, no one else could. She would have to just acknowledge she would have to pay more.

The extra costs will hit her pocketbook for an almost an extra $1,000 more annually.

Shame on this loan officer! He lied to her. This happens all the time. It is a sham and it costs many homebuyers thousands of dollars!

An estimated 70% of homebuyers are paying more than they should -- all because their FICO scores could have been higher if they knew what they should do before they close on their mortgage!

They are all inept!

At a meeting of over 50 certified housing counselors, a pointed question was asked; “Do loan officers know how to correctly counsel prospective homebuyers how to improve their credit scores. NOT ONE OF THEM RAISED THEIR HANDS – NOT ONE. One eventually yelled out to the confirmation of all attending, “They are all inept!”

There are two serious points to consider:

Loan Officers
Failure to Maximize Client’s Scores
Loan Officer Exams

Loan Officers

Loan officers want you to think they really do know everything about everything, including FICO scores. They don't want you to know differently. Even if they could, they bypass this opportunity for you. It is too distracting. Even if you could lower your monthly payment by $100 or even $200 a month by raising your scores, your loan officer really doesn't care. It doesn't benefit them. It is not making them more money. More importantly to you, it is not your loan officer making the monthly payment. It is you! They want you to close on your mortgage because they want to be paid today.

Mortgage loan officers are NOT certified credit counselors. They are NOT FICO score experts. They may be nice, and they can tell you every mortgage loan guideline, but they can't tell you how to maximize your FICO scores. They may tell you one or two items that raise your FICO scores a few points. But all too often, many more FICO score points higher are left on the table because those solutions are not given to you. Why? Loan officers don't know.

Failure to Maximize Scores

Those of us in the credit counseling and education fields have not found one loan officer that knows all three dozen factors that determine the FICO credit scores. We have run into many lenders who claim they are very knowledgeable, but after a short Q&A session, they always falter to even identify a mere ten factors of the FICO Score.

We run into "knowledgeable" experienced loan officers in a court proceeding as someone's credit expert. It doesn't take long into a deposition or cross examination that these "knowledgeable" loan officer is NOT A CREDIT EXPERT.

If loan officers don’t know all the factors that drive a FICO Score, how can any loan officer identify all your possible solutions to maximize your scores? They can’t! It doesn’t matter how “knowledgeable or experienced“ they are. They are costing you money.

Loan Officer Exams

Having worked on the national SAFE Mortgage Exam committee (and its predecessor) for almost 15 years, I have reviewed the answers to many loan questions. Loan officers always perform poorly when answering credit questions. I have seen their pass rates on basic credit questions consistently in the 20 to 30 percentile.

A more recent set of credit questions have fared no better, I have seen loan officers with successful pass rates from credit questions between 17 and 31%. It is stunning.

Here are some of the recent questions asked of mortgage loan officers and their respective pass rates:

How long does an inquiry lower a credit score?
1. (28% accurate)
How many days do multiple mortgage lenders have to pull your credit report and only count as one inquiry?
1. (17% accurate)
What is the optimal credit card utilization ratio to maximize a FICO score?
1. (22% accurate)

They may give you a suggestion or two that may or may not be right. They just don’t know. As a result, you are left with higher rate and fees, probably adding thousands extra to your mortgage payments.

The best advice for you? Create an account with My Credit Plan, pull your lender’s report and FICO scores, and My Credit Plan identifies many possible personal solutions to higher FICO scores. There is a reason the average score improvement of 73 points far surpasses any other program. It is very extensive. Start an account with My Credit Plan today. You will not regret it.