Concerned About Continual Credit Score Drop

[Anonymous]

Hi All,

I'm hoping someone could explain what I'm doing wrong, or the reason behind my FICO score dropping over the last few months. I've had a Wells Fargo card for about three years now, and decided it was time to open a 2nd account. I've always paid my bills on time, and in full. When I was approved for an AMEX card, they pulled my score from Experian, and it was a 771. I was very surprised it was that high to say the least. One of the perks of that card is that I get a free FICO score fro Experian, and it says that checking it does not affect the score. About a month after I opened my account, I saw the score drop to a 763, and thought it was due to the inquiry. The next month I checked, it went down to a 743. The explanation was "In your case this number is too low because you have very few accounts or because you've missed payments recently on some of your accounts." I called Wells Fargo and Amex, with both companies saying I've never paid late. I check today, and it has dropped to a 729, and the explanation is "Length of time accounts have been established, and Lack of recent installment loan information". I know that the average age of my accounts lessened with a new account opening, but a 771 down to a 729 seems very excessive for just opening a new card. I do not need a loan, or a mortgage. Again, I want to reiterate I've always paid on time and in full. I have about 18-27% utilization, and have never gone over 30%. What am I doing wrong, and will this continue to go down? Is this normal?

[Anonymous]

For what its worth, when I inquired with with experian about the credit report, they said I had no missed payments, and that the Amex card had not yet reported, but the inquiry was there. Credit Karma seems to agree with the payment history being just fine.

If someone could explain to me whats going on, i'd greatly appreciate it.

[Anonymous]

Your very thin, very young. high score is more susceptible to bigger hits.

First inquiry, a new account, overall utilization and number of cards reporting is likely effecting your score.

You have also likely dropped your average age of accounts below 2 years now that the AmEx is reporting based upon the above.

Instead of posting in generalizations, post your actual card balances/limites and whether both cards were reporting balances associated with each of the scores in order to get more insight

You are doing great, your score will recover.  Allow < 9% to report on one card when you want to optimize your score.

Unless you are applying for something, it doesn't matter right now.

Someone is going to tell you that you need to get at least a third card and now is probably a good time to do it.

[Anonymous]

Very thoughtful comments by Inverse.

It's possible that, during the time that your score was dropping, your utilization was increasing.  That would be consistent with what you described -- and there's a significant scoring difference between 18% and 27%.  That, along with an inquiry coming on board, and then a month later the new account registering, could easily account for a big drop. 

On the other hand, that's all now part of your profile.  If you'd really like to see what your score is like, I suggest you pay one card off entirely ($0 balance) and pay the other card down a lot, so that your total utilization is about 1-3%.  Make sure you get your balances the way your want before the statements cut, and make sure that you have a utility that lets you see you credit reports any time you want (like Credit Karma) so you can confirm that the new balances are reporting to the CRAs.

My guess is that you will see a significant rise in your score.

If you can get your score up a bit, then as Inverse says now would be a great time to add a couple more cards.  It's a good time precisely because you do NOT need a loan or a mortgage any time in the next couple years.

[Anonymous]

Get a copy of your credit report and scrutinize it to make sure there are no surprises.

You can get a free one from credit karma. IGNORE THE FAKE SCORE THERE, but review the details on the report to verify no derogatory information is being posted, no suspicious accounts being opened, no debt you forgot about being reported.

If nothing negative don't sweat it, in a year the new account penalty will be gone and your score will snap back quick.

[Anonymous]

Thanks everyone. I should have put my utilization the other way, as it has decreased since opening the new card. I've always kept it under 30%, but Wells Fargo gave me a low limit, and they do not like giving CLI's without hard pulls, which was the reason for opening the new account. I figured my limit would be better by joining AMEX. With the new card, my utilization has decreased even though I'm putting more on my cards. For example I spent about $1250 on credit last month out of $6500, so I had 19% utilization.

[redbeard]

With the AMEX score, make sure you look at the date they pulled it. On mine, for some reason, they run about 3 weeks behind, so if everything is static on your reports, its okay, but with changes (like adding a card), then the impact seems out of whack.

Dan

[Anonymous]

Hey mjgoldstein9!  Lot's of good advice here.

