topic Re: questions regarding score decrease in Understanding FICO® Scoring

questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 00:28:47 GMT

I am having a difficult time understanding how the utilization ratios can neatively effect ones score. Particularily when a slight increase in account balance across my 2 CO cards dropped my score 10 points for EX and 11 for TU.

I have been dilllegently trying to repair and rebuild my credit for the last 8 months since filing for bankruptsy. I have 2 CapitolOne cards with $500 balances each. I do understand that our scores can fluctuate and many factors go into calculating them. I was told, read many articles and watched countless videoes about repairing credit and almost all say to A.) Pay off balances in full every month to avoid interest charges. B.) keep a low utilization ratio below 30% but below 10% is best. Among other tips and pointers

I have been keeping my utilization as low as possible by both making periodic payments throughout the month but also keeping the balance on both my cards very low when the bill is generated around the 24th of each month. I paid both my card balances down to $40($36 last month) on one card and $28($0 last month) on the other. Two days later, after my cycle ended and my score decreases? Am I missing something? I get the importance of paying the balance down, but do I need to be below the previous months balance to avoid a negative reaction? Does the balance have to be $0? If so, how can I have a payment to make on time the following month? I have to retain SOME small balance on the card in order to have something to pay on to keep my payment history current and to show on time payments, correct? What is the best amount to keep low limit cards when building credit that will not negatively effect my score? Any information would be most welcome.. Thanks in advance.

CO $28/$500

CO-$40/$500

self lender loan $89/$1000 opened 2/25/19

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 00:40:02 GMT

@Anonymous wrote:
I paid both my card balances down to $40($36 last month) on one card and $28($0 last month) on the other. Two days later, after my cycle ended and my score decreases? Am I missing something? I get the importance of paying the balance down, but do I need to be below the previous months balance to avoid a negative reaction? Does the balance have to be $0? If so, how can I have a payment to make on time the following month? I have to retain SOME small balance on the card in order to have something to pay on to keep my payment history current and to show on time payments, correct? What is the best amount to keep low limit cards when building credit that will not negatively effect my score? Any information would be most welcome.

What is the source of your score(s)?

Your balance paydowns referenced above would not lower your FICO scores.

For maximum FICO scoring benefit if you have two revolvers with $500 limits, you'll want one of them to report a $0 balance while the other reports a small balance, in the $5-$40 range would be ideal (but up to $80 would probably be alright as well). You can use both the cards naturally any way you'd like, just come statement ending time try and pay one off completely, allowing it to report $0 where the other pay off all but a small balance, leaving that to report. Hopefully that makes sense. If you have any other questions let us know.

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 00:55:58 GMT

This is on MyFICO.com. I have been paying the $30/month fee to monitor my credit while rebuilding and figured best go with the one most used by lenders. My CO Platinum card I've had only 8 months. the limit was just increased three weeks ago. I opened up a CO QuickSilverOne card in January and my scores jumped to 630/604/613 from 579/588/601. I decided to open up a SelfLender loan in Feb to give me a payment history with an installment loan. My score dropped 6/15/0 respectively. I have been making all my payments on time and with out fail. My platinum card was at a zero balance last month so I figured this month I would leave a small, easy to payoff balance on the card to generate a bill and give me a chance to make another on time payment. Fortunately it means I never pay interest cause I pay the full amount due, but I would never have guessed it would hurt my credit score like that. Sure it's only 10 points but to someone trying so dilligently to work on his credit it can be a bit discouraging.

Re: questions regarding score decrease

thornback — Fri, 29 Mar 2019 01:18:05 GMT

Hi DirtyRatt (haha... great username ) - Welcome to the forums!

@Anonymous wrote:
I am having a difficult time understanding how the utilization ratios can neatively effect ones score. Particularily when a slight increase in account balance across my 2 CO cards dropped my score 10 points for EX and 11 for TU.
I have been dilllegently trying to repair and rebuild my credit for the last 8 months since filing for bankruptsy. I have 2 CapitolOne cards with $500 balances each. I do understand that our scores can fluctuate and many factors go into calculating them. I was told, read many articles and watched countless videoes about repairing credit and almost all say to A.) Pay off balances in full every month to avoid interest charges. B.) keep a low utilization ratio below 30% but below 10% is best. Among other tips and pointers
I have been keeping my utilization as low as possible by both making periodic payments throughout the month but also keeping the balance on both my cards very low when the bill is generated around the 24th of each month. I paid both my card balances down to $40($36 last month) on one card and $28($0 last month) on the other. Two days later, after my cycle ended and my score decreases? Am I missing something? I get the importance of paying the balance down, but do I need to be below the previous months balance to avoid a negative reaction? Does the balance have to be $0?
CO $28/$500
CO-$40/$500
self lender loan $89/$1000 opened 2/25/19

