FICOS dropped

[Anonymous]

Hey Everyone,

I had paid off all my credit cards thinking it would improve my chances of car loans in prep for submitting applications to shop around.    My FICO scores last month were Ex: 713, Tran: 707, Eq:  709.

I waited 30 days to see what my new scores would be under the assumption that the scores would go up.  I can't believe this.  They dropped:  Exp: 698, Trans: 693, Eq: 699.  What happened?  My only late was almost 7 years ago.  That will drop off in Nov.  I have $40K credit limit on 3 cards with 0 balances.  I only had $700 outstanding last month and paid it off.

I really annoyed now.  What the hell happened?  I can't believe this!!! I usually test my credit health by applying for pre authorizations even though I have these cards already.  I was denied pre-qualify by Cap 1, Citi, Chase & Discover even though I was approved last month for all of them. 

How long will it be before they go back up again? 

[undrtkr65]

did you notice any other change in your reports? I do know you need the leave a small balance on one card at less then 10% of the credit line. doing this should bring your score back.

[Appleman]

In addition to letting 1 credit card report a balance of no more than 9% of the credit line (it is preferable to pay it off each month once the amount reports) you may want to look into a Shares Secured loan if you only have credit cards reporting on the bureaus.

Basically, you deposit a set amount into a bank/credit union. Next, you take out a loan that is secured by the amount you have deposited. Usually you are paying 1-2% to use your own money but it adds an installment loan to your credit file. (Make sure they report to the bureaus)

Credit, a game we all play.

[Anonymous]

As earlier posters have mentioned, you have to have a small (less than 10%) balance reporting on one card.

Having zero balances across the board is not ideal in terms of FICO scoring.  Strange but true.

Lenders want to see ongoing ability to handle debt, and the way FICO reflects this is by giving top utilization points for having a very small balance on one of your revolvers.

Remember, this is just the reporting balance - you are free to pay that off again once it reports to avoid interest, then just make another small charge to have another small balance report the next month.

For auto lending purposes, presuming your DTI is in good shape and you do not have any negative auto loan history (excessive late payments on auto loans in the past, or past repos) on your reports, you are more than fine for a car loan at 690ish.  Anything over 680 is ocnsidered tier 1 by most auto lenders, so those ten points you lost, while frustrating, will not have any effect your interest rate on an auto loan if you are otherwise qualified.

If you'd prefer to wait until your scores rebound, get about 9% reporting on one card for the next reporting cycle, and your scores will rebound.  This part of FICO scoring has no memory, that is, each cycle's score for utilization only accounts for that cycle's numbers and does not "remember" the numbers in previous cycles.

[Anonymous]

Everyone,

Thanks for the replies.  Greatly appreciated.

Just unbelievable.  You are penalized for having 0 debt.  What kind of nonsense is that...lol   I may do the following:  1). wait for the next cycle;  2) request Cap 1 to resubmit my report after I charge perhaps $1,000 on it in a couple of days (POOL PARTY!!!), 3). Full steam ahead and start applying.  I am inclined to either get Cap 1 to resubmit or full steam ahead.  We will see.  I also have a very high salary.  Buddy of mine told me they would be crazy not to loan you money.

A few questions for everyone:

1.  I was told you can keep your auto loan inquiries down to 1 inquiry if you do all of them in a 2 week period?  Is there any truth to that?  If yes, how does it work & what is the best approach to do that?

2.  Is there a danger in giving the dealer your ss# to give to their lenders to perform credit checks crushing your credit with numerous inquiries?  My credit has already taken a hit. 

Thanks

p.s.  hmw_75...I have zero DTI.  I have no debt.  Blank slate.

[Anonymous]

You don't have to do anything, yourself, to limit the impact of the upcoming slew of inquiries.

When a car dealer submits your application to the dozen or so lenders they work with, these lenders will each pull your credit, generally within the same 24 to 48 hours, weekends notwithstanding. These are hard pulls, but are coded as "auto lending" inquiries. FICO will score the entire collection as one hard pull, even though all dozen or so will be listed on your reports. They will sit there until their reporting life is over, but their collective effect on your score is one. Future lenders you may apply with in the coming months, up to two years, will be able to see them, but will also see them coded as "auto lending" which generally means they are ignored by credit card issuers and such.

I bought a new car in March. I collected over 25 inquiries while shopping over a little under a week. 19 of them remain on my reports (the others fell off immediately, for whatever reason, i suppose the reporting lenders did something to cancel the requests, who knows). My score, including incurring the "high balance" notations on the new loan, is about 20 points higher now than it was then. It did drop a handful of points in the cycle between my old loan reporting paid off and the new loan appearing, but it was temporary and had nothing to do with the inquiries.

[Appleman]

Expect every inquiry to stay on your reports. The scoring model will lump them together but you will still show a large number of inquiries.