A really key thing that was mentioned is for you to pull your credit reports.  That's always the thing to do when you are puzzled by your score.  A free service that will give you both your EQ and TU reports as often as once a week is Credit Karma.  You should be pulling them weekly if you are at all unclear as to what's going on.

I really encourage you to get your utilization low (1-5%) and keep it there for a few months.  You will almost certainly experience a score rise.  You may need to learn when your cards report to the bureaus, but your reports will tell you that.  Be sure you understand how to control the amount that gets reported -- since you pay in full that is something you can absolutely do.  For a couple months you want one card to report $0 and the other to report a small amount, e.g. $20 or so.

Once you get a stable score (casued by the same low utilization for a couple months) you can decide whether you personally feel a need for your score to be yet higher still.

If you do, then consider adding a $500 Share Secure loan.to your profile.  That can be done in a way that costs you almost nothing.  It will give you solid 20-40 points if you do it right and if you have no installment loans in your profile.  (If you already have a car loan or a student loan it won't help.)  We can tell you more about that if you decide you are interested.

[takeshi74]

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@Anonymous wrote:

The next month I checked, it went down to a 743. The explanation was "In your case this number is too low because you have very few accounts or because you've missed payments recently on some of your accounts." I called Wells Fargo and Amex, with both companies saying I've never paid late. I check today, and it has dropped to a 729, and the explanation is "Length of time accounts have been established, and Lack of recent installment loan information". 

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Don't rely on the explanations on their own.  You have to carefully review reports from before and after each scoring change to determine the cause(s).

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@Anonymous wrote:

I know that the average age of my accounts lessened with a new account opening, but a 771 down to a 729 seems very excessive for just opening a new card.

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On what basis?  As stated above, a thin profile is susceptible to greater negative impact from given activity.  You also may not be accounting for all report changes that impacted your score.  Again, you'll have to carefully review reports to account for the causes.

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@Anonymous wrote:

What am I doing wrong, and will this continue to go down? Is this normal?

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It's probably not abormal for your profile and activity.  However, it's impossible to answer your questions without the report data or an idea of the details of what's going on with your reports.  Any score is generated from the data in a report at the time the score is generated.  Whether or not a score goes down all depends on the changes since the last time the score was generated.

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@Anonymous wrote:

Thanks everyone. I should have put my utilization the other way, as it has decreased since opening the new card. I've always kept it under 30%, but Wells Fargo gave me a low limit, and they do not like giving CLI's without hard pulls, which was the reason for opening the new account. I figured my limit would be better by joining AMEX. With the new card, my utilization has decreased even though I'm putting more on my cards. For example I spent about $1250 on credit last month out of $6500, so I had 19% utilization.

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Are the numbers stated above your revolving utilization as indicated on your reports?

[Anonymous]

Takeshi asked a good question about your utilization in his last post.  He's carefully drawing your attention to what the reports say, which is what matters from FICO's perspective.

It drew my attention again to your last post where you said:

"I've always kept [my utilization] under 30%, but Wells Fargo gave me a low limit, and they do not like giving CLI's without hard pulls, which was the reason for opening the new account. I figured my limit would be better by joining AMEX. With the new card, my utilization has decreased even though I'm putting more on my cards. "

One inference a reader might make is that you wanted to lower your utilization so you tried to get a higher total credit limit (by opening a new card).  As you observed, it enabled you to put more on your cards.

If, as you said earlier, you are always paying your CC balances in full, then that's ok.  But I'd be less than honest if I didn't tell you that a desire to lower your utilization should be (in my opinion) the last reason to open a new card or to seek CLI's.  The reason is that anyone can lower his utilization to 1% if he is spending a lot less than he brings home in takehome pay -- regardless of whether he has a total credit limit of $500, $5000, or $50,000.  And if he can't, it means necessarily that either in the recent past or the present, his spending has sharply outpaced his income, which is a giant red flag of financial problems.  Our aim should always be to spend far less than we bring home, so that we can be saving the difference: towards retirement, a house, a car, a rainy day fund, etc.

Again, you describe yourself as always paying in full, so you should be ok, but I thought I'd throw that out there anyway.  Best of luck...