You're utilization is fine (only 6.8%) -- seems you may have lost points for having 'too many accounts with balances.' I know it seems odd, but FICO will ding you a bit for having too many of your revolving accounts with a balance -- and since you only have 2 revolvers, you showed 100% of your revolving accounts with a balance as opposed to last month, when you had 50% showing a balance. The ideal (for FICO) is to have only 1/3 of your revolvers reporting a balance -- that is why many will advise that you have 3 open CCs and 1 installment for maximum FICO scoring; this will allow you to have one card report a balance while the other two are at $0, which will equate to only 1/3 of your cards reporting a balance and you will not be dinged the additional points. So - you may want to consider getting a third card.

Good news -- it really doesn't matter if you're not preparing to app for anything (I know you're rebuilding so 10 points is like the whole world but...I'm just saying). You can just use your cards and pay them while keeping overall utilization below 8.9% and individual utilization below 28.9% and don't worry about the small dip in scores. If you decide you want to app for something, then prepare your reports the month before by bringing one card to $0 and allowing the other to report only a small balance and you'll regain those points -- it's a bit easier to handle the dip in score when you know in the back of your mind that those extra points are available when you need them. Right now, I'm in the garden so I let all my cards report naturally - knowing that my scores are about 20 points lower than they would be if I paid down all my balances and only let 1/3 of my cards report- but it's not worth the extra hassle when I'm not apping for anything...

@Anonymous wrote:
If so, how can I have a payment to make on time the following month? I have to retain SOME small balance on the card in order to have something to pay on to keep my payment history current and to show on time payments, correct?

As far as the above statement.... No, you don't have to have a balance every month.

1. If you, for whatever reason, don't use your card at all one month and have no previous statement balance, it will report $0 to the bureaus along with a 'PAID' notation for that month.

2. You don't have to have a statement balance in order to have something to pay by the due date. You can pay your card to $0 before your statement cuts so it reports $0 to the bureaus; then start using your card again as usual -- these new charges will be considered your 'current transactions' -- which you can then pay off or down later that month before your next statement cuts, or - you can opt to let those charges report to the bureaus and then pay them by the due date.

If you pay off your current transactions before the statement date, then you will never have a 'statement balance' to pay by the due date, but you'll still always have the option to make a payment towards your current transactions for that billing cycle. If you choose to wait until the due date to pay your current transactions, then those transactions will be your 'statement balance' -- and a payment towards that statement balance will be due by the due date.

I know this can be confusing so... let's pretend your CapOne card has a billing cycle of 3/27 - 4/28; with a due date of 4/21:

You paid the balance down to $0 prior to the statement date of 3/27 so that it reports $0 to the bureaus. Since your statement balance is $0, you are not required to make a payment by the 4/21 due date. However, you decided to use the card again after 3/27 (during the billing cycle of 3/28-4/27) so now you have new charges -- and you want the card to report $0 again on the next statement date which will be 4/27. So, you can make another payment prior to 4/27 to bring that balance to $0. Now you will have no 4/27 statement balance and will not be required to make a payment by the next due date of 5/21.

Now-- what if you decided not to pay the charges you made between 3/28 and 4/27 and instead let the card report that balance for 4/27 statement? A payment for that statement balance will now be due by the next due date, which is 5/21. Any new charges made between 4/28 and 5/27, plus any remaining balance from the previous 4/27 statement (if you did not pay that statement balance in full on 5/21) will become your 5/27 statement balance, which will be due on 6/21.

Make sense?

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 01:16:20 GMT

Paying down your cards cannot lower your score. The only way a balance paydown in your situation can lower your score is if you paid both of your cards to $0 and both reported $0... that is, both showed a $0 reported balance on your CR at the same time.

If both of your revolvers aren't showing a $0 reported balance at the same time, you aren't losing points due to paying down your balances.

