Card over limit credit score goes down will it recover?

[MountainHiker]

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@Jordan23ww wrote:

There's a saying in the credit community, "Utilization has no memory"!  That just means if a person loses points because of a change in their credit card utilization going up, assuming there are no other negative changes in their profile, when they pay the card back down to what it used to be, they will regain those points. So in this scenario, as long as there are no other drastic or negative changes in their credit profile they should regain those 17 points once they repay the increase in their balance and the card reports these  changes to the credit bureaus.  

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Jordan that is awesome. The nerd in me will be interested in learning if her payment not only brings down the balance but also restores those lost Fico points. I believe she paid just enough to put the balance back to where it was. And in a few weeks her plan is to pay it down. But I must say I am curious to see if Fico will reward her for being back under her spending limit just like it punished her for being over it. This will be like a case study. LOL. 

[Lou-natic]

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@Jordan23ww wrote:

There's a saying in the credit community, "Utilization has no memory"!  That just means if a person loses points because of a change in their credit card utilization going up, assuming there are no other negative changes in their profile, when they pay the card back down to what it used to be, they will regain those points. So in this scenario, as long as there are no other drastic or negative changes in their credit profile they should regain those 17 points once they repay the increase in their balance and the card reports these  changes to the credit bureaus.  

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Well this saying doesn't apply anymore with the advent of FICO10T (the T is for trend data) and the fact that it will be one of the new mortgage scores used (along with VS4.0) so maybe not today, maybe not tomorrow but if you plan to buy a house in the future this is absolutely something you need to be aware of and the data goes back 24 months.

[MountainHiker]

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@Brian_Earl_Spilner wrote:

Points will come back. The main concern should be what lenders will do with that information. A lender may hand out adverse action, like fees, or penalty apr. But, there are other lenders that monitor reports for things like this. Both Discover and NFCU will take note and deny things such as CLIs due to going over the limit. NFCU actually has a reason code that an account went over the limit in the last 12 months indicating how long it may be affecting their decisions on a different account(s).

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That's great DP feedback that I imagine most people don't know about. Certainly is a new one on me. I will definitely communicate that to my friend. 

[MountainHiker]

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@Jordan23ww wrote:

There's a saying in the credit community, "Utilization has no memory"!  That just means if a person loses points because of a change in their credit card utilization going up, assuming there are no other negative changes in their profile, when they pay the card back down to what it used to be, they will regain those points. So in this scenario, as long as there are no other drastic or negative changes in their credit profile they should regain those 17 points once they repay the increase in their balance and the card reports these  changes to the credit bureaus.  

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Thank you for posting this information. 

[MountainHiker]

As promised I wanted to report what the results were after experiencing a Fico score drop due to going over a credit card spending limit.

If you recall I have a friend who accidentally went over her credit limit once the interest fees were added to her balance and it happened one day before her statement date.

She was just $15 or $20 under her spending limit and the added interest fee put her about $3 over. And that amount was reported to the credit bureaus and she lost about 17 FICO points.

As of yesterday her credit card reported the new balance and true to her word she paid it down to exactly where it was before the lost of the 17 FICO points. And this week she plans to pay it down by 50%. 

What was interesting is she regained nearly all 17 FICO points just by paying the card back under the spending limit. Essentially she's at about 98% utilization for that card. And nothing else changed on her credit report.

But because FICO does seem to punish a credit file for being over the spending limit on a particular credit card, it does appear that Fico does in fact reward you for just getting the card back under the spending limit. 

I did not know this information beforehand, and thus could not personally answer her questions on the matter. But we now have real result oriented proof on this topic. Interesting and definitely a case study.