@Cazzieboy, maybe it is just in my limited experience, but a significant drop after opening your second card on such a thin file is not at all uncommon. The thing is, while someone with an old and fat file may well only see a 5-point drop, or less, when opening a new card, that event is balanced out by the rest of the history of that file, in your case, there was virtually nothing to balance out that second card.
Last year as I was rebuilding my credit following small business failures for both my wife and I and bankruptcies for both of us as well, I saw my FICO scores nose dive when I started applying for credit, and that was with a credit history of over 40 years. The good news is, if you play your cards right, your scores can rebound nearly as quickly (or even quicker) than they dropped. Consider this; following my discharge in March of 2020, my Experian FICO 8 was sitting in the low 630s, not long after I applied for my second credit card it bottomed out at 607, now 10 months later it is sitting at 678, a rise of 71 points!
@Cazzieboy wrote:Rebuilding a credit score from 0, I obtained a secured credit card with a low credit limit. After seven months of very low utilization each month (5%) and paying off the balance every month, my score improved very nicely and quickly. I decided to apply for a second unsecured card. As a result, that put a hard inquiry on my report as expected. It was the only hard inquiry on my report. Experian dropped my FICO score 19 points for having a single hard inquiry. The drop occurred the day after I applied for the card. I was extremely upset and immediately called to complain, and complained quite vehemently due to their website explaining that a single hard inquiry normally drops a score approximately 5 points or less. They totally refused to discuss it. Subsequently, (after a very short amount of time) once my approval and initial small charge on this card showed up, Experian dropped my FICO score again by 33 points, a 52 point total drop inside a month. I'm almost of a mind to believe this was a subjective punishment for my complaining phone call after the initial drop of 19 points. A curious circumstance here that might corroborate that thought is that since my phone call complaint to Experian, I have not received one promotional/adverisement email from them. And we all know how frequently we receive those emails from all credit bureaus with which we are registered. I have scoured the internet searching for a similar situation for this big of a FICO score drop with same or similar circumstances and nowhere is a point drop of this magnitude mentioned.
Would appreciate any knowledgeable comments or experiences to shed some reasonable thought on this.
Thank you!
You're overreacting. On thin profiles like yours, the effect of an inquiry and of a new account is exaggerated. However these effects pass within a matter of months. So my advice is to chill out. No one is seeking revenge against you. It's just an algorithm.
@Cazzieboy wrote:Rebuilding a credit score from 0, I obtained a secured credit card with a low credit limit.
Since you're rebuilding a credit score from 0, not building from 0, can we assume you have at least 1 closed account on your CRs? If so, the lower average age of accounts can affect your FICO scores negatively whenever you add new accounts.
If you have only the 2 credit cards listed on your CRs, then I can tell you the approximate FICO scores you can expect at 7 months, because I only had 2 CCs at 7 months, too. Your FICO 8 score should be about 2 points less than mine at that age if you optimized your score. The differences were that my 2nd CC was 3 months old (+7 points), and I had an additional hard inquiry without a matching open account (about -5 points).
Also, certain ages can reassign you to an new scorecard, temporarily dropping your FICO scores, independent of a new hard inquiry or a new account reporting to the CBs. You can expect these temporary drops to occur on the 1st of the month, because the FICO algorithms use the 1st of the month to calculate account ages, regardless of which day of the month the account was opened.
After seven months of very low utilization each month (5%) and paying off the balance every month, my score improved very nicely and quickly. I decided to apply for a second unsecured card. As a result, that put a hard inquiry on my report as expected. It was the only hard inquiry on my report. Experian dropped my FICO score 19 points for having a single hard inquiry. The drop occurred the day after I applied for the card.
The FICO score adjusts as soon as the new hard inquiry is updated on your credit report, not the next day. (I say "adjusts," but FICO scores don't actually get calculated unless someone uses a hard or soft inquiry to pull the CR from the CB. Every time a FICO score is calculated, Fair Isaac gets paid a fee. So, no inquiry, no calculation, no fee.) From your description, it sounds like something else happened the next day, dropping your score an additional 14 points or so from where the hard inquiry dropped it the previous day, which was about 5 points.
I was extremely upset and immediately called to complain, and complained quite vehemently due to their website explaining that a single hard inquiry normally drops a score approximately 5 points or less. They totally refused to discuss it.
FYI, the CBs don't control FICO scores. They just report FICO scores when required.
Subsequently, (after a very short amount of time) once my approval and initial small charge on this card showed up, Experian dropped my FICO score again by 33 points, a 52 point total drop inside a month.
Once the new account reports, the matching hard inquiry point loss adjusts from the initial about 5 points lost to between 0 and 2 points lost. Therefore, you should have gained 3 to 5 points, plus the gain from opening the second CC (if you have only the 2 CC accounts on your CR), minus the losses from individual and aggregate revolving account utilization (if any), minus the loss from 100% of open accounts reporting balances (if any), minus the loss from 100% of open revolving accounts reporting $0 balances (if any).
If you only had 2 CCs on your CR and used the AZEO method -- 1 bankcard (VISA, MC, Discover, or AMEX) reports a $10 to $20 balance, the other CC reports $0 -- then your Experian FICO 8 score would be about 725. If both CCs report $0, then your Experian FICO 8 score would be about 705 to about 715, due to the "All Zero" penalty.
I'm almost of a mind to believe this was a subjective punishment for my complaining phone call after the initial drop of 19 points. A curious circumstance here that might corroborate that thought is that since my phone call complaint to Experian, I have not received one promotional/adverisement email from them. And we all know how frequently we receive those emails from all credit bureaus with which we are registered.
