Don’t Mess with Credit Scores

Understanding your credit score is not always an easy task. One day it could be high, and the very next day it could be low. What should you do? Realty Times columnist, Lew Sichelman, explains this situation in his article, “Credit Scores Are Ever-Changing.”

A common scenario involves someone getting approved for a loan with the rate he or she intended, but with a credit score that was lower than anticipated. "Leave it alone,’ says Southwest Florida mortgage broker Frank Cicione.”

Cicione was teaching an understanding credit score class at the Florida Association of Mortgage Brokers annual convention in Tampa. "If it ain't broker, don't fix it," he said.

Attempting to improve your credit score can actually create further damage. “Trying to improve your score could actually result in a lower score, not a higher one. Some steps to a higher number are counterintuitive, such as opening a new account and closing out an old one, a step that you could really mess up your score.”

Personal credit scores obtained through the Internet or other sources are often misleading. “Another common mistake borrowers make is showing up at a broker's office with a credit score that has been purchased over the Internet. More likely than not, Cicione told the class, the score you have in your hands is going to be 50-60 points lower than the classic FICO score the mortgage business goes by.”

Cicione continued to say that these scores are specifically designed for consumers, not businesses. The reason scores obtained off the Internet are lower is so that consumers will not encounter any “surprises” when dealing with a lender. It helps the consumer to go into a transaction, only to hear that their credit score is higher than expected.

“But if your broker didn't mention that and the score he receives is much lower than the one you pulled, don't be alarmed. He's not trying to rip you off by forcing you into a higher-rate loan.”

Cicione explained to his class that a credit score is merely a “snapshot” of the consumer’s credit history. The score can easily change within a month, even without having any drastic changes to the account.

“Credit scores ‘are active things,’ he said. ‘They're vibrant, and a new score is generated every single time’ an inquiry is made.”

To better try and understand why your score is not as high as expected, Cicione tells his class to focus on the four codes, or factors, that are listed on each individual’s credit report.

"These codes are your roadmap,’ he said. ‘They are listed in the order of importance or weight causing a negative impact when calculating the score. And they should be relayed back to the consumer to explain how they can change their credit profile and increase their score over time.’

There will be other little things that contribute to the resulting score, but the reason codes are what you should focus on. “While four factors will be listed, the first two ‘are the ones you really want to pay attention to," Cicione said. "The lower ones are probably not worth worrying about."

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