Sudden unexplained drop in Fico 5/4/2

[nothing02]

So I'm in the middle of getting a mortgage and have noticed that I've had a sudden unexplained drop in my Fico 5/4/2 score--bad news and will increase my loan costs. I'm talking approximately a 40 point drop for no apparent reason. The only things that changed were the amount reported on one of my credit cards went from $0 to $900 and there was one additional credit pull from the lender. I've been watching my credit closely for years and have never seen anything like this. I'm going to be paying down all my additional credit card debt (I have about $15k at 0% which I can pay off immediately if I want to--now I want to). Can anyone think of anything else I can do or any reason why the score would have tanked like this? So strange.

[JoeRockhead]

Welcome to the forum. What's the credit limit on the card that reported the $900 balance?

[nothing02]

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@JoeRockhead wrote:

Welcome to the forum. What's the credit limit on the card that reported the $900 balance?

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It's an AMEX that has no set credit limit.

[GZG]

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@nothing02 wrote:

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@JoeRockhead wrote:

Welcome to the forum. What's the credit limit on the card that reported the $900 balance?

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It's an AMEX that has no set credit limit.

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old fico scores can be influenced by charge cards, so that's most likely the reason

what's the high balance listed for that card is it $900 or close to that amount?

[SouthJamaica]

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@nothing02 wrote:

So I'm in the middle of getting a mortgage and have noticed that I've had a sudden unexplained drop in my Fico 5/4/2 score--bad news and will increase my loan costs. I'm talking approximately a 40 point drop for no apparent reason. The only things that changed were the amount reported on one of my credit cards went from $0 to $900 and there was one additional credit pull from the lender. I've been watching my credit closely for years and have never seen anything like this. I'm going to be paying down all my additional credit card debt (I have about $15k at 0% which I can pay off immediately if I want to--now I want to). Can anyone think of anything else I can do or any reason why the score would have tanked like this? So strange.

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A 40 point drop doesn't occur without a reason. A $900 balance on an Amex charge card is not likely to be the reason. Neither is a single credit pull.

Yes of course you should pay off the $15k balance.

And you should pull your credit reports and go over them with a fine tooth comb to try to figure out what caused the point drop.

And @GZG is right to be zeroing in on the charge card's previous "high balance". If it wasn't much higher than $900, the $900 balance could be affecting your EX FICO 2.

[nothing02]

The high balance on the AMEX is $2485. There's only one other thing that really occurs to me. Recently, USAA closed a very old credit card of mine. They had sent me an email (yes, an email, not a phone call or a letter) asking me to verify my address, and when I didn't respond, they closed the card. The closure actually isn't showing on my report yet, and I do have some other cards that are almost as old, so I would be really surprised if that were it. I was expecting a drop of maybe a couple points when that hit the report. I also closed a HELOC back in August but I've been checking my score since then and it never dropped until now. Could it be some kind of delayed reaction to that? I don't know. Also might be worth noting that the other scores have not dropped like this. For example my TU Bankcard score even increased from 793 to 797 while the 4/5/2 dropped 40 points, so it must be something that affects 4/5/2 specifically.

[FlaDude]

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@nothing02 wrote:

Recently, USAA closed a very old credit card of mine. ... The closure actually isn't showing on my report yet, and I do have some other cards that are almost as old, so I would be really surprised if that were it. I was expecting a drop of maybe a couple points when that hit the report. I also closed a HELOC back in August but I've been checking my score since then and it never dropped until now. 

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I don't know about the older scores, but for FICO8 closed accounts stay for aging purposes for up to 10 years so don't typically cause an immediate drop on closure. Was the HELOC your only installment loan? If so, maybe credit mix is factoring in.

[SouthJamaica]

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@nothing02 wrote:

The high balance on the AMEX is $2485. There's only one other thing that really occurs to me. Recently, USAA closed a very old credit card of mine. They had sent me an email (yes, an email, not a phone call or a letter) asking me to verify my address, and when I didn't respond, they closed the card. The closure actually isn't showing on my report yet, and I do have some other cards that are almost as old, so I would be really surprised if that were it. I was expecting a drop of maybe a couple points when that hit the report. I also closed a HELOC back in August but I've been checking my score since then and it never dropped until now. Could it be some kind of delayed reaction to that? I don't know. Also might be worth noting that the other scores have not dropped like this. For example my TU Bankcard score even increased from 793 to 797 while the 4/5/2 dropped 40 points, so it must be something that affects 4/5/2 specifically.

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No, the closing of an account would not affect your scores like that.

[nothing02]

I would really like to get to the bottom of this. I just went through my reports with a fine-toothed comb. This is based on a MyFico TransUnion report from 10/31 and another from 12/5. During that time, the 4/5/2 score went from 775 to 733. Here are the changes:

- Total balances decreased by about $2k (yes, decreased).

- One card that previouly had a $2485 balance now has a $900 balance (I stated incorrectly in the original post that the balance on this card was previously $0), which accounts for most of the above decrease with other cards also paid down a little

- Average age of accounts, age of oldest account, and age of most recent account increased by two months (obviously!)

-Number of recent inquiries went from 4 to 5.

That's it. I have read every page of the reports and no new negatives.

I've been watching my credit closely for years and in this situation I would expect an increase of a couple points for the lower balances and a decrease of a couple points for the new hard pull. It would be a wash and there would be no change overall, possibly a point in either direction.

I do notice that the factors listed by MyFico on the 4/5/2 page are different. The October report lists: "You've opened a new credit account relatively recently, You've made heavy use of your available revolving credit, You've recently been looking for credit, You have a lack of recent activity from a non-mortgage installement loan." The December report does not say "You've opened a new credit account relatively recently" and says "You have too few or too many credit accounts" instead. I have a lot of cards, it's true - currently 15 personal cards. I did not open any new cards between these two reports. The only thing this could be is that the scoring model changed recently and is now penalizing people who have lots of cards.

Those who are really experienced at this, could that be it? Do they even make changes to old scoring models?? I was always under the impression that it is actually good to have a lot of cards because it only decreases credit utilization. But maybe there was a new change and they're now penalizing people for having lots of cards.

Finally, to answer FlaDude's question, that was not my only HELOC, so taking that out of the mix shouldn't be the reason for the drop.

[FlaDude]

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The only thing this could be is that the scoring model changed recently and is now penalizing people who have lots of cards.

Those who are really experienced at this, could that be it? Do they even make changes to old scoring models?? I was always under the impression that it is actually good to have a lot of cards because it only decreases credit utilization. But maybe there was a new change and they're now penalizing people for having lots of cards.

 I'm pretty sure they do not make changes to the algorithm for old FICO models, they create new models (9, 10) to tweak the logic.