FICO score miscalculation after new credit account opened?

[Anonymous]

Hi All,

Some background.  21 years old.  Chase Freedom $6k CLI opened Nov 2014 (14 month history).  Citi DoubleCash $2.7k CLI opened June 2015 (8 month history).  And most recently, Chase Sapphire Preffered $16k CLI opened late December 2015 (1 month history).  

I was poking around for new cards in December, thinking maybe amex, but I checked and found out I was pre-approved for the Sapphire Preffered card.  I was elated!  There was a "Spend 4k in 3mo / 50k miles" offer on the table which I had every intention of picking up.  I put around $2.5k on it in January (15% util).  My Freedom and Citi hard were at around 3% and 2% utilization, respectively.  

The DoubleCash card provides me with a free monthly FICO score.  I've been following it closely and doing my best to keep it climbing.  Keeping utilization under 30%, all on time payments - trying to be smart about it.  My score has reflected this.  September 2015: 763, October 2015: 774: November 2015: 781 -- now heres the shock -- December 2015: 727!

I have to think this is a miscalculation or something.  My util acorss the board DROPPED as I was able to offload my expenses to the Sapphire card.  Note: spending on the Sapphire didn't start until 2016 as I was away and the card was in the mail.  Neither Freedom or Citi card went above 12-15% utilization in that time.  My total CLI jumped from $8.7k to a whopping $24.7k.  How could my score have taken such a hit!

Any info would be greatly appreciated -- thanks.

[EdMan63]

I'm no expert but my guess would be a combination of the new account and inquiry. The new account probably cause your Average Age of Accounts to drop which in turn caused the score drop given your relatively short credit history. Good news is after a few months it should be right back up there again. 

[Anonymous]

Interesting, thanks for the input.  CreditKarma reports a TU 787 (down -8 from the inquiry) and EQ 787 (down -6 from the inquiry).  Credit.com 784.  I know these don't mean anything in comparison to the FICO but the discrepency is odd.  Before this I'd monitor all three and the TU, EQ, and FICO were all within a few points.  Thanks for the reply EdMan!

[bdhu2001]

More than likely your score is dropping due to the new tradeline, inquiry, and multiple accounts reporting a balance.   Pay off every card except the double cash and keep the reported balance on your double cash below 10%.  When I say reported balance, that does not mean pay interest.  That means pay previous months balance my due date, but make sure that you have additional charges that will show you at 10% or less.  

I have a Costco AmEX that I use every time I shop at Costco and I pay previous statement balance in full.  Thus, my current statement shows that I owe $672, but I've paid no interest.  As long as I pay $672 before due date, I'll continue to pay no interest even though I'm making additional charges.

[Anonymous]

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@bdhu2001 wrote:

More than likely your score is dropping due to the new tradeline, inquiry, and multiple accounts reporting a balance.   Pay off every card except the double cash and keep the reported balance on your double cash below 10%.  When I say reported balance, that does not mean pay interest.  That means pay previous months balance my due date, but make sure that you have additional charges that will show you at 10% or less.  

I have a Costco AmEX that I use every time I shop at Costco and I pay previous statement balance in full.  Thus, my current statement shows that I owe $672, but I've paid no interest.  As long as I pay $672 before due date, I'll continue to pay no interest even though I'm making additional charges.

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Hmm, I think I may be a little lost!  I keep the statement balance at 1% utilization on the Citi and Chase Freedom cards now, Sapphire at 5-10%.  Does this not have the same effect?

[SouthJamaica]

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@Anonymous wrote:

Hi All,

Some background.  21 years old.  Chase Freedom $6k CLI opened Nov 2014 (14 month history).  Citi DoubleCash $2.7k CLI opened June 2015 (8 month history).  And most recently, Chase Sapphire Preffered $16k CLI opened late December 2015 (1 month history).  

I was poking around for new cards in December, thinking maybe amex, but I checked and found out I was pre-approved for the Sapphire Preffered card.  I was elated!  There was a "Spend 4k in 3mo / 50k miles" offer on the table which I had every intention of picking up.  I put around $2.5k on it in January (15% util).  My Freedom and Citi hard were at around 3% and 2% utilization, respectively.  

The DoubleCash card provides me with a free monthly FICO score.  I've been following it closely and doing my best to keep it climbing.  Keeping utilization under 30%, all on time payments - trying to be smart about it.  My score has reflected this.  September 2015: 763, October 2015: 774: November 2015: 781 -- now heres the shock -- December 2015: 727!

I have to think this is a miscalculation or something.  My util acorss the board DROPPED as I was able to offload my expenses to the Sapphire card.  Note: spending on the Sapphire didn't start until 2016 as I was away and the card was in the mail.  Neither Freedom or Citi card went above 12-15% utilization in that time.  My total CLI jumped from $8.7k to a whopping $24.7k.  How could my score have taken such a hit!

Any info would be greatly appreciated -- thanks.

---

It's actually obvious. You lose points for looking for new credit. You get at least one hard inquiry when you apply, you get a brand new account when  you get the account, and your average age of accounts goes down. It's a temporary hit, though, as time heals all wounds. But if you want your scores to keep going up, and to never go down, don't apply for anything.

[Anonymous]

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@SouthJamaica wrote:

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@Anonymous wrote:

Hi All,

Some background.  21 years old.  Chase Freedom $6k CLI opened Nov 2014 (14 month history).  Citi DoubleCash $2.7k CLI opened June 2015 (8 month history).  And most recently, Chase Sapphire Preffered $16k CLI opened late December 2015 (1 month history).  

