topic Re: Sudden unexplained drop in Fico 5/4/2 in Understanding FICO® Scoring

Sudden unexplained drop in Fico 5/4/2

nothing02 — Tue, 05 Dec 2023 17:52:08 GMT

So I'm in the middle of getting a mortgage and have noticed that I've had a sudden unexplained drop in my Fico 5/4/2 score--bad news and will increase my loan costs. I'm talking approximately a 40 point drop for no apparent reason. The only things that changed were the amount reported on one of my credit cards went from $0 to $900 and there was one additional credit pull from the lender. I've been watching my credit closely for years and have never seen anything like this. I'm going to be paying down all my additional credit card debt (I have about $15k at 0% which I can pay off immediately if I want to--now I want to). Can anyone think of anything else I can do or any reason why the score would have tanked like this? So strange.

Re: Sudden unexplained drop in Fico 5/4/2

JoeRockhead — Tue, 05 Dec 2023 18:20:28 GMT

Welcome to the forum. What's the credit limit on the card that reported the $900 balance?

Re: Sudden unexplained drop in Fico 5/4/2

nothing02 — Tue, 05 Dec 2023 18:21:43 GMT

@JoeRockhead wrote:
Welcome to the forum. What's the credit limit on the card that reported the $900 balance?

It's an AMEX that has no set credit limit.

Re: Sudden unexplained drop in Fico 5/4/2

GZG — Tue, 05 Dec 2023 20:49:22 GMT

@nothing02 wrote:

@JoeRockhead wrote:
Welcome to the forum. What's the credit limit on the card that reported the $900 balance?
It's an AMEX that has no set credit limit.

old fico scores can be influenced by charge cards, so that's most likely the reason

what's the high balance listed for that card is it $900 or close to that amount?

Re: Sudden unexplained drop in Fico 5/4/2

SouthJamaica — Tue, 05 Dec 2023 20:52:52 GMT

@nothing02 wrote:
So I'm in the middle of getting a mortgage and have noticed that I've had a sudden unexplained drop in my Fico 5/4/2 score--bad news and will increase my loan costs. I'm talking approximately a 40 point drop for no apparent reason. The only things that changed were the amount reported on one of my credit cards went from $0 to $900 and there was one additional credit pull from the lender. I've been watching my credit closely for years and have never seen anything like this. I'm going to be paying down all my additional credit card debt (I have about $15k at 0% which I can pay off immediately if I want to--now I want to). Can anyone think of anything else I can do or any reason why the score would have tanked like this? So strange.

A 40 point drop doesn't occur without a reason. A $900 balance on an Amex charge card is not likely to be the reason. Neither is a single credit pull.

Yes of course you should pay off the $15k balance.

And you should pull your credit reports and go over them with a fine tooth comb to try to figure out what caused the point drop.

And @GZG is right to be zeroing in on the charge card's previous "high balance". If it wasn't much higher than $900, the $900 balance could be affecting your EX FICO 2.

Re: Sudden unexplained drop in Fico 5/4/2

nothing02 — Tue, 05 Dec 2023 21:52:55 GMT

The high balance on the AMEX is $2485. There's only one other thing that really occurs to me. Recently, USAA closed a very old credit card of mine. They had sent me an email (yes, an email, not a phone call or a letter) asking me to verify my address, and when I didn't respond, they closed the card. The closure actually isn't showing on my report yet, and I do have some other cards that are almost as old, so I would be really surprised if that were it. I was expecting a drop of maybe a couple points when that hit the report. I also closed a HELOC back in August but I've been checking my score since then and it never dropped until now. Could it be some kind of delayed reaction to that? I don't know. Also might be worth noting that the other scores have not dropped like this. For example my TU Bankcard score even increased from 793 to 797 while the 4/5/2 dropped 40 points, so it must be something that affects 4/5/2 specifically.

Re: Sudden unexplained drop in Fico 5/4/2

FlaDude — Wed, 06 Dec 2023 04:13:07 GMT

@nothing02 wrote:
Recently, USAA closed a very old credit card of mine. ... The closure actually isn't showing on my report yet, and I do have some other cards that are almost as old, so I would be really surprised if that were it. I was expecting a drop of maybe a couple points when that hit the report. I also closed a HELOC back in August but I've been checking my score since then and it never dropped until now.