Keep in mind that MF only provides you with "alerts" when an alertable event happens. There are plenty of non-alertable events that happen with your CR. The score changes that happen with non-alertable events aren't known from your perspective until you see an alert come in and you get a new score. It's common (but incorrect) to assume that the score change you're seeing must be 100% due to the alert reason provided. Sometimes it is 100% due to it. Sometimes it's 50%. Other times it's 0% and the alertable event has no impact at all on the score change you're provided with.

Re: questions regarding score decrease

SouthJamaica — Fri, 29 Mar 2019 01:21:34 GMT

@Anonymous wrote:
I am having a difficult time understanding how the utilization ratios can neatively effect ones score. Particularily when a slight increase in account balance across my 2 CO cards dropped my score 10 points for EX and 11 for TU.
I have been dilllegently trying to repair and rebuild my credit for the last 8 months since filing for bankruptsy. I have 2 CapitolOne cards with $500 balances each. I do understand that our scores can fluctuate and many factors go into calculating them. I was told, read many articles and watched countless videoes about repairing credit

Actually most of that stuff is misleading. The best place to learn is right here in this forum.

and almost all say to A.) Pay off balances in full every month to avoid interest charges.

Sure that's a good idea, but it begs the question: when to pay in full? before or after the statement cuts?

B.) keep a low utilization ratio below 30% but below 10% is best.

Not so. Keep individual utilization below 28% and aggregate utilization below 9%. And remember that utilization is computed as of the reporting date, which is usually the statement date, but not always, depending on the particular lender. With Capital One it is the statement date. These percentages won't totally optimize your utilization, but they're close enough to optimal to make sure you're not getting hurt.

Among other tips and pointers
I have been keeping my utilization as low as possible by both making periodic payments throughout the month but also keeping the balance on both my cards very low when the bill is generated around the 24th of each month. I paid both my card balances down to $40($36 last month) on one card and $28($0 last month) on the other.

With 2 cards you would do better, scorewise, by having 1 of the 2 report a zero balance. If the other one is at $40, which in your case is 8%, you're fine.

Two days later, after my cycle ended and my score decreases? Am I missing something? I get the importance of paying the balance down, but do I need to be below the previous months balance to avoid a negative reaction?

No, utilization has nothing to do with what's happened in the past. It's a snapshot of what's in the moment.

Does the balance have to be $0? If so, how can I have a payment to make on time the following month? I have to retain SOME small balance on the card in order to have something to pay on to keep my payment history current and to show on time payments, correct?

No you don't.

What is the best amount to keep low limit cards when building credit that will not negatively effect my score?

As I mentioned above, in your case the optimal numbers would be for one statement to report zero and the other to report $40 or a little less.

Any information would be most welcome.. Thanks in advance.
CO $28/$500
CO-$40/$500
self lender loan $89/$1000 opened 2/25/19

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 01:36:22 GMT

Thanks for all the tips guys. I guess I didn't realize that having a small balance on BOTH cards would cause that. Aggregate utilization is something I just recently learned about. I will be more mindful about that going forth.
I am aware that a third card is wise but I was hoping to hold off until my credit score allowed for a better solution then what I currently qualify for.. I appreciate all the great advice..

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 02:43:30 GMT

No need to pull the trigger on a 3rd card right away. The score difference between having 2 cards and 3 cards is minimal. You can still have very high scores with under 3 cards. I went 15 years with just 1 CC the entire time and had 790-800 scores for the majority of that time period.

Re: questions regarding score decrease

SouthJamaica — Fri, 29 Mar 2019 03:16:12 GMT

@Anonymous wrote:
Thanks for all the tips guys. I guess I didn't realize that having a small balance on BOTH cards would cause that. Aggregate utilization is something I just recently learned about. I will be more mindful about that going forth.
I am aware that a third card is wise but I was hoping to hold off until my credit score allowed for a better solution then what I currently qualify for.. I appreciate all the great advice..

You don't want to apply for a 3rd card at this time. That won't help you at all.

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 08:35:11 GMT

Thanks again for all the feedback guys. I have no intention of applying for a third card till my credit score improves enough to qualify for a higher tier card. As stated my score is nowhere near high enough at this time. I 'll jist keep making my on time payments and keep a low utilization and see how things progress

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 12:14:44 GMT

Two quick thoughts:

(1) You ask more than once about strategies that will help you build credit over time. The AZEO strategy (All cards Zero Except One, with the remaining card reporting a smallish balance) will not help you build your score. It won't hurt you in your desire for your scores to go up over time, but it won't help either. Where AZEO comes into its own is as a short-term strategy to be employed in the 40 days before an important credit pull. BBS, SouthJ, and others can explain why this is so if you are interested.

