Blown Mortgage

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If I could of reached my hand through the phone and strangled the representative from FICO on the other end of the phone, I would of.

Got a client – teacher, divorced, been on the job 30 years, good credit except for some minor dings, SFR, trying to do a cash-out conforming refinance to pay off some of her outstanding credit card debt.

Pretty much done deal (even with the lower appraised value) except her mid-FICO score is 679 and we have price bumps for:

<75-80% LTV cash-out refinance

>680 mid-FICO score

So I tell her we have to raise her FICO mid-score by one single point. We sit down and review her credit report in detail. I hand and email her my credit repositories letter detailing how to legally clear up your credit history with Experian, Equifax and TransUnion complete with the three names, addresses, phone number and websites.

It’s the usual stuff we deal with every day with our clients. “I haven’t used my Sears card in over 6 years and Sears is reporting me 2×30 days late last year?” kind of conversation.

So she hits the phones and calls every single one of her erroneous creditors listed on her credit report.

Most of them will only clear the incorrect items with the three credit repositories, which can take 30-60 days.

We were able to do a conference call with Macys who was showing her 6×30 days late last year. She was never late with Macys. Macys doesn’t know how this got reported, so Macys agrees to fax a letter removing all 30-day lates and showing a zero balance.

Outstanding. I forward this on to the credit bureaus and was told to wait 2-3 days for the FICO correction.

Three days later I get the new credit report and her FICO scores have DROPPED 30-35 points after removing the Macys 6×30 day lates from last year and paying off the balance.

So I call up FICO and ask them WTF?

Now I’m told since the 6×30 day lates were removed, FICO’s algorithm credit matrix will now look more heavily at the outstanding credit card debt to high credit limits.

Let me get this straight…

1. We clean up her credit history by removing an error by a creditor in writing.

2. She pays off numerous small credit cards and pays down some of her larger credit card debt.

3. She gets more 30-day late pays removed (but only through the three credit repositories, not by fax on creditor letterhead with name and phone number).

… and you lower her FICO scores across the board?

I’m trying to remain calm with this FICO customer service rep as he is explaining over and over again about FICO’s algorithm credit matrix. That by removing the recent late pays it hurt the client’s FICO credit score.

So I ask him should she not pay a couple of credit cards and get some 30 day late pays now.

He tells me it might HELP her FICO scores to have recent late pays.

If anyone can make sense of FICO please let me know.

As an FYI… per the Federal Trade Commission (FTC), there is only one source for your clients to get a free credit report from all three credit repositories, “annualcreditreport.com”.

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