topic Re: Balance to Available Credit on Revolving Accounts and a Car Loan in Understanding FICO® Scoring

Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 18:34:35 GMT

I checked my "FICO® Score 8" credit score though the Amex website today and I saw my credit score had declined from 720 in August to 675 in September. The reason for this must be the new notification they had for me: "Ratio of balance to limit on bank revolving or other rev accts is too high".

However, this makes no sense to me. My credit cards have a credit limit of 70k and I have never exceeded over 5k in utilization and my credit utilization has been stable in the last few months (and always below 10%). Where is this coming from?

The one big change I've had since July is that I got a car loan of 25k. However, as I understand it this shouldn't be counted as "a revolving account" and my August score was fine (although lower than before the car loan) and that was after the car loan was already in my credit report.

I also noticed that all the free websites (Credit Karma etc.) showed a dramatic decline in my credit score immediately after I got my car loan. My credit score on those sites dropped from around 740 to 660. Again, why? I know they use a different (and worse) methodology but shouldn't they realize it's a car loan and not a credit card? I though it was just those sites being crappy but now my actual FICO score as reported by Amex has also plummeted and there has been absolutely no dramatic changes in my credit report (no delinquent payments or nothing else negative has happened).

Is my car loan (through Infiniti financial services) in some way being interpreted as "a revolving account" and is it tanking my credit score? This is quite perplexing and annoying - I wasn't expecting a car loan to tank my credit score.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 19:58:15 GMT

Did you have any previous open installment loans? If you had one that was almost paid off for example, adding a new one could raise your installment loan utilization significantly and cause a score drop. I wouldn't expect that to be more than 20 points, though. Those 20 points coupled with the new account and inquiry could possibly constitute 30 points, but that's about the most I'd predict.

I think it's more likely that the auto loan is being coded incorrectly as a revolving credit line. If that's the case, you'd be adding a maxed out "revolver" in the eyes of FICO and your aggregate utilization would rise from 7%-8% to 42%, meaning it would have crossed 2 thresholds. From that, I could certainly see a 40-60 point drop, so perhaps this is what you have going on.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:02:24 GMT

Thanks for you reply. I don't have previous open installment loans.

If the auto loan is being coded incorrectly, how would I go about fixing that? I'm not looking forward to my credit score being crap because of an error they made (if that's what is happening here).

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:04:18 GMT

A few quick questions:

Do you have a copy of your August EX report and do you have a definite date that report was generated?

If I understand you right, you believe the following chronology occurred:

(1) In August your EX report showed the car loan on it. (Where did you get the report?)

(2) Some number of days after that, your EX FICO 8 from Amex was generated. It was 720.

(3) In Sept the Amex FICO score was 675.

Is that right?

Are you certain that the data #2 was drawn on occurred after the date of of the report in #1? If you are sure, how is it that you are sure?

On your Experian report is the auto loan listed as an installment loan? Or is it of some other type?

Is this your only installment loan?

Although you are confident that your total utilization stayed low, did your individual utilization on any particular card go way up? (e.g. from 25% to over 50%)

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:07:56 GMT

And just to clarify, Credit Karma is classifing the auto loan as "auto loan" and my credit utilization ratio is 4%. So it appears correctly there but still my credit score tanked as per Credit Carma and as per FICO. I don't understand.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:13:25 GMT

Is this your only installment loan? If not, it may have taken your installment loan utilization up to near max depending on what the other installment loans were originally and are now.

It's only one account but what's your AAoA now? Did it drop below 2 years by chance? Any other new accounts?

You say your credit utilization is 5% overall but that doesn't tell us anything because individual tradeline utilization can have a huge effect. For example if you have $80,000 in TOTAL credit limits but you have a card with a $4000 CL that you maxed out due to a 0% BT, you'd be maxed out on one card but still only 5% overall. That one maxed out card can have a drastic effect on your FICO score.

Also how many total credit cards and how many show any balance at all?

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:22:44 GMT

The only way I have been monitoring my credit score is through Credit Karma and through the Amex website (Fico 8).

Here's the chronology:

I got the auto loan in late June.

FICO score as reported by Amex on July 19th is 739 - this is 4 points higher than in June and the message I get from the credit score website that is accociated with the June score is that I have "lack of recent installment loan information". So the car loan is not accounted for yet.

FICO score as reported by Amex on August 19th is 720. Now the message is that "Proportion of loan balances to loan amounts is too high" and that "In general, when you first obtain an installment loan your balance is high, and as you pay this loan down, the balance decreases." This makes sense. So clearly the auto loan was in the report on August 19th.

FICO score as reported by Amex on September 19th is 675 (a drop of 45 points). Now the message is that "Ratio of balance to limit on bank revolving or other rev accts is too high" and that "Your FICO® Score evaluates your balances in relation to available credit on revolving accounts. The extent of your credit usage is one of the most important factors in your FICO® Score. In your case, this proportion of balances to credit limits is too high on these accounts."

I have no idea where this September drop came from. Credit Karma actually shows a similar decline from 712 to 663 between August 31st and September 2nd (it shows the credit score history in a graph).

Credit Karma classifies the auto loan as an auto loan. I have not got an actual credit report from Experian in the last few months.

This is my first and only installment loan.

I am 100% sure my total utilization has stayed below 10%. It is possible that individual utilization of one of the cards spiked although I have not made any unusual pucrhases between August 19th and September 19th.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:28:21 GMT

As I said, looking at total utilization is not enough.

