How Quickly Can FICO Scores Improve?

[Anonymous]

I just read another post that poked fun at how quickly a negative mark can effect your credit and how long it takes for the positive points to up your score.  In all seriousness though, that seems pretty accurate!  How quickly can improvement be seen in your score? 

In my case, in the summer of 2010, my scores were all about 737.  Last summer, after opening 2 store cards early in the year, my scores quickly dropped to 660!  I have since paid off all but one of my debts/credit cards, my total use is at 57%, but as of yesterday, my scores are still at 660.  What is it going to take to get back to the 700s??  If I pay off the last card will my score still lag behind?  My one concern is I know I will need a new car soon.  I'd like to get my score up again before I get an auto loan but I'm starting to feel like it will be 2017 before that happens.

I appreciate your input. 

[Revelate]

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@Anonymous wrote:

I just read another post that poked fun at how quickly a negative mark can effect your credit and how long it takes for the positive points to up your score.  In all seriousness though, that seems pretty accurate!  How quickly can improvement be seen in your score? 

In my case, in the summer of 2010, my scores were all about 737.  Last summer, after opening 2 store cards early in the year, my scores quickly dropped to 660!  I have since paid off all but one of my debts/credit cards, my total use is at 57%, but as of yesterday, my scores are still at 660.  What is it going to take to get back to the 700s??  If I pay off the last card will my score still lag behind?  My one concern is I know I will need a new car soon.  I'd like to get my score up again before I get an auto loan but I'm starting to feel like it will be 2017 before that happens.

I appreciate your input. 

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57% utilization isn't a pretty metric from a FICO perspective assuming you're speaking of revolving debt.

57% -> near zero is probably 700 right there assuming you have no derogs on your report, also you may get an additional bump around the one year mark on those new store cards and wherever your new AAoA transitions over a boundary.  If you're looking for top tier financing, I'd take a hard look at where I was financially and how badly I need that car... and then see about airstriking the credit card balances.

For more tailored advice, I'd highly suggest posting your various tradelines and balances, and people can give you a better recommendation.

[Anonymous]

Pardon my naivite, but I don't know what an AAoA is or what that means in regards to "transitions over a boundary".  Could you clarify?  I'm on these boards pretty infrequently so I'm not familiar with the lingo and abbreviations sometimes  

The 57% is my debt to credit ratio.  This month also marks the one year anniversary of when I got my last store card.  Both store cards were paid off within the 6 month promotional period - no change in my score when the debts were eliminated.  I have 3 CCs, an AmEx, MC, and Discover card and 3 store cards.  All my cards are at a 0 balance except the MC which is close to maxed out and also happens to be the oldest card I have at 8 years and has the highest limit.  Aside from having a high balance on my MC, I have no negative marks on my credit reports (just pulled them yesterday) and never have.  I've never missed or made a late payment, etc.  The only thing I haven't mentioned is that I transfered a balance to get a lower rate in November of 2011 but that debt has already been paid off.  So, aside from the high MC balance, I'm not sure what else would be holding me back from a higher score or why my score hasn't jumped as I've paid off my cards. 

I will need a new car though, no way around it.  My car is 14 years old with nearly 200k miles.  Still ticking but I'm at the point paying for repairs is not making much sense...especially considering it gets 12mpg and gas near me is almost $5/gallon.  So, I need to be ready with a game plan   

[Anonymous]

Let me correct an misconception that your question seems to indicate (maybe not):

FICO scores are generated at the time it is pulled.  It is a snapshot of your credit and is not historical in the least.  The reason that it seems FICO scores are historical is that certain factors that make up your FICO scores measure past performance such as payment history etc.

In terms of your particular situation:

1) Utilization measures how much of your credit you are using.  The higher the utilization, the worse your score.  Overall utilization is the key factor (total outstanding/total revolving credit), but there are negatives for having multiple balances and high balances on any particular card.  Utilization makes up around 30% of your FICO score.  The magic percentages for utilization are 100%, 80%, 50%, 30%, 10%.  If you are higher than these percentages, your hit per percentage is higher.  Can you get your overall utilization below 30% or even better 10%?  Also, remember this isn't about whether you pay in full (PIF) every month because you can still show utilization even when PIF.  The reason is that different credit cards report what is owed and paid at different times.  For example, AMEX reports to the credit bureau around the day your statement is generated so unless you are paying before your statement is generated, you will always show a balance owing.  So review your credit report, pay early so the credit cards that are PIF report 0.  If you can get the overall utilization below 30% and that one MC below 80% or 50%, you should see a nice FICO bump.

