Do I have this correct or am I just imagining that credit scores...

[whistle]

..as used by banks and credit card companies have a threshold limit of 666? That is, if ones score falls below that level credit for major purchases such as automobiles, homes, refinancing and other big ticket financial transactions that require longer term installment credit are denied without a secondary signature and the interest rates are usually jacked up considerably? Scores in the 700 and over range are typically run through without fault provided the person is not approaching over extension compared to income. The gray area seems to be this range from 666 to 699. What have others on DU experienced with this?

[RevolutionStartsNow]

1. 666? I don't think that's the case...

You are correct that if you have a score over 700, you will typically qualify for the best interest rates, but the grey area is more like 620-700. 620 is a threshold number for sure, then again around 675-680.

It has to do with the probability that you will default or make a late payment. The lower your score, the higher probability you will default, and therefore you pay a higher rate.

The biggest problem with this system, in my opinion, is how complex they've made it; until a few years ago you couldn't even get your own FICO score (or at least not easily). Even now you can get your score but good luck trying to figure out how it works.

And there are some very silly aspects of credit scoring; for example, about 35% of the weighting is based on your ratio of revolving balance to revolving credit limit. The lower your balance (in relation to the total limit), the better your score. I discovered that I could raise my score by several points just by paying down $200 on a $300 limit credit card.

[hector459]

2. It's still always "discretionary" Usually used against minorities

I know, my sister works for a bank and it really all depends on who and what you are. Lot's of really bad loans made to whites under the threshold but they usually live in certain "safe" areas (upper class neighborhoods). They can us a boarderline credit rating any way they want to. I could say more, but then I would have to kill you. ;)

[Mystified]

6. I disagree

I work for one of the largest mortgage companies in the nation and I can tell you flat out that the company does not discriminate on any basis. If we can qualify you for a loan, you will get the loan. The more loans we do, the more money we make. In addition, the floor I work on has about 200 people wokring the phones selling mortgages all around the country. The Account Executive never sees the person on the other end of the line. Plus, the federal gov't monitors loans based on race and sex (based on info voluntarily provided by the applicant) to ensure discrimination is not occuring. There may be the occasional po-dunk local bank that will turn away loans, but you don't encounter that at the major institutions any longer. It's all about market share.

[hector459]

14. Why do you think you have so many mortgage foreclosures from

"qualified" borrowers if they were so credit worthy? And the gimmicks that lenders use to qualify borrowers is also discretionary. You may not even see it but believe me, the discrimination is real.

[whistle]

3. I found this suggestion for helping credit scores on a chat site....

<snip>

The computerized genie who scores credit does not like a high ratio of balances to credit lines because it may indicate financial distress. But don't run out tomorrow to open some more lines, because the genie also has a strong distaste for multiple new accounts in a short period of time. That can be another indicator of financial distress.

Here is how the genie who scores credit views credit card usage.

GOOD/ /BAD

4 Cards/ /15 Cards

No Delinquencies in Past Two Years/ /Many Delinquencies in Past Two Years

Balance Below 50% of Line On All Cards/ /Many Cards Maxed Out

No Cards Acquired in Last Two Years/ /Three New Cards Acquired in Last Month


Copyright Jack Guttentag 2004

[webDude]

4. some more sh _ t of FICO...

-up to 30% depends on where you live(zip).
-It depends on where you WORK(ExxonMobil versus McDonalds)
-Some credit card companies will not post your credit limit. So what, you say? If they do this, then the scoring puts your highest BALANCE as your limit. So, for example, if you have a card with a limit of $1000, but they don't post it, then your highest balance becomes the limit. So if your highest balance was $500 and your present balance is $480, it makes it look like you are maxed out instead of at below 50% of your balance.

they will do this so your score will not be high and other credit card companies won't vie for your attention.

[RevolutionStartsNow]

9. Agree, and disagree

"up to 30% depends on where you live(zip)."

I'm not sure I believe that. While I wouldn't put it past them, I've studied the FICO system enough to doubt that much depends on your zip code.

I don't know about the where you work part. I work for myself, so how does that affect my score?

I do agree with that last one; I have a credit card that does that, where they don't report the limit, only the balance, and probably for just the reason you describe.

[JohnnyCougar]

5. Is there any way to find out your score that is free?

I heard you have to pay money to find out.

[Mystified]

7. I believe there is

I know a new law just passed entitling every American to receive one free credit report annually, but I think they were going to roll it out a few states at a time. If you're willing to part with $35-$40 you can get all 3 major credit bureau reports at www.myfico.com

[lectrobyte]

8. Of course, 666 is everywhere. Do not antagonize the dark force.

It's in the barcodes of practically everything.

[whistle]

11. Am I missing something, there is only one numeral 6 in that....

...barcode, or are you suggesting that the triple parallel bars in red signify sixes? But they are longer, or does that matter? Who invented bar codes anyway?

[lectrobyte]

12. Don't believe everything you read on the internet. Look at some

barcodes yourself and make up your own mind. The three sixes are separator characters or something like that, at least officially...

[RevolutionStartsNow]

10. Here's a good credit score "trick" I learned recently

If you have a copy of your credit report, check out the reporting dates of your various credit cards. It's usually on or right after your due date.

Now, some of us don't always pay our credit cards exactly on the due date, because of the grace periods offered; we might pay it just after the due date but before any late fee is incurred. No big deal, right?
But ideally you want your payments posted before that reporting date, so that the balance will always be at its lowest point for the month.
This can have a significant impact on your score, depending on how much you are paying and how high you keep your balances. You need to make sure you get your payments in every month before the reporting date.

[indigo]

13. Thresholds vary from lender to lender

For example, your mortgage loan rate may differ depending on where you fall. One mortgage company I talked to used: 670,720,750+, where each level knocks off a 1/4 pt to evaluate a mortgage app for the self-employed (in this situation, credit scores are given a great deal of weight). Whether credit card company, car loan, mortgage -- interpretation of scores will depend on a particular lender's internal rating system.

Some lenders use one reporting agency (one of Equifax, Experian or Trans Union), some use all three. Generally, your score varies from one to the other, so lenders that use all three will take the 'middle score'.

"Where you work" doesn't count for much on your credit report as this is a self-reported information that is not verified by the credit reporting agencies. However, reporting 'self-employed' status can be a ding on an *application*. For more complex situations like a mortgage, the self-employed generally pay a higher rate that the 'employed'. The only way around that is supplying documentation (tax records), excellent credit (750+) and a healthy down payment.

The most important factors in calculation of your credit score are, 1) as already mentioned, your balance/limit ratio 2) delinquint acct status (paid vs unpaid) and 3) 'age' of any blemish. For example, if you miss a payment on a account, it can have a large impact immediately thereafter. But if you missed a payment 2+ years ago, it impact is relatively minor (unless you do it again). And 4) how long you've had credit. (you'd like 10yrs +)