topic Re: Credit score dropped opening new cards in Understanding FICO® Scoring

Credit score dropped opening new cards

bradtech519 — Fri, 01 Jun 2012 21:23:41 GMT

Hello,

I am attempting to build credit/paid in fulls. I am using transunions tool and it is stating the main factors hurting my score were that I didn't have any open credit cards. I had a stage card and older cards that I paid off and stopped using entirely. (2009 last used). I had disputed some negative info and my score jumped up to 640. After a new credit card its dropped to 626. I actually have two new cards and the 2nd one hasn't hit my report yet. I plan on getting the "paid in full" each month because this is what I was told would help establish credit. My goal is to get approved for a home loan in a year or two. Current debt to income is around 20% due to student loans but they have been paid succesfully on time and I own a rental house that pays the loans essentially. My scores were the following 640 experian 640 transunion and 580 equifax ?!?. Looks like all three will take a 10-12 point hit now. Hope I didn't make a long term mistake

Re: Credit score dropped opening new cards

Crashem — Fri, 01 Jun 2012 21:31:58 GMT

If you didn't have any open revolving trade lines, then you made the right decision. In fact, in 6 months or so, you might want to get that 3rd card. Your initial score will take a drop from having new account, new inquiries, and reduced AAoA. But in 6 months, a lot of this will recover. Remember even if you PIF, your revolving debt utilization might be high. Revolving Utilization is based off of reported balance on the card which typically occurs when the statement is generated. Only revolving debt utilization really matters.

Re: Credit score dropped opening new cards

bradtech519 — Fri, 01 Jun 2012 21:35:50 GMT

I only had old revolving lines reporting back in 2009. Nothing that is currently active. The first card has shown up on there but the capital one I have has not. I had planned on charging around 20-30% and then paying off each month around due date. I did have two denials during the process and two cards I got accepted on. So maybe the denials are hurting.. I'm done after the four tries and will wait it out.

Re: Credit score dropped opening new cards

marty56 — Fri, 01 Jun 2012 21:35:22 GMT

Are the scores you gave are FICO scores? If not you need to get your EQ/TU scores here to know were you really stand.

Re: Credit score dropped opening new cards

bradtech519 — Fri, 01 Jun 2012 21:38:57 GMT

From transunions website itself. My equifax score is quite a bit lower than the traunsion and experian ones. This site shows the equifax score correct?

Re: Credit score dropped opening new cards

Crashem — Fri, 01 Jun 2012 21:44:54 GMT

I would only bother to buy the EQ FICO score here. The TU is kind of worthless as it uses an old and not often used scoring model.

BTW, I wouldn't be surprised to see your score take a big jump in a couple of months. It seems like FICO scoring can be delayed with new trade lines appearing.

Re: Credit score dropped opening new cards

Crashem — Fri, 01 Jun 2012 21:48:13 GMT

BTW, you can use the cards as much as you want. However if you want low reported utilization (which is what you want), you need to pay just before billing cycle ends (statement date) so it reports low balance to credit bureaus. Ideal utilization for maximum FICO is 1 card that is reporting between 1-9% of total and card utilization and all other cards reporting 0. You might want to do that one month and pull your score once it all reports just to see what your max fico can look like.

Re: Credit score dropped opening new cards

bradtech519 — Fri, 01 Jun 2012 21:48:52 GMT

I thought when attempting to get a mortgage they will pull all three and use the middle score? Sorry I've read on this stuff and it seems to contradict itself a lot lol!

So Transunion and Experian give numbers that aren't really part of the three score process?

Re: Credit score dropped opening new cards

Crashem — Fri, 01 Jun 2012 21:52:30 GMT

Brad,

When you apply for mortgage, the get a FICO score (almost for sure using FICO 04) from each of the major credit bureaus (TU EQ EX). They typically use the middle score for credit scoring purposes and determining interest rates.

Re: Credit score dropped opening new cards

bradtech519 — Fri, 01 Jun 2012 21:55:19 GMT

Can I get the 04 EQ/TU/EX scores here or somewhere else? Sorry i didn't realize there were different year FICO scores. I assumed they would get what I was looking at from transunion themselves.

Re: Credit score dropped opening new cards

Crashem — Fri, 01 Jun 2012 22:01:52 GMT

The problem you have is that there is basically few places to buy your real FICO 04 score including directly from the credit bureaus. You can buy your equifax FICO 04 score from here or from equifax (but it is tricky). The TU FICO score sold here is TU98 score which is not accurate for mortgage purposes. Basically no other places to buy FICO scores. The credit scores sold by others are generally not accurate as mortgage lender pretty much use FICO 04 base scoring.

Re: Credit score dropped opening new cards

bradtech519 — Fri, 01 Jun 2012 22:05:33 GMT

That sucks I was seeing a big difference between my experian and transunion scores compared to the one here. I was 640 with both and 580 here. I wonder if my 04 Transunion and Experian are closer to the 640s they give me now or the 580 with my equifax score which now may be even lower.

Re: Credit score dropped opening new cards

Crashem — Fri, 01 Jun 2012 22:13:59 GMT

Best way is to compare the 3 reports. And when I say compare, you need to pay close attention to the details. If they are all reporting the same info, your FICO scores from the other bureaus are likely within 20-30 points of the equifax score here. Typically if you have higher utilization, you will see bigger swings between your FICO from the 3 bureaus.