The long term strategy is to never be late, keep your total utilization under 29%, and keep each card at under 49%. Coupling that with strategies for removing derogs is the simplest long term strategy.

(2) You mention that you are paying $360 per year to monitor your scores, just as part of the long term desire to track your rebuilding efforts. And you base that on the idea that the myFICO credit monitoring product is the most likely to give you real FICO scores. This is a common mistake. There are many strategies and tools out there that will permit you to frequently pull your reports and even get FICO 8 scores at zero or almost zero cost. BBS uses this approach himself and he can walk you through it.

Of course, you may enjoy the pleasure of the myFICO product, which is fine. If the $360 per year makes you happy, then that's a slam dunk. But I just wanted to alert you in case you would be even happier paying only a few dollars a year.

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 12:22:20 GMT

@Anonymous wrote:

The long term strategy is to never be late, keep your total utilization under 29%, and keep each card at under 49%. Coupling that with strategies for removing derogs is the simplest long term strategy.

I will also add to CGID's insightful post to be smart about applying for credit. Basically, apply for the products that you need or find great value in relatively early on so that clock can start on their aging process. Avoid unnecessarily applying for credit as time goes by, as doing so will continually drop your AAoA and reset your AoYA to zero. Allowing your file to age with minimal applications is a good strategy for long-term growth.

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 12:39:48 GMT

All great tips guys.. again thanks..I am not applying for any type of credit period for at least another year so no worries about trying to put out to many inquires. I'm only trying to PREVENT my score going down further because I'm doing what I'm "suppose to be doing" in regards to my credit card usage and on time payments. As mentioned before I was totally unaware that keeping even a small balance on BOTH cards would have a negative effect on my score. Lesson learned.
As far as using MyFICO for credit monitoring for $360/yr. The banks and Lenders use it why shouldn't I? Yes there are cheaper alternatives out there and from reading from my research they aren't always the most accurate either.. To be able to see and monitor my credit score and get quarterly credit reports ,to me, IS worth the money spent.. I will not pay for it forever but until I'm confident that the steps I'm taking are working and I can see that progress for myself I don't feel it's a wasted expense. I have truthfully had more issues trying to pull my reports from the 3 bureaus individually than I'd like to.

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 12:55:52 GMT

@Anonymous wrote:
As far as using MyFICO for credit monitoring for $360/yr. The banks and Lenders use it why shouldn't I?

The banks don't use the myFICO Ultimate credit monitoring tool that you are paying $360/year for. They use FICO scores (with a few exceptions) but FICO scores can be obtained easily at almost no cost in many ways. And there are plenty of tools that give you frequent free reports. (The $30/mo myFICO Ultimate product, in contrast, only gives you a report every 90 days.)

I am not pushing you to cancel your myFICO Ultimate subscription -- just want to make sure you know all your options so that you can if you choose pay much less. That's a choice and there is no single right answer for all people.

Here's an analogy that might help. Suppose you were buying Advil at $5 a bottle, because you were under the impression that this was the real anti-inflammatory that doctors prescribe. It would be helpful information to know that the "Advil" label doesn't get you anything that isn't in generic ibuprofen -- which you might be able to get for far less. It would still be an ok choice to pay for Advil, but a friend would still want to provide you with that information (ibuprofen = Advil) so that you could explore the far cheaper alternative if you wanted.

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 13:09:14 GMT

They may not use the Ultimate version but they do still use some form of FICO score correct? What other services out there allow you to get a free report every 3 months and alerts you of updates and changes to your FICO score as they happen?. I have crediwise from my CCs. But that's Vantage 3.0. Same thing with Self Lender. They use vantage also. The only other monitoring services that uses FICO that I've come across are the 3 bureaus themselves and they charge even more. If there is a free solution out there that has the same features available I'd be all for it.

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 13:47:31 GMT

BBS can walk you through it. The zero-cost or ultralow-cost strategy involves using more than one tool. The person assembles a toolkit of different tools that let him do the thing he most needs at that time.

