FICO score drop after using a previously-idle credit card

[Lel]

I decided to use a Visa with a long account history (opened in 1993) that I hadn't used since 2003.  I decided to do this because it was suggested that keeping the account active with an established payment history could increase my FICO score.  The balance of this credit card was just reported ($75), and this resulted in decrease in my score from 794 to 785.

The Score Watch explanation about why this might have occurred is as follows:

1 of your previously dormant accounts reported recent activity

Why did I get this alert? This alert was sent because there is new activity on an account that was inactive for more than 56 months.

How newly active accounts impact your score: You received this alert because one of your credit accounts is showing activity after having been inactive for some time. The effect this has on your FICO® score is hard to predict; it may cause your score to go up or go down.

This kind of alert often happens at the same time as other alerts on the same account. The other alert, perhaps a balance increase alert or an account change alert, likely has a greater effect on your FICO® score. However, it is possible for new activity on an inactive account, by itself, to affect your FICO® score.

Your FICO® score may go up if most of the accounts listed in your credit report have been inactive recently and then new activity is reported on one of the accounts. Consumers who have recently used credit responsibly often have higher FICO® scores than consumers who have not used credit at all recently. Therefore, showing new account activity on your credit report that previously had little recent activity can help your FICO® score.

Your FICO® score may go down if the new activity is reported on an account that was already in bad status. Accounts in bad status include those that are currently past due, have a history of missed payments, or are charged-off or sold to a collection agency.

I found this to be an interesting effect, but I'm hoping it's temporary.  Has anyone else experienced the same sort of effect?  How long did it take to correct itself?  Should I continue to use the card, or is it  better to let it idle again?

[haulingthescoreup]

You should get it back the next month. The same thing happened to me after I had gotten disgusted with a card and sock-drawered it for three months. I decided to grit my teeth and use it, and I lost points the first month, getting that same message. Since I paid the balance in full, the points were back the next month.

Again, since FICO tries to measure and predict risk, if a consumer is rummaging around and digging out old cards and using them, this is a possible indicator of financial problems. As long as you pay the card off again, you should recover your points.

[Lel]

Okay, so I will continue to use this card and see what effect it has on credit scores once I pay it off.  Thanks for sharing your experience.

You mentioned in another thread that one could pay off the credit card balances before a statement posts, thereby generating a zero balance report to FICO.  This is a really stupid question, but does that affect the payment history as reported by the credit card companies to the CRAs?  That is, because the account is at zero balance prior at posting, would the credit card companies then report "no payment due" to the CRAs?

[Creditaddict]

you would want to pay the balance except an ammount that would keep you below 9% util on the statement, then when statement comes, pay remainder.  You have to leave little balance or it won't report to credit report you are even using it and therefore won't really help you.

[Anonymous]

You should use all CC  once or twice a year....PIF  in about 1 week OR before the report time.  This keeps them reporting  active with a Bal $0   The amount that you charge doesn't matter.

[haulingthescoreup]

---

@Lel wrote:

Okay, so I will continue to use this card and see what effect it has on credit scores once I pay it off. Thanks for sharing your experience.

You mentioned in another thread that one could pay off the credit card balances before a statement posts, thereby generating a zero balance report to FICO. This is a really stupid question, but does that affect the payment history as reported by the credit card companies to the CRAs? That is, because the account is at zero balance prior at posting, would the credit card companies then report "no payment due" to the CRAs?

---

Not at all a stupid question, because I didn't know how this worked until I blundered across it.

I have a high-CL card that I used to pay for new flooring. Since we kept running back and forth to Home Depot, returning and getting new stuff, I wound up with a pretty good-sized balance of $10K or so. I paid it off 5 days before the statement was due to drop, because I didn't want 34% util to post on it. I pulled my TrueCredit reports the day after it updated, and I saw that $10K+ figure, which dampened my drawers. But it turned out to be the high balance figure, and the current balance showed as $0. And it's the $0 that's used in figuring your util.

So if the CC's are doing their jobs correctly, they will report your highest balance during the cycle AND your balance as of the statement date, or whatever date they use. That way, even if you keep having $0 report for util purposes, others can see that you have in fact been using the card.

And when it comes to the CCC's looking at whether you're using the card, they don't look at the statement balances; they look at your total charges within the billing cycle. If you aren't going to carry balances and pay interest, then they don't care when you pay it off, before or after the statement drops. As long as you pay!

Message Edited by haulingthescoreup on 04-01-2008 03:34 PM

[Lel]

Thanks, hauling, that helps quite a bit. By the way, I can't help but notice the difference in pre- and post-app FICOs. What exactly was it that you applied for that caused such a drastic drop in your TU and EX scores?

[Anonymous]

She opened 4 new cc's. Her scores will start going back up as the accounts age. Also the inq's will stop affecting her score a year from the date of the inq.

[haulingthescoreup]

Well, by the time I was done, it was 6 cc's and a car loan, all pretty much in one swell foop. And one of the CC's I used for a high-util balance transfer. That, plus the car loan which is currently at 100%, or was until the first payment yesterday, got my scores all excited. They're already starting back up.

Oddly, I didn't get hit much total for the inqs. (You can tell, because the inqs hit right away, while the accounts take a while to post, so if you pull scores, you'll see the intermediate inq-only scores.) 0 pts on EQ and TU, and 3 on EX after the main app binge. It was the sudden re-aging of my average age from 4 years, 11 months to 3 years, 7 months that did it. And even though my oldest accounts are the same as before, I wonder if I didn't change score buckets on the average age. Dunno if average age can trigger this, though.

It's all OK, though, I needed to make major changes in my credit profile, and it's already helping in other ways. I'm very curious to see where I'll be in late May / mid June, when all the new stuff is 3-4 months old.

[Anonymous]

HTSU  I will try to remember to let you know what happens to my score when my 10 or so new accounts hit the 3 mo. mark by the end of the month. Although I am in a different score bucket it might provide some useful info.