topic Re: Using Inactive Account caused 10 point Drop in Understanding FICO® Scoring

Using Inactive Account caused 10 point Drop

cem13 — Sun, 24 Jan 2016 22:49:21 GMT

I have 10 cards from various institutions. I use NFCU as my primary and my PenFed or NASA as my back up. All others are in my sock drawer.

Over the holidays, I brought all of my cards out of the darkness and into the light. I used all of them for gas, coffee, milk, and (dont tell my wife) a beer. I PIF the same day that I used them so they still reported $0.00.

My Sportsman's Visa has not been used in over 6 months but when it reported activity but a $0 balance; all 3 scores dropped EXACLT 10 points. Today, I received another message from a second card (BBVA) indicating an inactive card has become active without any point loss.

So the trigger must be 6 months but there is no penalty for a second card becoming active in my case. This is good to know because I will do a much better job with my rotation in the future.

Re: Using Inactive Account caused 10 point Drop

Thomas_Thumb — Sun, 24 Jan 2016 23:26:08 GMT

Thanks for the information.Looks like 6 months may be a trigger for an inactive label.

Cards that become inactive may suffer AA such as a reduced credit line and if left inactive for a few yesrs, closure. Years ago I did not use one of my credit cards for over a year and my CL was dropped from $20k to $13k. Now I use all my cards at least every 3 to 5 months to avoid any potential AA action. Unlikely that any AA would happen if cards are used within a 12 month frequency but, I prefer not to take the risk.

It's good you used your cards and avoided a potential surprise CL slash. I would anticipate your scores should rebound within 30 days.

Re: Using Inactive Account caused 10 point Drop

elim — Sun, 24 Jan 2016 23:39:14 GMT

Mine alert after 3 months. I rarely lose points.

Re: Using Inactive Account caused 10 point Drop

cem13 — Mon, 25 Jan 2016 00:47:13 GMT

@elim wrote:
Mine alert after 3 months. I rarely lose points.

I think 6 months is the magic number. I had a card (BBVA) that was not used for 4 months. It triggered an alert but I did not lose points.

Re: Using Inactive Account caused 10 point Drop

cem13 — Mon, 25 Jan 2016 00:49:18 GMT

@Thomas_Thumb wrote:
It's good you used your cards and avoided a potential surprise CL slash. I would anticipate your scores should rebound within 30 days.

I expect to get all those points back after one complete cycle. I have several other cards reporting monthly at $0. So my overall util is still under 5% and no more than 25% for one card. I will post back when I get my points back.

Re: Using Inactive Account caused 10 point Drop

Anonymous — Mon, 25 Jan 2016 00:59:59 GMT

Hi TT. The puzzling thing is that our OP is not posting about various kinds of AA that might be taken by a credit card company due to inactivity. (Lowering one's CL, canceling the card, etc.)

He's claiming that the FICO model itself took action against him. And what is really strange is (if true) is that the CRAs did not report any change in any of his CC balances. In other words, he believes that FICO punished him even though the CC that became "active" continued to report a $0 balance continuously.

If so, this is really surprising to me. I have never seen yet a documented case of this happening. A reported CC balance changing from $0 to a positive number -- this can certainly change your score. So could a positive balance going to $0. But a reported CC balance being $0 and staying $0 and the CL also not changing and the CC remaining open -- and yet that particular CC account causing the score to go down -- this I have never seen an authenticated case of.

What people certainly have reported is situations where the credit monitoring service (typically myFICO) gives an "alert" stating that a card that had not been used for a while had been recently used. (And a CMS is very different from the FICO model.) But in virtually every case the alert was triggered by the reported balance changing from $0 to a positive number, which can indeed cause your score to go down. Or some other (non-alertable) change in the person's credit profile had happened in the few weeks before -- this previous event causing the score drop but the person not finding out about it until he gets the alert about a balance change.

It just seems really strange for a CC tradeline that is remaining open and is constantly showing $0 with no change in CL could cause a change in one's score.

Re: Using Inactive Account caused 10 point Drop

cem13 — Mon, 25 Jan 2016 01:13:38 GMT

@Anonymous wrote:
Hi TT. The puzzling thing is that our OP is not posting about various kinds of AA that might be taken by a credit card company due to inactivity. (Lowering one's CL, canceling the card, etc.)

He's claiming that the FICO model itself took action against him. And what is really strange is (if true) is that the CRAs did not report any change in any of his CC balances. In other words, he believes that FICO punished him even though the CC that became "active" continued to report a $0 balance continuously.

If so, this is really surprising to me. I have never seen yet a documented case of this happening. A reported CC balance changing from $0 to a positive number -- this can certainly change your score. So could a positive balance going to $0. But a reported CC balance being $0 and staying $0 and the CL also not changing and the CC remaining open -- and yet that particular CC account causing the score to go down -- this I have never seen an authenticated case of.

What people certainly have reported is situations where the credit monitoring service (typically myFICO) gives an "alert" stating that a card that had not been used for a while had been recently used. (And a CMS is very different from the FICO model.) But in virtually every case the alert was triggered by the reported balance changing from $0 to a positive number, which can indeed cause your score to go down. Or some other (non-alertable) change in the person's credit profile had happened in the few weeks before -- this previous event causing the score drop but the person not finding out about it until he gets the alert about a balance change.