Re: Credit score dropped opening new cards

llecs — Fri, 01 Jun 2012 22:50:32 GMT

It was already hinted, and maybe quasi-answered, but if you bought scores directly from Equifax, TransUnion, or Experian, then none of the scores you bought are FICO scores.

And yes, the EQ from here is used by virtually all lenders. TU FICO on here is used by some lenders, but not all. Most use a newer version that cannot be purchased from anywhere, except from your lender.

Re: Credit score dropped opening new cards

cd2004 — Sat, 02 Jun 2012 17:38:08 GMT

I think it depends if you will see a score drop based off your current file. For instance, I just got approved for 3 store cards and I was thinking that i would take a big hit after I lost 7 pts due to inquiry from Victoria secret. Low and behold 2 of those cards were added to my report this week and I received a 12 pt increase. I think because I did not have any store cards in my file it helped me and lowered my util. I still have 2 chargeoffs and judgment on my report.

Re: Credit score dropped opening new cards

whatamess — Mon, 22 Oct 2012 07:40:06 GMT

I have a question... I thought I had this thing somewhat figured out. When an account is PIF, and reports as such... does that make your score drop? It seems that this has happened to me 3Xs. When I pay off accounts my score drops anywhere from 5-11 pts. I've been trying to keep my revolving accounts @zero before the end of each billing cycle thinking it would bump up my scores. Is it that I still need to have a balance showing so that the CRA's see that there is still activity on the accounts? It seems that paying debt down is ok as long as you don't pay it off. I'm in the game, I just don't have the right coach and playbook! I'm trying... just need sum help! Trans: 705 before drop, Eq: 671 and fell to 664. Score watch is a nice tool, but its not specific. I feel like a blind man who hit the lottery, But can't find his money!:smileysad:

Re: Credit score dropped opening new cards

llecs — Mon, 22 Oct 2012 17:49:27 GMT

whatamess wrote:
I have a question... I thought I had this thing somewhat figured out. When an account is PIF, and reports as such... does that make your score drop? It seems that this has happened to me 3Xs. When I pay off accounts my score drops anywhere from 5-11 pts. I've been trying to keep my revolving accounts @zero before the end of each billing cycle thinking it would bump up my scores. Is it that I still need to have a balance showing so that the CRA's see that there is still activity on the accounts? It seems that paying debt down is ok as long as you don't pay it off. I'm in the game, I just don't have the right coach and playbook! I'm trying... just need sum help! Trans: 705 before drop, Eq: 671 and fell to 664. Score watch is a nice tool, but its not specific. I feel like a blind man who hit the lottery, But can't find his money!:smileysad:

:smileyvery-happy: on SW.

Is this a CC? The only times you'd ever see a drop on a FICO for having a zero balance is if 1) the CC or revolving was closed thereby resulting in the TL being permanently removed from util (which can result in a drop if you are carring balances on the other CCs), or 2) all of your balances hit $0 (oddly enough, FICO can ding you for having all $0 balances).

On the reporting of balances, even if you pay 100% of it off, it can still report a balance. Most CCs report the balance you had on the statement date, as opposed to the due date. Some people pay off their CCs on the due date thinking it would report $0, but they end up using it again before the statement date and that can throw off their reporting.

Aside from these two, I can't see a scenario where a $0 balance results in a drop, with that being the only issue or change on the CR. Note that for SW, SW will monitor your scores and monitor for major changes to EQ and will throw out the score and a likely reason behind that score change. Note that not all of the suggested changes results in that specific score change. For example, I once gained 20 for adding an inquiry. Inquiries don't increase your FICO so the increase was due to a dropped baddie which SW isn't designed to pick up on. In other words, you might have 3-4-5 changes on your CR that resulted in a net score change of X, but SW will only give one to you (depending on the alert type). I always recommend subscribing to a credit monitoring service that monitors all 3 reports. Some allow you to pull your reports daily and you can specifically target your report for these changes. e.g. no longer blind.

Re: Credit score dropped opening new cards

whatamess — Wed, 31 Oct 2012 12:33:14 GMT

One of those accounts was an installment loan, and the other two were revolving accounts.. I paid the installment account in full and got a SW alert about a month or so later saying that the status of the account improved but my EQ score dropped.. I've gotten pretty sharp about when my revolving accounts report.. So I zero them out or get the balance as low as I can before the closing date, But it seems everthing is ok as long as there is a balance.. Just when I zero them out my score goes down. Now my score went up after leaving one of the accounts dormant for about three months and then using it again afterwards. But it seems the more I think I know the more I find otherwise.

Re: Credit score dropped opening new cards

somnipotent — Wed, 31 Oct 2012 22:04:55 GMT

You will tend to see a drop in your scores due to the HPs on your CRs. The higher your score the harder the hit, same goes for the amount of INQs already on your report, the more you have, the softer the blow. Either way, TLs and/or CLIs generally will have an overall POSITIVE effect on your score in the long run. Like everyone else said, within 6 months your scores should recover from the INQs and be higher because you have more credit to your name.