I don't know about the older scores, but for FICO8 closed accounts stay for aging purposes for up to 10 years so don't typically cause an immediate drop on closure. Was the HELOC your only installment loan? If so, maybe credit mix is factoring in.

Re: Sudden unexplained drop in Fico 5/4/2

SouthJamaica — Wed, 06 Dec 2023 05:08:12 GMT

@nothing02 wrote:
The high balance on the AMEX is $2485. There's only one other thing that really occurs to me. Recently, USAA closed a very old credit card of mine. They had sent me an email (yes, an email, not a phone call or a letter) asking me to verify my address, and when I didn't respond, they closed the card. The closure actually isn't showing on my report yet, and I do have some other cards that are almost as old, so I would be really surprised if that were it. I was expecting a drop of maybe a couple points when that hit the report. I also closed a HELOC back in August but I've been checking my score since then and it never dropped until now. Could it be some kind of delayed reaction to that? I don't know. Also might be worth noting that the other scores have not dropped like this. For example my TU Bankcard score even increased from 793 to 797 while the 4/5/2 dropped 40 points, so it must be something that affects 4/5/2 specifically.

No, the closing of an account would not affect your scores like that.

Re: Sudden unexplained drop in Fico 5/4/2

nothing02 — Thu, 07 Dec 2023 03:50:42 GMT

I would really like to get to the bottom of this. I just went through my reports with a fine-toothed comb. This is based on a MyFico TransUnion report from 10/31 and another from 12/5. During that time, the 4/5/2 score went from 775 to 733. Here are the changes:

- Total balances decreased by about $2k (yes, decreased).

- One card that previouly had a $2485 balance now has a $900 balance (I stated incorrectly in the original post that the balance on this card was previously $0), which accounts for most of the above decrease with other cards also paid down a little

- Average age of accounts, age of oldest account, and age of most recent account increased by two months (obviously!)

-Number of recent inquiries went from 4 to 5.

That's it. I have read every page of the reports and no new negatives.

I've been watching my credit closely for years and in this situation I would expect an increase of a couple points for the lower balances and a decrease of a couple points for the new hard pull. It would be a wash and there would be no change overall, possibly a point in either direction.

I do notice that the factors listed by MyFico on the 4/5/2 page are different. The October report lists: "You've opened a new credit account relatively recently, You've made heavy use of your available revolving credit, You've recently been looking for credit, You have a lack of recent activity from a non-mortgage installement loan." The December report does not say "You've opened a new credit account relatively recently" and says "You have too few or too many credit accounts" instead. I have a lot of cards, it's true - currently 15 personal cards. I did not open any new cards between these two reports. The only thing this could be is that the scoring model changed recently and is now penalizing people who have lots of cards.

Those who are really experienced at this, could that be it? Do they even make changes to old scoring models?? I was always under the impression that it is actually good to have a lot of cards because it only decreases credit utilization. But maybe there was a new change and they're now penalizing people for having lots of cards.

Finally, to answer FlaDude's question, that was not my only HELOC, so taking that out of the mix shouldn't be the reason for the drop.

Re: Sudden unexplained drop in Fico 5/4/2

FlaDude — Wed, 06 Dec 2023 19:53:10 GMT

The only thing this could be is that the scoring model changed recently and is now penalizing people who have lots of cards.

Those who are really experienced at this, could that be it? Do they even make changes to old scoring models?? I was always under the impression that it is actually good to have a lot of cards because it only decreases credit utilization. But maybe there was a new change and they're now penalizing people for having lots of cards.

I'm pretty sure they do not make changes to the algorithm for old FICO models, they create new models (9, 10) to tweak the logic.

Re: Sudden unexplained drop in Fico 5/4/2

Thomas_Thumb — Thu, 07 Dec 2023 03:18:27 GMT

The older Fico models are very sensitive to # of cards/accounts with balances. So, if you only have a few cards then increasing # of cards with balances can drop score quite a bit. The sensitivity is elevated if you have recent inquiries. My EQ score 5 dropped from 809 to 765 going from 3 of 6 to 6 of 6 cards with small balances.