Typically he joins Credit Karma purely for its ability to pull fresh EQ and TU reports as often as once every 7 days. Karma's alerts can be nice too (e.g. an alert for a new account, a new inquiry, etc.). The person ignores Karma's scores.

There are a few different free products that will give you EX reports and EX FICO 8 scores.

Some people incorporate any free FICO scores they get from their credit cards as well. Free TU FICO 8 scores are very common.

Then, when you feel a need to get all three FICO 8 scores (EX, EQ, TU) along with a nice 3B report -- all drawn at the same instant -- you sign up for the $1 trial offer at Credit Check Total and then cancel it shortly after obtaining the report and scores. You can repeats the trial as many times as you like, though in your case I can't see much of a need beyond doing it quarterly.

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 13:58:30 GMT

@Anonymous wrote:
What other services out there allow you to get a free report every 3 months and alerts you of updates and changes to your FICO score as they happen?.

The myFICO Ultimate product does not alert you of changes to your FICO score as they happen. Often changes happen to your score that are not alerted. What the product does is alert you of a subset of changes that happen to your report -- and when that change happens, it pulls your FICO 8 score. But as I say many changes happen to reports that are not alerted, and even when no change appears to have happened to your report your FICO 8 score can change (and this also is not alerted).

This is a constant problem in the forums which BBS is trying to fix as he and others advise the people who make the myFICO tool. A visitor to the forums is bewildered by an alert he gets accompanied by a score change, and in 99.9% of the cases it's because the score changed at least once, perhaps multiple times, and the subscriber was not notified. (It's a bit ironic that BBS is helping myFICO correct problems in a tool that he sees no value in purchasing himself and he is helping them for free.)

PS. Just for the record, I see a huge value in the Ultimate product when a person is preparing to buy a house.

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 18:50:25 GMT

@Anonymous wrote:
As mentioned before I was totally unaware that keeping even a small balance on BOTH cards would have a negative effect on my score. Lesson learned.

While this is true, there are two points that I'd like to make.

One, the negative effect should be quantified. Are we talking 3 points? 5? 10+? The impact of 50% of cards/accounts with a balance verses 100% of cards/accounts with a balance can vary from person to person, profile to profile. Below is a table from last year where I went from no cards with a balance to all of my cards with a balance. The difference on my profile for going from 50% cards/accounts with a balance to 100% is EX 0, TU -11, EQ -5. This is of course FICO 8 scores and other models (like the mortgage ones) can be impacted more.

Second, while it may have been mentioned already, it's worth repeating: Any negative effect with respect to you allowing both of your revolvers to report a small balance as opposed to only one will only impact your score adversely until you go back to just one out of the two with a small reported balance. Since utilization is a single point in time metric, all that matters is what the algorithm sees on your CR at the moment a score is produced. There is no long term benefit of having just 1 of 2 cards report a balance monthly. To help illustrate my point, you could have both cards with a reported balance all year and then in December drop to 1 of 2 with a reported balance and your score would be exactly the same in December as it would if you went all year with 1 of 2 with a reported balance. You can test this yourself if your profile is stable, moving back and forth between 1 verses 2 (out of 2 total) cards with a reported balance and your score should yo-yo +X, -X, +X, -X etc. Any time you don't see +X or -X exactly, it simply means something else changed on your report.

Re: questions regarding score decrease

Anonymous — Fri, 29 Mar 2019 17:57:36 GMT

BBS just gave you a great way of thinking about your CC balances.

And not only is the scoring factor "number of accounts reporting a balance" a pure snapshot in time, but so is CC utilization. So I will heighten BBS illustration, namely....

Suppose you have ten credit cards and for 24 consecutive months you have all of them reporting a balance, and your total CC utilization is the 40-47% range every month, with some cards going as high as 68% -- and then at the end of that two year period you pay all to zero except one with the remaining card at $15 .

Your score would be no different at month 25 than if you had all those zero balances and the single card with the small balance every single month throughout those two years.

That's what I meant when I said that keeping your CC balances ultralow (or zero) does not help you build your score over time. You can get its benefit at the last minute.

Now if I were you I'd steer a middle course. Utilization in the 40-percent range consistently might be a little high, since you are rebuilding. That's why I recommended keeping your total U under 29% and each card individually under 49% -- it'll eliminate the possibility that a creditor could get worried and lower your credit limit. But aside from that, a utilization of 1% will help you no more and no less than a utilization of 25%.