It just seems really strange for a CC tradeline that is remaining open and is constantly showing $0 with no change in CL could cause a change in one's score.

This is exactly what happened. I will give more details. The card in question is Sportsman's Visa. I opened this card via SCT back in May15. I used it upon receipt just to cycle it, PIF, then sock drawered it. So it sat idle from June to 28DEC when I cycled it again. I charged 2 coffees on it for $6. Upon my return home, I went on-line and PIF the $6 bill.

This card closes on the 19th and reports on the 23rd of every month. So when it reported to TU first yesterday, the alert was "inactive account becoming active" and a 10 point drop. I pulled my TU report to verify nothing else changed. A few hours later, I get the same alert from EQ with the same 10 point drop. I pulled my EQ and nothing changed.

Today, EQ sent me an alert for my BBVA card that was 4 months inactive but NO point drop. I have yet to receive an alert on EX for either card. If I do get an alert from EX, I will pull my report to verify nothing else changed.

So the conclusion I draw is this: An inactive account greater than 6 months, that is used ($6 in my case) will cause a drop in score. An inactive account 3~6 months that becomes active will NOT cause a point drop. I will test this theory again.

My scores are ~700 with no baddies in 5 years. Mortgage, car & 3 SL reporting along with one CC reporting balance. BK7 filing JAN2011 and DC JUN2011.

Re: Using Inactive Account caused 10 point Drop

Thomas_Thumb — Mon, 25 Jan 2016 01:55:26 GMT

Other posters have also reported score drops when inactive accounts become active. I don't recall timeframe of inactivity but, I believe they were in the 6 month to 18 month range. Yes, their scores "bounced back" the following cycle as I recall.

So, your experience is normal - but YMMV depending on scorecard assignment.

Let us know how things work out - and continue to use cards periodically to avoid potential AA.

Re: Using Inactive Account caused 10 point Drop

Anonymous — Mon, 25 Jan 2016 02:13:40 GMT

Fascinating. When you received an "alert" for the Sportsman's Visa yesterday, this alert was from the myFICO 3B credit monitoring product, right?

One definite thing this seems to show -- which I regard as significant -- is that the CMS's "once inactive now active" alert can be triggered even when the balance is staying a constant $0. Which is interesting.

On the other hand all we can say with 100% certainty is that in the last few weeks something changed in your profile to cause a score drop, and myFICO reported the drop when an alertable event happened. The alertable event was without question the S-Visa reporting, but the thing that caused the drop might have been a non-alertable change in the profile happening weeks ago or more.

This sort of thing happens a huge amount around here. People write in baffled as to why Event X could have caused a score drop. The most recent person I responded to about this (last week I think) was a guy who was scandalized that FICO could have lowered his score because he received a credit limit increase. What is certain is that a CLI could not have in itself caused his score to drop, but it was indeed the thing that triggered the alert -- the drop must have happened due to a change in the profile that happened earlier.

I am not saying with certainty that this must be what happened in your case, but it happens so often that it's worth considering.

Another reason I think it is worth considering is that FICO's models do in fact interpret a profile with a $0 balance across all cards as identical to a person who is not using his cards at all. In other words, for the scoring model, the only way it conceptualizes "inactivity" is when balances are at $0. That's actually a primitive way for FICO to work -- it should be designed to look at the date of last use. But it doesn't. If the scoring model had factors that assessed how recently you have used a card, it wouldn't need to use the All Zero = Not Using Your Cards rule, as we know it does.

Re: Using Inactive Account caused 10 point Drop

Anonymous — Mon, 25 Jan 2016 02:25:27 GMT

@Thomas_Thumb wrote:
Other posters have also reported score drops when inactive accounts become active. I don't recall timeframe of inactivity but, I believe they were in the 6 month to 18 month range. Yes, their scores "bounced back" the following cycle as I recall.

So, your experience is normal - but YMMV depending on scorecard assignment.

Let us know how things work out - and continue to use cards periodically to avoid potential AA.

Have you seen anyone who has posted that this has happened and their balances remained $0 the entire time? That's what is interesting about our OP's case.

What is most common is that there is is in inactive-to-active alert and that is coinciding with a balance going from zero to positive. That is consistent with what we know about the scoring model: an extra account with a positive balaance certainly can cause a score drop.

No one doubts that people report score drops after getting an alert that an account has become active. But people also report lots of other stuff: score drops after getting a credit line increase, for example, which is impossible. (If by "after" one means "caused by.") The possibility that the score drop could have been caused by an earlier non-alertable event is crucial to bear in mind.

Re: Using Inactive Account caused 10 point Drop

Thomas_Thumb — Mon, 25 Jan 2016 03:12:55 GMT

Yes, I too am puzzled on how an inactive => active is triggered if balance is zero. My guess is one of the inactive cards must have reported a non zero balance. It is possible to use a card on statement close date, have the balance report to the CRAs and then pay balance later that day. If this happened, the card statement could potentially show a zero balance but the CRA reports would show non zero. However, the OP indicates otherwise

As far as the score drop, I would normally associate it with an increase in # cards reporting a non zero balance.

