Debt to credit ratio question.

[Anonymous]

Hello. I am new to Fico forum and wanted to see if someone would be able to answer some questions and concerns I have. I have had my navy credit card for 7 months. Hardly use it. My credit limit is 2k I used $295 which would be below 20%. I got a notification from my credit monitoring from equifax and it dropped 39 points. Like WTH am I missing? Transunion dropped about 8 points not sure what experian reads but this doesn't make sense nor sound right. I am in the process of buying a house and then my score drops 39 points and I utilized below 20%. Will someone please shed some light and help me please because something is not adding up. Thanks in advance guys.

t

[jamie123]

How many credit cards do you have?

If it is your only credit card, you are better off letting it report $0. There is a calculation that determines what percentage of your credit cards have a reporting balance. If you only have 1 card and it reports, you have 100% of your credit cards reporting a balance. You won't get nicked points if this number is kept under 50%. That's why you need at least 3 credit cards, but if you are house hunting it is definitely best to wait until after the house closes to get more cards.

[DollyLama]

Hmm that utilization should not ding that on that card alone, but if you carry balances on others, it could have crossed a threshold of overall utilization. When you state you "hardly use it", did you have and maintain a zero reporting balance on the card till this last statement cut. Many get dinged for a dormant card becoming active again. The only way to know is to pull your report, especially the one that got hit the hardest. Look for differences, did your oldest account age off and considerably drop your average age of account. Have you gone on a CC app spree recently. Not unusal for hiding collectors over a charge off collection to start reporting either. 

[Anonymous]

Jamie has definitely asked the right question, which is how many credit cards do you have?  Once we know that we can tell our OP how to best prepare his score for a mortgage.

Side note to Jamie:

You have raised an interesting question, which is what is the best way to optimize a score when the person has only one credit card.  There's basically two factors at play.

     (1) The scoring penalty for having all cards at $0

     (2) The score penalty for having all cards showing a balance

This has been debated here a number of times with almost a 100% consensus that Penalty #1 is greater than Penalty #2 for the person with exactly one card.  Thus the recommended action for such a person is not to have the card report $0 but rather to report a small dollar amount (e.g. $10).

Of course, we hope our OP will tell us that he has multiple cards, in which case we can recommend the optimal strategy of All Cards at Zero Except One (AZEO) with one card reporting reporting a small balance.

[SouthJamaica]

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@Anonymous wrote:

Hello. I am new to Fico forum and wanted to see if someone would be able to answer some questions and concerns I have. I have had my navy credit card for 7 months. Hardly use it. My credit limit is 2k I used $295 which would be below 20%. I got a notification from my credit monitoring from equifax and it dropped 39 points. Like WTH am I missing? Transunion dropped about 8 points not sure what experian reads but this doesn't make sense nor sound right. I am in the process of buying a house and then my score drops 39 points and I utilized below 20%. Will someone please shed some light and help me please because something is not adding up. Thanks in advance guys.

t

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It is impossible to tell what caused the point drop.

You would need to examine your credit report, and compare it with an earlier report with the higher score, to even begin to form a theory as to what caused it.

If you're in the process of buying a house you would do well to be following your MyFICO 3B reports, showing the mortgage scores.

[Thomas_Thumb]

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@jamie123 wrote:

How many credit cards do you have?

If it is your only credit card, you are better off letting it report $0. There is a calculation that determines what percentage of your credit cards have a reporting balance. If you only have 1 card and it reports, you have 100% of your credit cards reporting a balance. You won't get nicked points if this number is kept under 50%. That's why you need at least 3 credit cards, but if you are house hunting it is definitely best to wait until after the house closes to get more cards.

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jamie123 - For those with a single card data suggests it is better to report a small balance than no balance at all.

Key point is with a single card a high utilization results in a double wammy (in addition to a high card utilization, aggregate utilization will necessarily be high). So for those with only 1 card, reported balance should be less than 9% of credit limit for best results.

Here is how I'd rank  single card reporting scenerio from best to worst:

1) Card reports a balance above 0% but less than 9%

2) Card reports a balance above 9% but less than 29%

3) Card reports zero balance

4) Card reports a balance above 29% but below 49%

5) Card reports a balance above 49% but below max out condition (let's say 89%)

6) Card reports a max out condition above 89%