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How quickly does FICO score respond to "improvements"?

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Anonymous
Not applicable

How quickly does FICO score respond to "improvements"?

My Fico score is pretty good (EQ was 785 but then took a hit because I used a credit card I hadn't used in 8 months!). The score report suggests that I have too many credit card accounts. I have a bunch of rarely used cards because they have special rebates or other features that make them economical for some infrequent transactions. I pay all cards in full each month but the report shows high balances on the two cards primarily used. (My impression is that Chase may be reporting balance due + all activity since statement close date when reporting to CU, even though balance due will be paid automatically.) If I close some accounts that I haven't used in the last year, and assuming little effect on total credit line available, would it make any difference and how quickly would any change be seen in the FICO score? I could easily reduce credit card use (reported balances) by 80% or more by switching to a debit card for most purchases for a few months. Again, how soon would that be reflected in a Fico score? I ask because we might be considering a mortgage this winter on purchase of second property (we don't have a mortgage on our home now). I presume a good score would be helpful in those circumstances. Thanks!
Message 1 of 6
5 REPLIES 5
laz98
Senior Contributor

Re: How quickly does FICO score respond to "improvements"?

the changes are reflected whenever the creditors report to the credit bureaus, which varies from creditor to creditor.

Message 2 of 6
RobertEG
Legendary Contributor

Re: How quickly does FICO score respond to "improvements"?

% util is the one element of FICO scoring that has no historic memory.  As soon as the next month reporting is made, the prior month % util is no longer scored.

You can shoot for monthly fine-tuning of your % util, as that helps you keep your util under constant control.  But for purpose of arriving at a FICO score that will be used by a creditor in their credit grantng decisions, getting % util to the ideal about two months before you apply for new credit is the critical time.  Now is the time to experiment and find out whether a card reports on the billing due date, or at some later time.  Then you can fine-tune util.

Ideal is having all cards below 10% util, with at least half reporting no balance.

 

 

Message 3 of 6
Anonymous
Not applicable

Re: How quickly does FICO score respond to "improvements"?

You say "Ideal is having all cards below 10% util, with at least half reporting no balance." Do you mean having each card below 10% util, or the sum of all cards less than 10% of total credit available? Our most-used card runs about 25% util. Total of all cards is well under 10% util. We've a half dozen credit cards we use regularly. If one CC wants to offer 5% rebate for some uses, and another for others, we use the cards that way. But that does mean more open accounts.
Message 4 of 6
haulingthescoreup
Moderator Emerita

Re: How quickly does FICO score respond to "improvements"?

Ehh, don't worry about the "too many accounts" bit. In almost every case, there doesn't seem to be a real ding involved.

 

What's probably happening is that like any normal person, you're waiting for your statements to generate, and then you pay your bill. Unfortunately, that means that the totals of your charges for the month on each card are being reported, and it looks like you have a lot of debt, even though you pay them off immediately.

 

If you're not getting ready to apply for new credit, the next isn't necessary. But if you are, or if you like fine-tuning your scores, try this:

 

Go online to each account 3-4 days before the next statement is due. Not the due date, but the date that the statement posts. Pay off all but one or maybe two of your cards each month. Only allow 9% or less of that card's/ those cards' balance/s to remain. Let each card's statement post, showing $0 on the paid-off cards and the minimal figure on the remaining one or two.

 

THEN go pay off that last balance. It's frighteningly easy to forget to do this, and then you have a late, yikes.

 

What this does is minimize your util (revolving credit utilization) on your reports, and your scores should benefit accordingly.

 

It's very nutty, and as I said, it's only useful if you're trying to max your scores, for whatever reason.

 

This came about because the banks were told to report a balance to the credit bureaus once a month, and they chose to report the balance on the statements in most cases. (Note: HSBC/ Orchard bank cards and US Bank CC's report the balance as of the last business day of the month, but they are distinctly in the minority.) They could have chosen to report the balance remaining, if any, as of the due date, but no.

 

So it's kinda dumb, but this is the work-around for it if you want to use it.

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 5 of 6
RobertEG
Legendary Contributor

Re: How quickly does FICO score respond to "improvements"?

If each card is below 10%, then overall % util must necessarily be below 10%.

If one card is above 10% util, and yet overall util is below 10%, the overall util is much more important.

Message 6 of 6
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