@CorySoccer wrote:@dragontears I just looked at my Experian account again and you are right. I didn't notice at the time, but I do have another red down arrow stating that because I'm not carrying over a balance on my credit cards that it shows me as a higher risk than someone who carries over a balance month to month.
I haven't carried a balance in years. Why now all of the sudden am I being penalized for not having a balance carried over? It's only with Experian that this is an issue with.
Just don't get it lol.
I wonder if the term "risk" is correct when describing the all zero penalty. I mean is it really likely you are a greater risk to lenders if you pay all your debts in full each monrh?
I'm not saying there isn't a penalty for all zero, but I don't think it's because borrowers who pay in full are more risky.
@KatSoDak Thanks for the reply... As crazy as it is it literally says that I am a "higher risk" person by paying off all my balances lol.
@CorySoccer wrote:Hey all!
So I checked my Experian score today and noticed it dropped 15 points. FIFTEEN? The ONLY change in my credit profile is that 2 months ago I signed up for a card (PenFed Gold) and haven't used it yet.
When I clicked on the "what has changed" everything was/is good (I carry no balances, my loan balances are low, good mix, good AAOA all that stuff) and I saw a red down arrow stating "No credit card activity."
When I clicked on it it said "There is no recent activity on credit cards and/or bank-issued open-ended accounts. The FICO Score evaluates the mix of credit cards, loans and mortgages on a credit report. Your credit report shows no open credit cards and/or bank-isued open-ended accounts or sufficient recent information about your credit cards and/or bank-issued open-ended accounts. People who demonstrate responsible use of different types of credit, including credit cards, are generally less risky to lenders."
I'm sure I'm not the only one who has a credit card that they don't use (or at least use regularly)...but a 15 point drop?? I scoured all 3 credit reports for anything that might have popped up erronously such as a collection, late payment etc...and nothing. In fact, my credit is improving month by month.
So what gives? Has anyone else experienced a drop like this? I guess I'll go out today and rack up the $$ to the limit this afternoon (joking of course, but I will use the card...)
EDIT: I just now noticed another red down arrow that says "Not using revolving credit." And goes on further to say that because my balances on my cards are reporting as zero that that is hurting my score and that lenders want to see small balances on your cards as it shows that you are less of a risk than people with zero balances. What is up with this nonsense?
I've been having zero balances for years and now all of the sudden Experian is dinging me for having zero balances and not using a card??
Good grief. :/
Thanks!
I guess you got hit with the "all zero" penalty which comes when all cards report zero balance.
You get rid of it by letting at least one card report a small balance before you pay it off.
The FICO insiders who participated in a Q and A with us claim that statistics have shown that people who have small balances are less risky than people who have no balances. [I personally don't believe it; I believe the real reason is that FICO is out to improve profitability for their customers, and people who abhor debt and prefer zero balances are simply less profitable]
@GatorGuy wrote:
Remember FICO scores are a snapshot in time. If all your credit cards show zero, they algorithm sees it as you not using your credit cards. Their research says someone who doesn't use credit cards is a slightly higher credit risk then someone who uses them responsibly and within limits.
I do not see how a CRA that parses data, including the highest amount charged on each trade line, can assign a greater risk to an account that was paid to zero within the same reporting period it had a balance, compared to a trade line that also had a charge during a reporting period but was not at zero when reported.
Too bad we can't see the statistics behind this claim from FICO.