Trouble understanding FICO hits

[Anonymous]

I have a credit card that I don't use very frequently. It's tied to one of my checking accounts, and I maintain it because it's no fee, convenient, and has a fairly high credit limit. I've had this card for several years now, and I've not had problems with it, except this: every time I use it, no matter how long it's been (a few weeks or a few months) since the last time I used it for a purchase, my FICO drops by a couple of points and won't go back up again. This has happened to me three times now, always with this card.

I never carry a balance on this card, and I always pay it off completely within a week or so of making the charge. The only reason I use the card is to keep some activity on it, for fear that the bank will cancel it if I don't. Clearly, however, this is not working for me.

So, my question is this: why does this happen? I'd always been given to understand that this type of activity is what the credit agencies like to see: moderate, responsible use of credit followed by prompt payment. This is pretty obviously not the case, since my every charge on this card is treated like the end of the world, like I'm charging a new car and not paying it off.

I'm still fighting my score up under a Chapter 7 bankruptcy, and it really annoys me that these drops keep happening. At this point, I'm not trusting that when the bankruptcy comes off my reports, as it's supposed to this summer, that my score will go up. I've taken my score from just over 600 to 674 in a little over a year, but it's dropped 6 points for two charges like the ones above, both of them for under $30! That's just ridiculous!

[smallfry]

You should see a nice point jump once the BK drops. I did. So will you.

[RobertEG]

I think what you are seeing is a minor part of FICO scoring.

Under util of revolving credit, there are three major scoring sub-categories.

Overall % util

% util on each card, and

% or revolving accounts showing ANY balance.

The most important is overall % util.  To control this, you have to know the exact date that the CCC reports to the CRAs.  If you pay, although timely, and they report a balance, it will show a % util.  But more importantly, with only one CC reporting, it will show 100% of your accounts with a balance, even if only $1.

You need to know the exact reporting date of your CCC, and post at least 5 days before that date.Pay before their reporting date.

[Jazzzy]

Hi makeinu, and welcome to the forums.

As RobertEG asks, are you sure you are paying this card off before the statement cuts? Managing debt to maximize your FICO score means not only managing the debt, but managing what reports. The amount that is reported by the credit card company is the amount shown on your reports...and that is the number your score is based on, whether it's paid off or not.

If you only have the one credit card, you don't want to let a balance show on it. For FICO scoring, you want to let a balance show on less than half of your accounts. You may benefit from opening up a couple more tradelines. After your BK drops off this summer, you shouldn't have any difficulties if you want new credit. You could get new cards now, but the offers you get, the credit lines you can start with, etc. may be better once the BK is gone.

You've made great strides...FICO is often one step back, two forward. Try not to get too frustrated with the little variances.