I was poking around for new cards in December, thinking maybe amex, but I checked and found out I was pre-approved for the Sapphire Preffered card.  I was elated!  There was a "Spend 4k in 3mo / 50k miles" offer on the table which I had every intention of picking up.  I put around $2.5k on it in January (15% util).  My Freedom and Citi hard were at around 3% and 2% utilization, respectively.  

The DoubleCash card provides me with a free monthly FICO score.  I've been following it closely and doing my best to keep it climbing.  Keeping utilization under 30%, all on time payments - trying to be smart about it.  My score has reflected this.  September 2015: 763, October 2015: 774: November 2015: 781 -- now heres the shock -- December 2015: 727!

I have to think this is a miscalculation or something.  My util acorss the board DROPPED as I was able to offload my expenses to the Sapphire card.  Note: spending on the Sapphire didn't start until 2016 as I was away and the card was in the mail.  Neither Freedom or Citi card went above 12-15% utilization in that time.  My total CLI jumped from $8.7k to a whopping $24.7k.  How could my score have taken such a hit!

Any info would be greatly appreciated -- thanks.

---

It's actually obvious. You lose points for looking for new credit. You get at least one hard inquiry when you apply, you get a brand new account when  you get the account, and your average age of accounts goes down. It's a temporary hit, though, as time heals all wounds. But if you want your scores to keep going up, and to never go down, don't apply for anything.

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That makes sense to me.  I understood I would incurr some hit, I was just a little suprised as to how much of one it was!  I'm happy with my new Sapphire card and I guess a hit is just the name of the game.  I will apply for an amex sometime this year, will be watching closely to keep the FICO going up.  Thanks for the input.

[Anonymous]

Your file is thin so the activity has a more dramatic impact than it would with a thick file. As time goes on, your scores will become less volatile.

[bdhu2001]

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@Anonymous wrote:

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@bdhu2001 wrote:

More than likely your score is dropping due to the new tradeline, inquiry, and multiple accounts reporting a balance.   Pay off every card except the double cash and keep the reported balance on your double cash below 10%.  When I say reported balance, that does not mean pay interest.  That means pay previous months balance my due date, but make sure that you have additional charges that will show you at 10% or less.  

I have a Costco AmEX that I use every time I shop at Costco and I pay previous statement balance in full.  Thus, my current statement shows that I owe $672, but I've paid no interest.  As long as I pay $672 before due date, I'll continue to pay no interest even though I'm making additional charges.

---

Hmm, I think I may be a little lost!  I keep the statement balance at 1% utilization on the Citi and Chase Freedom cards now, Sapphire at 5-10%.  Does this not have the same effect?

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Sorry for confusing you.  Based on trial and error, we've discovered that for most of us, only one card should report a balance.  If you're utilizing 1 % on both Citi and Chase and you're allowing the 1% to report of statement cut date, then you have multiple cards with a balance.

Through trial and error, many of us have found one card reporting a balance to be the sweet spot for getting our highest FICO score.  For a few people two cards work, but going with the norm usually works and you can test from there.

Multiple cards wasn't the only reason for your score hit.  You also had a hard inquiry and a new trade line.  Based on your statement you previously had two cards reporting & went up to three. A hard inquiry wouldn't have you loosing 50 points, neither would a new trade-line. Thus, I believe it's the combination of all trade-line, hard inquiry, & multiple balances that created the drop.

[SouthJamaica]

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@Anonymous wrote:

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@SouthJamaica wrote:

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@Anonymous wrote:

Hi All,

Some background.  21 years old.  Chase Freedom $6k CLI opened Nov 2014 (14 month history).  Citi DoubleCash $2.7k CLI opened June 2015 (8 month history).  And most recently, Chase Sapphire Preffered $16k CLI opened late December 2015 (1 month history).  

I was poking around for new cards in December, thinking maybe amex, but I checked and found out I was pre-approved for the Sapphire Preffered card.  I was elated!  There was a "Spend 4k in 3mo / 50k miles" offer on the table which I had every intention of picking up.  I put around $2.5k on it in January (15% util).  My Freedom and Citi hard were at around 3% and 2% utilization, respectively.  

The DoubleCash card provides me with a free monthly FICO score.  I've been following it closely and doing my best to keep it climbing.  Keeping utilization under 30%, all on time payments - trying to be smart about it.  My score has reflected this.  September 2015: 763, October 2015: 774: November 2015: 781 -- now heres the shock -- December 2015: 727!

I have to think this is a miscalculation or something.  My util acorss the board DROPPED as I was able to offload my expenses to the Sapphire card.  Note: spending on the Sapphire didn't start until 2016 as I was away and the card was in the mail.  Neither Freedom or Citi card went above 12-15% utilization in that time.  My total CLI jumped from $8.7k to a whopping $24.7k.  How could my score have taken such a hit!

Any info would be greatly appreciated -- thanks.

---

It's actually obvious. You lose points for looking for new credit. You get at least one hard inquiry when you apply, you get a brand new account when  you get the account, and your average age of accounts goes down. It's a temporary hit, though, as time heals all wounds. But if you want your scores to keep going up, and to never go down, don't apply for anything.

---

That makes sense to me.  I understood I would incurr some hit, I was just a little suprised as to how much of one it was!  I'm happy with my new Sapphire card and I guess a hit is just the name of the game.  I will apply for an amex sometime this year, will be watching closely to keep the FICO going up.  Thanks for the input.

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The hit is bigger with you because you had less history, and fewer cards, than many of us. But like I say, it's temporary, and you will rebound, possibly very quickly, due to the greater available credit and number of accounts, and reduced utlization percentage.