I think that's normal. The first month, you received the "new customer" promo/ad emails nearly every day. After that, you transitioned to the normal customer emails, which, for me, was only the monthly FICO CR and FICO score notice and updates when a new account or new CL was reported. So, I went from 19 emails the first month to 1 or 2 emails every month thereafter. A few more "new customer" confirmation/promo/ad emails whenever I upgraded, then downgraded, my Experian account, then back to the 1 or 2 emails per month.
I have scoured the internet searching for a similar situation for this big of a FICO score drop with same or similar circumstances and nowhere is a point drop of this magnitude mentioned.
Would appreciate any knowledgeable comments or experiences to shed some reasonable thought on this.
Thank you!
If you only have 2 CCs on your Experian CR, a 52-point drop on your FICO 8 score for adding the 2nd CC isn't normal. You should've gained points unless you had high utilization.
What else is on your CR? What's your current FICO 8 score at 7 months (or whichever FICO score you're concerned about, since you didn't specify which FICO score dropped). Which service are you using for your Experian CR and FICO scores? MyFICO or Experian.com or something else? What were the dates of the hard inquiry, the 19-point drop, and the report of the new account?
Please list all accounts, name and type, open and closed, month and year of opening the account, balance reported, CL or original loan amount, and any derogatories on your CR, and we'll try to narrow down the cause of the drop.
@Anonymous wrote:@USMC_Winger While a 52-point loss might not be normal, it is not entirely accurate to state "you should've gained points." Credit scores almost always drop temporarily when a new account is reported because of the risk and uncertainty that new credit line represents. That risk is often described in these forums as the "new account penalty."
I just went through this myself with only 2 CCs earlier this year, and I've read others' reports. The 1st 3 revolving accounts don't lower the FICO 8 score. Adding the 1st and 2nd revolving accounts increases the FICO 8 score, according to reports. I've seen myself that adding the 3rd revolver doesn't change the Experian FICO 8 score when either one of the previous revolvers is less than 12 months old.
The OP's "new account penalty" started on the date the secured CC was approved and was still in effect 7 months later when the unsecured CC reported. There wasn't an additional "new account penalty" to lower the FICO 8 score when the 2nd CC reported.
That penalty does not disapear until the new account reports for the first few months and doesn't show a huge jump in utilization.
For FICO 8, that penalty disappears 12 months after the youngest revolver turns 12 months old.
Reading the original post again, a reasonably informed guess could be made at what happened.
1. New inquiry - loss of 19 points. Seems excessive but OP has a very thin file.
I agree.
2. "Subsequently, (after a very short amount of time) once my approval and initial small charge on this card showed up, Experian dropped my FICO score again by 33 points" - the new account reported to the credit bureaus showing a (small) balance. In all likelihood the score declined because of the "new account penalty."
I don't think a 2nd "new account penalty" was added when the 2nd CC reported. The "new account penalty" was already included in the OP's FICO 8 score prior to the 2nd CC reporting.
3. Also, since the OP appears to have only 2 open credit cards, he/she could also suffer both the "Too many credit cards reporting balances" and "Too many credit accounts reporting balances" penalties because at least 50 percent of their credit cards reported a balance. While the impact of these penalties appear to vary by credit profile, it is known that they occur when more than one-third of credit cards report balances on Equifax, and more than one-half of cards show balances on Experian and TransUnion.
That's the main reason why three credit cards are frequently suggested as the minimum amount in these forums; so that if one card (one-third of credit cards) reports a balance the score will not be affected by the "too many cards with balances" penalty.
At 7 months, I had 1 CC report a 1% balance and the other report $0. Neither the "Too many CCs reporting balances" and "Too many credit accounts reporting balances" showed up in the top 4 reason codes for my Experian FICO 8 score of 727:
- Length of time accts have been established
- Lack of recent installment loan information
- Length of time revolving accounts have been established
- Too few accounts currently paid as agreed
However, I suspect "Too many accounts with balances" is the 5th reason, because my Experian FICO 9 score of 728 (nearly identical score, which suggests similar weightings for identical reason codes) showed this as the 4th reason:
- Length of time accts have been established
- Length of time revolving accounts have been established
- Lack of recent installment loan information
- Too many accounts with balances
It could simply be that the OP lost 33 points for a new account added to their credit report, plus the proportion of accounts reporting a balance was above the threshold set by the credit bureaus.
@Anonymous: Well, previous to the new account reporting, the OP's FICO 8 score either:
- included 100% of accounts with balances and 100% of revolving accounts with balances (so still reporting 100% of them with a balance wouldn't drop the FICO score, theoretically) or
- received the "All Zero" penalty from 100% of revolving accounts reporting $0 (so reporting a small balance on 50% of revolving accounts would improve the FICO 8 score by about 10 to 20 points).
Also, the points lost for the HP should have decreased when the matching CC account reported, thereby adding 3 to 5 FICO points (or even more if it dropped 19 points just from the inquiry).
Therefore, I think the OP's FICO 8 score should have increased a bit, not dropped 33 points, when the 2nd CC first reported with a small balance if the 2 CCs were the only accounts on the OP's Experian CR.
@...........
Here's a question to ponder. If Experian's actions in this case are "normal" for thin/new/short history circumstances, why do they as well as Equifax and Transunion inundate me with attempted motivation emails to open up new credit cards, if in fact it will have the effect on scores I have experienced? Let me be clear, those emails target me specifically with my specific information and numbers clearly stated. These are not general marketing-type emails. There's a disconnect here. As I mentioned previously, I have not received one email from Experian since my complaining phone conversation over a month ago, while the emails from Equifax & Transunion keep rolling in almost daily. Very curious.
Thanks again so much for your responses to this circumstance. It's very much appreciated.
No need to ponder that one. To make money. They are indeed marketing and advertising.