Post your credit limits and balances line by line and let's see.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

DollyLama — Fri, 29 Sep 2017 20:31:09 GMT

I'd spent $1 and get my reports from credit check total (true fico), cancel the trial offer within a week. Look at each and every account, how they are coded, and balance to total tradeline. Any tradeline cancelled for inactivity? Used recently for inactivity. Does not correspond with your statement balances, etc.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:33:04 GMT

Average age of accounts is only 10 months and the car loan had no impact on that. So even though that is keeping my score lower (I got a SS number two years ago), that can't be why my score plummeted.

I maxed out one card around August - September. It was my CapitalOne Quicksilver card that only has a credit limit of $1,000. Could that have a huge impact on my score? I've already paid that off and now the balance is zero and now other credit card is even close to being maxed out.

Ps. I double checked and my auto loan is correctly classified.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:38:02 GMT

A new loan absolutely WILL lower your AAoA, for sure, guaranteed. Did it lower it TO 10 months, or did it lower it below 6 months? That will have an effect.
Maxing out a $1000 credit line can knock out a score anywhere from 10 points to 40 points according to various data points. I just maxed out my brand new Capital One accidentally because a statement reported even though it wasn't to happen til October. My score dropped up to 30 points.
Just because you paid off that Capital One card doesn't mean it reported yet. It will report on the statement cut AFTER payment, so if you paid and a new statement hasn't come out showing $0 balance, it will still show maxed out on your current pulls.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:42:04 GMT

A good idea. I spent the $1 and my Experian data as of today shows that my credit score is 737. So that must have been a weird dip in my score that has now been reversed. The only thing I can think of is that I had that one credit card maxed out around the time when the dip happened. I had no idea that one card could have such an impact even though the total credit utilization ratio (a ratio that every single website talks about) was very low.

So it must have not had anything to do with my auto loan after all.

Thanks everyone for your assistance, really impressed by all of you and how helpful you are!

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:42:52 GMT

@Anonymous wrote:
Average age of accounts is only 10 months and the car loan had no impact on that. So even though that is keeping my score lower (I got a SS number two years ago), that can't be why my score plummeted.

I maxed out one card around August - September. It was my CapitalOne Quicksilver card that only has a credit limit of $1,000. Could that have a huge impact on my score? I've already paid that off and now the balance is zero and now other credit card is even close to being maxed out.

Ps. I double checked and my auto loan is correctly classified.

Yes. ABCD and I have been trying to suggest to you that, if your individual utilization went way up on a card, this would cause a big score drop and it would also be a classic case of the reason statement you did in fact receive:

"Ratio of balance to limit on bank revolving or other rev accts is too high"

Your scores should get much better once your reports show that card at a $0 balance.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:46:58 GMT

PS. Since Karma gives you no way to see a copy of your Experian report, I encourage you to sign up for a free tool that enables that you to get a monthly report:

https://www.creditscore.com/

This way you'll have regular access to all three reports.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:47:32 GMT

Note that every single credit website or blog out there has one purpose: to sell you on new credit. Their advice typically is just copied and pasted from other websites and most of the people running those websites are clueless. Heck, most bankers and real estate agents and mortgage loan officers are totally clueless about FICO scoring, too -- they just regurgitate the absolutely wrong information.

Many of us here monitor our profiles VERY discretely, line by line, point by point.

FICO8's score is 30% utilization -- basically 165 points of FICO are based on utilization.

Utilization in FICO scoring involves things like:

Aggregate (total) utilization -- keep this under 8.9% but above $0.
Individual account utilization -- never let a card report over 39% utilization, but lower is better. You can use 100% of the credit limit but pay most of that off before the statement cuts
Installment loan utilization -- what balance percentage is left of the original loan?
Number of cards with balances -- EQ, EX and TU all count this differently, but you generally only want to carry balances in 1 out of 3 cards, preferably less!

Maxing out ONE card can have a big effect on FICO. The higher your score is, the harder maxing out one card affects your FICO score (drops more). Knowing when your statement cuts and planning your balances on that date will help you keep a high score and reduce the risk of AA by other lenders who can get spooked.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 20:59:18 GMT

@Anonymous wrote:

FICO8's score is 30% utilization -- basically 165 points of FICO are based on utilization.

Utilization in FICO scoring involves things like:
Aggregate (total) utilization -- keep this under 8.9% but above $0.
Individual account utilization -- never let a card report over 39% utilization, but lower is better. You can use 100% of the credit limit but pay most of that off before the statement cuts
Installment loan utilization -- what balance percentage is left of the original loan?
Number of cards with balances -- EQ, EX and TU all count this differently, but you generally only want to carry balances in 1 out of 3 cards, preferably less!
Maxing out ONE card can have a big effect on FICO. The higher your score is, the harder maxing out one card affects your FICO score (drops more). Knowing when your statement cuts and planning your balances on that date will help you keep a high score and reduce the risk of AA by other lenders who can get spooked.

This is extremely helpful, thank you! This is the type of information that is crucial but I have never seen such detailed information on the actual figures behind the algorithm before.

I'll keep these lessons in mind going forward. Thanks again to all of you for your help and apologies if I couldn't reply efficienctly enough! While I was writing a reply and looking into things, others had already chimed in with other helpful questions and suggestions! Thanks again, this is a great community.

Re: Balance to Available Credit on Revolving Accounts and a Car Loan

Anonymous — Fri, 29 Sep 2017 21:01:45 GMT

It's all good! I suggest keeping your own spreadsheet or a paper calendar just to write down expected statement dates so you know in advance to pay things down in time to report either a $0 balance or a balance of less than 8.9% on one card only.

Remember: your highest FICO score based on credit card usage is to do the AZEO Method which means "All Zero Except One".

All cards $0 balance at statement, but one card with a balance of $5 to less than 8.9%. I like just letting $5 report, then paying it off a few days after the statement posts so I avoid interest!