The score drop described here does not appear to be caused by a spike in utilization based on the OP's comments.

Re: Using Inactive Account caused 10 point Drop

cem13 — Mon, 25 Jan 2016 05:28:34 GMT

@Anonymous wrote:
Fascinating. When you received an "alert" for the Sportsman's Visa yesterday, this alert was from the myFICO 3B credit monitoring product, right?

One definite thing this seems to show -- which I regard as significant -- is that the CMS's "once inactive now active" alert can be triggered even when the balance is staying a constant $0. Which is interesting.

On the other hand all we can say with 100% certainty is that in the last few weeks something changed in your profile to cause a score drop, and myFICO reported the drop when an alertable event happened. The alertable event was without question the S-Visa reporting, but the thing that caused the drop might have been a non-alertable change in the profile happening weeks ago or more.

This sort of thing happens a huge amount around here. People write in baffled as to why Event X could have caused a score drop. The most recent person I responded to about this (last week I think) was a guy who was scandalized that FICO could have lowered his score because he received a credit limit increase. What is certain is that a CLI could not have in itself caused his score to drop, but it was indeed the thing that triggered the alert -- the drop must have happened due to a change in the profile that happened earlier.

I am not saying with certainty that this must be what happened in your case, but it happens so often that it's worth considering.

Another reason I think it is worth considering is that FICO's models do in fact interpret a profile with a $0 balance across all cards as identical to a person who is not using his cards at all. In other words, for the scoring model, the only way it conceptualizes "inactivity" is when balances are at $0. That's actually a primitive way for FICO to work -- it should be designed to look at the date of last use. But it doesn't. If the scoring model had factors that assessed how recently you have used a card, it wouldn't need to use the All Zero = Not Using Your Cards rule, as we know it does.

Yes. I have 3B Fico.

I received an alert just a few days ago when my only CC with a balance reported for the month. So the only item triggering my drop is the point drop.

Also, like I mentioned, I pulled a copy of my TU and EQ directly from the CRA and compared it to the previous report about a month ago. Nothing else in my file changed except the CC balance change, which triggered a 2 point gain a few days ago.

So the inactive alert for the SMG Visa was the trigger. Also I charged $6 and paid it via the website that same day. So SMG Visa reported $0 balance. So it is NOT another CC reported a balance. Also the BBVA triggered an alert for inactive but it was only 4 months.

Re: Using Inactive Account caused 10 point Drop

elim — Tue, 26 Jan 2016 02:49:19 GMT

So I went out with a friend tonight and she was talking about a recent large bill she just paid. She said "...and I had to use a credit card. I haven't had to use one in like 6 months".

I remembered this thread after wondering all day why in the heck would FICO ding you for pulling a CC from the SD and put in rotation to show use. Pretty sure they should change their model to say "used A credit card after using none" instead of "rotated a dormant CC" to let us that actually rotate cards keep our scores. Anything to ding the scores of the borrower I would imagine.

Ding for not having a CC

Ding when you app for a CC

Ding when a CC reports

Ding when you use a CC

Ding for rotating a CC

Fair Isaac... awesomeness since 1956 <smirk of sarcasm>

lol, risk assessment? really? more like sheep assessment

sorry, we did have some drinks

baa baaaa

Re: Using Inactive Account caused 10 point Drop

cem13 — Tue, 26 Jan 2016 04:55:27 GMT

@elim wrote:

Ding for not having a CC
Ding when you app for a CC
Ding when a CC reports
Ding when you use a CC
Ding for rotating a CC

sorry, we did have some drinks

I hope you had enough drinks to make you forget about all those dings?

I received an alert for "account not used for 4 months is now active" without any "dings". Now I cannot say if this would normally "ding" me because I already took a 10 point hit from my SGV the day earlier. So it is possible that I would have received the hit on the BBVA with 4 months.

FICO must view 3 months as "normal". I will continue to test this theory when I rotate my cards again in a few months. I will certainly wait for 4 months but not 6 months and wait for the reported.

The interesting part is that TU and EQ "dinged" me exactly 10 points each whereas EX did not trigger an alert. I have NOT looked at my EX in the past few weeks but I am sure SGV reported to EX. So why did EX not drop (if reported)?

Re: Using Inactive Account caused 10 point Drop

Windfall — Tue, 26 Jan 2016 17:23:21 GMT

What's so weird is that I just got an alert that one of my accounts that had been inactive for 5 months (which actually isn't true, not sure why) had an increase of $589 which triggered my score with Experian to go UP by 7 points! Scoring is so strange.

Re: Using Inactive Account caused 10 point Drop

cem13 — Thu, 28 Jan 2016 15:54:09 GMT

UPDATE:

My PenFed AMEX reported to EX today. I received an alert that "an account inactive for 5 months, recently became active". It did NOT change my score.

So there are 2 options for my theory:

1) There is a 6 month timeframe to use CC that become active to trigger a score drop OR

2) The first score drop for an inactive account will negate a score drop for any other "inactive accounts becoming active"