2) AAoA: 15% of your credit score is measuring your length of credit.  The key factor here is AAoA, average age of accounts.  Basically you take all your credit lines (open or close) and see what the average months it is open.  There are certain AAoA that give you bigger lifts.  When you applied for the new cards, you brought down your AAoA.  Given the drop you mentioned, my guess is that you don't have a lot of credit cards.  Nothing you can do about this except wait as the new cards get older, they will help you in the future if you get new cards.

3) FICO Scorecards: This is harder to understand.  Basically, FICO has different scorecards for different categories.  When you got the new credit cards, you were probably moved to the "seeking new credit" scorecard.  Different scorecards weigh the various factors of FICO differently.  Basically they try to compare yourself with others in the same situation.  So if you compare well, your FICO is higher etc.

Basically the lesson to learn here is unless you have a great and extensive credit file, you should not apply for new credit without planning for it.  If you were thinking about the car loan, I would have told you not to apply for the store cards before then.

[llecs]

I'd suggest reading the following:

Common Abbreviations

Credit Scoring 101 - great for knowing what is in your credit score and to see how your score is impacted.

AAoA is average age of accounts. AAoA is the average of all of your OC accounts whether good or bad, opened or closed. As you add new accounts, your average drops and so can your FICO scores. When you added the two new accounts, that average may have dropped resulting in a score loss that is slow to come out of. Also, FICO will ding you for adding new accounts but the effects from that don't typically last for more than a year. About the only thing you can do is let everything age and don't apply for anything (other than a car of course).

57% util is very high. Get it down if you can. Ideally, for max points, get all to report $0 except for one CC, and get that one CC to report a balance of under 9% of your CL. I paid down my CC util from 89% to 1% and saw a 125 point gain on EQ FICO. Revolving util is scored in a big way.

OP, where did you pull your score from?

[MarineVietVet]

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@Anonymous wrote:

The magic percentages for utilization are 100%, 80%, 50%, 30%, 10%. 

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May I ask where you found this information? I'm not saying you are wrong but I'm just curious.

I don't recall FICO publishing such specific percentages but I've been wrong before. 

[Anonymous]

They haven't.  But I have seen some tests that seem to validate these percentages.  It is really hard to say the exact effect as people are on different scorecards and the effects will be different.  For sure, it is not a linear scale.  But in the percentages are good guidelines from what I can see.

I forget this other point: I do remember some FICO people discussing under 30% being a key factor in scoring.

[Anonymous]

Yes, utilization is important and will improve score immediately.  One other factor is when you get to have zero baddies.  When you get that last late, last CO or last CA removed and your file is clean, you'll see a big bump.  I did.

[Anonymous]

Thank you for explaining this.  This is the type of information I need to know. 

I agree wholeheartedly that my MC balance needs to come down to make further headway with my scores.  Starting this summer I am in a better position to make that happen pretty quickly.  Unfortunately, I was laid off and dealing with medical debt so, while I paid off the smaller balances, I have just been treading water with the MC, making minimum payments.  There's only one card I use at this point but pay in full every month.  I suppose, relatively speaking, my AAoA is fairly "young".  My CCs are 7 and 8 years old but 2 of my store cards are from last March and April.  I was aware the score could be affected up to a year but I thought, paying them off would essentially, cancel out the score drop I'd get from opening them. 

So, if I lower my MC balance and get my utilization to under 50% by say, end of summer, should I notice much of a change in my score by that point?  Maybe the age of my store cards haven't been considered yet since it's just a year this month.  Maybe next month it will be better if that is taken into account?

Either way, the scores I've gotten are TU and EQ scores.  Last summer I pulled from all 3.  I usually pay for my scores once or twice a year but inbetween will monitor my score (though I know it's not the same) on a free site like creditkarma.com.  It bumped up a bit when I paid off my last CC but only a few points.     

[Anonymous]

No one can predict what getting the MC utilization under 50% will do.  Question for your though: when you say get it below 50%, do you mean the card balance or your overall utilization?  Use the FICO Score Estimator to see what it might do.

As for the new cards, you took somekind of hit for seeking new credit but after a year, but that should fall off soon if it hasn't already.  The thing that is harming you is that your AAoA decreased significantly and that is something that you can't solve.

Depending on where your score is, it might be worth attacking the utilization question by getting CLIs on existing cards or with new cards.  Have to see where you are once you pay things down a little and get any negatives you can get off.