Also, as mentioned above, Experian score 2 looks at charge card utilization based on current/high balance. Your ratio is above 29% so that could be triggering the "heavy use" reason code.

Fico 8/9/10 often ignore authorized account utilization. However, AUs are always considered in the older Fico models.

Also, AU accounts count toward # of accounts with balances. Any significant changes in AU account balances?

Re: Sudden unexplained drop in Fico 5/4/2

nothing02 — Thu, 07 Dec 2023 03:47:29 GMT

Thank you for that. I t s

@Thomas_Thumb wrote:
The older Fico models are very sensitive to # of cards/accounts with balances. So, if you only have a few cards then increasing # of cards with balances can drop score quite a bit. The sensitivity is elevated if you have recent inquiries. My EQ score 5 dropped from 809 to 765 going from 3 of 6 to 6 of 6 cards with small balances.

Also, as mentioned above, Experian score 2 looks at charge card utilization based on current/high balance. Your ratio is above 29% so that could be triggering the "heavy use" reason code.

Fico 8/9/10 often ignore authorized account utilization. However, AUs are always considered in the older Fico models.

Also, AU accounts count toward # of accounts with balances. Any significant changes in AU account balances?

Thank you for that. No, I don't have any authorized users on my cards. And you know what, I actually made a mistake in my previous post. I stated that one of my cards had a $0 balance and then it increased to $900. Actually, the balance was at $2485 and then went down to $900. The number of cards with balances remained the same, 4/15, and the total balances decreased by $2000. So this is still a big mystery.

Re: Sudden unexplained drop in Fico 5/4/2

Thomas_Thumb — Thu, 07 Dec 2023 04:40:35 GMT

It's not authorized users on your cards (accounts) - it's accounts where you are listed as an authorized user by others.

Btw - you should list score drops on EQ, TU and EX individually for the mortgage scores and Fico 8. That may provide some insight on identifying cause(s) of your score drops. Most critical are account balance details at the point in time when your old and new scores were generated.

Re: Sudden unexplained drop in Fico 5/4/2

nothing02 — Thu, 07 Dec 2023 04:46:03 GMT

@Thomas_Thumb wrote:
It's not authorized users on your cards (accounts) - it's accounts where you are listed as an authorized user.

Btw - you should list score drops on EQ, TU and EX individually for the mortgage scores and Fico 8. That may provide some insight on identifying cause(s) of your score drops.

I see--I am not an authorized user on anyone else's card, either. I only ran TU in October but I did run TU and Experian just now. Here are those numbers:

October:

TU 5/4/2: 775

TU 8: 777

December:

TU 5/4/2: 733

TU 8: 780

EX 5/4/2: 734

EX 8: 759

I do have scores from back in June from all 3 bureaus. I'll list those too. The situation was not radically different back then, though utilization ratio was higher (13%) because I have opened a few new cards since then and there were 9 accounts with balances, not 8.

EX 5/4/2: 739

EX 8: 757

EQ 5/4/2: 782

EQ 8: 790

TU 5/4/2: 786

TU 8: 772

Re: Sudden unexplained drop in Fico 5/4/2

jocko61 — Tue, 04 Jun 2024 16:42:45 GMT

There needs to be a major class action lawsuit against these credit reporting agencies, especially Fico. What they are are doing is messing with your ability to get financed for very important things like houses, and even lease agreements on rental properties. Understandably they are there to protect the banks from people who have a history of bad credit or no credit history. Understandably credit is not a right, but the creditors and reporting agencies do have to follow rules. It is wrong that Fico has a million different scoring models where they have no problem giving you a high score to go out and get junk credit, such as credit cards and vehicles, but if you want to make a good purchase such as a house, best of luck to you ! You better get yourself in a lot of debt and pay that debt off slowly over time and hope you 5,4 , 2 scores get to at least 625. The best thing for everyone is to not play the credit game. Boycott banks that use unfair reporting agencies like FICO. If all possible save money and pay cash for everything.