Re: Guess the cause of my score drop
11-30-2012 12:01 AM
Well I don't know how it happened but I just hope you're going to be awake to provide the answer.
Indeed. Here it is:
As I’ve hinted at, my 56 points drop was the result of a string of events that just happen to have occurred at the same time. There are 3 major events, mainly just 2. One of my accounts reported a new balance, and one of my new accounts started reporting after the first statement. Normally these events would happen days apart, but due to an apparent Score Watch error, they resulted in a single alert, and therefore a single score change.
I did max out on one card, the card with a new balance.
This is because the card is a BofA-issued Visa Signature, which doesn’t report the credit limit but does report the high balance. For FICO scoring purposes, the high balance is treated as the credit limit. I’ve been in the process of building up the high balance for this card, so when BofA reported the new balance, which was also the high balance, utilization on the card was 100%. I bet this cost me quite a few points. Overall utilization was hurt, too, but not by that much. My previous utilization was around 25%. I don’t think 40% is that much different.
The last time I added a new account, I suffered a penalty of merely 15 points. My score is lower now, so the penalty should be less severe, right? However, the Score Watch alert includes the following:
"This score decrease may be caused by this new reason:
- You have not established a long revolving credit history. "
With the new card added, my AAoA fell to below 5 months. I had just finished an app spree, but this new account apparently brought the AAoA down to the range that FICO considers a short revolving credit history. It looks like the critical point is at 5 months or so. The penalty for falling below this must be severe, way higher than the 15 points I had lost due to another new account.