My temporary destruction of my FICO score with a balance transfer.

[fliphusker]

I am not some crazy wild man tossing around my FICO score like it means nothing or a college kid playing around with their first credit card. Before I bought my house 10 years ago, (Paid off now.) my FICO score was a mess. 490 messy to be exact. In the two years prior to me buying my house, I took my credit score from that poor excuse up to 720.

In the meantime, I got into the credit card game with rewards cards and balance transfers. Before you read any further, this is not for someone who sucks at managing money. Living on a rigid budget and keeping exceptional records is a must. I implore you, if that criteria does not apply do not read further.

Over the last eight years, I started building my rewards credit card empire. Going out and snaring my Cap One Quicksilver first. That was followed by my Discover card. The gem was my Citi double cashback that I beat up on a constant basis. That was followed up by Chase Freedome for its rotating categories. Braclays was put into my inventory next for its 5% grocery cash back. (Now dead.)  My Amazon card is used way too often but they make it too easy, right? AMEX Everyday and the not highly touted, Nuesenda cards came next. (If you do not have a Nuesenda card look into a post I have about it around here.) I use them to their fullest extent each quarter and pay them off monthly when applicable.

Along the way, I did a big balance transfer with my Chase Slate card for 15 months after a huge remodel on my house. I took it out before I jacked up my cards simply for the rewards and before it screwed up my FICO.

When I took out my AMEX 14 months ago I had a plan in place that I was going to grab another balance transfer card at the end of it. I had to spend $500/month on my AMEX for six months to make $50/mo for a total of $300. My limit was $8,500 so tossing $3K on it was not a big deal. Sure I went over the 30% mark but I was nowhere close to the 60% threshold that I have read is a major downgrade on your FICO. (Was not doing anything with my credit anyway.) At the same time, Discover gave me 0% interest for a year due to a dispute. So out went more money on both cards quickly. But with my long game, I was not concerned. Never went much over 20% utilization of my Discover let alone much over 10% of my total utilization.

That leads me to the whole point of this. Utilization. Most think that utilization is about your overall utilization. But that is absolutely false. Utilization per credit card matters just as much regarding your FICO score no matter if your total utilization stays the same. You take one card utilization over certain thresholds — your FICO pays the price.

So as the $4,200 is tossed into the risky stock market and doing well, (Thank you Vanguard.) I took out a BOFA balance transfer card. BOFA did not play nice and only gave me a $3K limit, was hoping for $5K.

So without upping my (Actual) utilization I massacred my new BOFA and put the balance at 100%. According to Credit Karma, last week my FICO jumped. It did not show my BOFA hit but showed the reduction in utilization of my Discover go to zero and my AMEX cut in half. Total utilization dropped from 10% to 8%. My Credit Karma Transunion jumped six points from 797 to 803. When you have a higher FICO that is actually a big jump.

I knew the other shoe was about to fall. The BOFA max was not listed yet nor was the faulty utilization. My AMEX card is out of sync with the others so it does not report payments in the middle of the month.

My BOFA posted and BAM, out the window my lovely and hard-earned FICO score went. My gorgeous FICO score I have worked so hard to protect was shattered into 708 pieces. A 95 point drop. OUCH!!! 708 is still decent in FICO land, right? In case of an emergency, I have the BOFA money in the market. (I actually have a six-month emergency fund in the market.) My total utilization falsely changed again and jumped to 14% due to my BOFA showing $3K but did not show my Discover utilization change. 

I am curious to see what happens with the current total utilization changes when the incorrect figure of 14% changes and goes back to 10%.

I do hope that this helps out people who have inquiries on how a balance transfer can help/hurt them. But my advice, do not get a balance transfer. Look, if you sucked with credit cards before, do you really think you will be responsible with another one? Just be responsible.

I will update this as my score changes. I will try to put up another post when I clear up my FICO in 17 months. This is just to help out others as so many here have helped me out. 

UPDATE

The correct utilization posted due to Discover reporting the BT of to BOFA. My overall utilization dropped down to the correct 10% down from 14%. CK FICO score bumped up 28 points to 736. Healthy jump just for dropping my utilization 4%. No other changes affected my CK score. 

[marmaladepie]

Did you notice the 95pt drop on Credit Karma? I just saw a recent post about a 99pt plunge and someone pointed out that CK/Vantage Scores not true Fico 8/9 scores.

[fliphusker]

Ya, the score change was according to Credit Karma, sorry if I was not more clear. 

[Jnbmom]

Credit karma uses vantage scores which are completely factored diffrent than FICO. 

No lenders use vantage scores, so only thing good about CK is for monitoring and does not give you an accurate picture of your credit profile 

[fliphusker]

While this may indeed be the case, I have checked my FICO score with the 3 real TU  with CK and it is not far off my actual score. 

The overall gist is no doubt my real FICO has taken a plunge as well. This was not meant to be a debate about CK and its viability to be used to ACCURATELY gauge its usage. 

[marmaladepie]

I agree. The BT will hit you. I did balance transfer to a CU card not expecting them to send me a check for the WHOLE amount/credit limit of the card. So when the new account was reported, it was at 100% utilization. After the initial shock of score drop, it bounced back in a few months.

[Jnbmom]

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@fliphusker wrote:

While this may indeed be the case, I have checked my FICO score with the 3 real TU  with CK and it is not far off my actual score. 

The overall gist is no doubt my real FICO has taken a plunge as well. This was not meant to be a debate about CK and its viability to be used to ACCURATELY gauge its usage. 

While I agree changes reflect on both variables,  I just don't take much stock in CK. My scores are 80-100 points higher with FICO as they use a different variables. And since lenders don't use those on CK I consider them just for entertainment purposes, but do love the monitoring aspect 

. 

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[fliphusker]

Is your score indicative of the norm? Nope, Do most lenders go off your FICO? Nope, more complicated than that. So is your FICO really a true measuring stick? Nope. 

The gist of the article is to what to expect with utilization changes. How many people think that one card is not going to impact their FICO with a substantial rise in only its utilization while keeping overall utilization the same?

I would suspect that maxing out one card like I did also have a huge impact on my real FICO. Would it be 95 points? I would not be one bit surprised. 

[Anonymous]

Individual utilization certainly matters on all FICO models. 

A 95 point loss caused solely by a card getting getting maxxed out (while total utilization stays the same or drops) is unlikely in any FICO model.  Though as the other folks have observed, Vantage can respond very differently to an event like that, so I am not surprised you might have seen that on Karma.

Even on FICO models, a person can solve a serious scoring hit if he lowers his individual util to < 89%.  The breakpoints for individual seem to be: 89, 69, 49, and 29 percent.    Some people have reported no penalty in going from 5% to 48% (not even a single point) -- though crossing over 49 and 69 are certainly real penalties for everyone.

[NRB525]

Thanks for the description and data points, OP. Indeed, a 100% utilization card could cause some score drop.

Congrats on the rebuild. Your money management is paying off.

Looking forward to your update when the next Discover statement is printed with the TU FICO.