No credit card required
Browse credit cards from a variety of issuers to see if there's a better card for you.
After not using a charge card for a few months I purchased a item that can easily be paid off with one billing cycle. The item in question is less than $70. Why did my Equifax go down 2 pts. and my transunion 8 pts? My utilization decreases on all my credit accts monthly and I'm never late. This baffles me because I just want better credit.
Would someone please enlighten me as to why my experian score dropped from 642 to 617 after the balance on one of my cards decreased by over $200? I significantly overpay on my credit cards each month in an effort to increase my score, prove my credit worthiness, and decrease my overall ultilization. With that said, I do not understand why my experian score went down when I'm attempting to manage my credit responsibily. Thanks in advance for any fruitful insight on this conundrum.
I'm going through something similar. I have quite a few cards that I only use every 6 months or so to keep them active, but I usually try to PIF these cards before statements cut, because if I let a balance report to the bureaus then I lose points (even if it's just a tiny amount). I lost 7 points last time from just using one card (and let it report) that I hadn't used in several months. I think it's strange that we get punished score wise for finally using a card we haven't used in a long time. And heaven forbid you have one card report over 30% util (even though your total util is under 10%) because I lost 15 points for doing it, and even though I got that card back under 30%, I only gained 6 points back. It so frustrating when you're trying to raise your score.
This is interesting. I have heard people claim to have seen this before, enough people that it sounds like it's more than just the credit equivalent of Bigfoot. It may have happened to me for all I know and I have just not been watching my scores that month.
Just for clarity, JM3 and the OP, you are describing this experience, correct?
You don't use a card for a long time, at least six months possibly longer, like 8 or more. Then you use it for a small amount, and it reports a non-zero balance the next month. After it reports, you lose some points, even though that small purchase didn't change your total utilization at all.
Quick question to Kooler: do you have several cards? If you have only a few, then the answer is pretty straightforward. People lose points for having a significant part of their accounts reporting a non-zero balance. That one card going from zero to positive caused your profile as a whole to have a significant tilt toward having non-zero balances (because you don't have that many cards to begin with).
But let's assume for a second that, like JM3, you have a lot of cards, and that furthermore you didn't cross any line in terms of having a bigger percentage of non-Z accounts. In other words, let's assume that the phenomenom as descrbed is real: that FICO really does somehow see that this card hasn't been used for a very long time, and now it is reporting a balance, and that both things together make a (small) risk factor, worth dropping you a few points.
Have other people seen this happen to them? (In a way that rules out known causes like your non-zero balances increasing?) Has this been discussed at much length before here on the Forum? Any veterans here know anything about it?
If so, I am really curious about how long FICO waits before it does this. For example, does this typically involve five zero balances in a row? More? Like 7 or 8? Anyone have any thoughts about this?
All of the above is by way of just being interested in it as a fun question of abstract theoretical interest. Kooler and JM3, however, may just want to know some practical advice about how to avoid it happening to them. If so I definitely can suggest some simple stratgeies for that if either on them is interested.
Yes that is exactly what I am describing and I would love some suggestions as how to avoid it. I get that I should have probably used my other cards more frequently than every 6 or more months, but now that's too late so what can I do now to avoid point loss if I do use them and allow them to report? What I've been doing to avoid the point loss so far is just PIF before statement cuts, but that's sure not going to help in the future if I ever need to let a balance report on those cards that haven't reported a balance in several months.
I don't have that problem. I do have about 20-23 cards. Mostly major, a few stores. There's a bunch I do use all the time and then there's the one's I rotate and probably don't get used much. I have 5 reporting a balance right now. And I just gave my Chase to hubby to use this past month since I haven't used it since Dec. No change. My ut has gone up from purchasing furniture on the others from around 5% to 14%. I did have a small point drop (2) with the new ut reporting. I think that's normal. I'm getting ready to hand hubby another cc I haven't used since Dec. for August. But I'm not planning on seeing any changes in score. I can leave a balance on it for a month to see what happens. I will report back when that happens.
As far as the practical solution goes, the following may make your CC life easier.
Call your credit card companies and ask them to move the start of your billing cycle to (say) the 25th of the month. Most card companies will do this for you. Then just make the 1st of the month or thereabouts the day that you pay bills and review charges. Get it all done on one day in about 20 minutes. If you are willing to, add auto-pay or auto-draft as a backup to make sure there's no possible way you could ever miss a payment. Personally I set them all up to pay in full since that forces me to always keep a couple grand in my checking, but not everyone likes that.
Now to address the issue that the OP brought up. Divide your cards into a few categories. First there are the cards that you are sure you will use at least every other month. Those you don't have to worry about. The rest are the cards that might possibly be unused for at least three months at a stretch. Of those see if there is some kind of recurring expense that you are sure you would charge anyway. Netflix is a favorite, so is Amazon Subscribe & Save. Now those cards are taken care of. Sock drawer the rest. Make it a rule to take them out once a quarter: Jan 1, April 1, July 1, Oct 1. Use them for something small that you were going to get anyway: one per item at the grocery works. Done. I am guessing that the problem our OP described (assuming Bigfoot is real) doesn't kick in until at least three zero balances in a row occur, so quarterly would be enough.
As far as the general problem of maximizing score benefit by CC payments, I personally think it is a bad idea to worry about it. I think the thing to do is to always pay in full if you can, and if you can't work toward that as your main goal. Don't worry about your utilization ratio, just let the amounts report as they would naturally. If you have a high utilization some month, your score will drop. It doesn't matter. The "bad" effect will disappear the next month. In fact, as many have argued, there's a long term advantage to you for your CCCs to see that you often have balances and always pay them in full. Now of course, if you need your score to be maximally good some month, just pay all the cards down to $0 except one and leave the remaining card < 9%, with a total U of maybe 1-2%. But doing that every single month may be more worry producing than necessary.
The idea of permitting your U% to go up a lot some month (with a score hit) may freak you out too much to be worth it, even though you know in your head that the hit is very temporary. In that case just make a couple payments per month on the cards that you charge the most on and keep your total U at 1-5%.
In summary, use your cards for the stuff you need, let them report naturally, keep your U% and spending low, and you'll be fine, Once in a great while you can squeeze a few extra points with the "All cards $0 except one" rule but that's only when your really need a few extra points and it should be done rarely.
PS. It's also worth observing that, if you are genuinely anxious about improving your score, don't get any more cards (since it looks like you have 7). The best thing you can do is let the ones you have age and have a perfect payment history on them. It's entirely possible to score in the 830s with three credit cards.
@koolerthanmost wrote:After not using a charge card for a few months I purchased a item that can easily be paid off with one billing cycle. The item in question is less than $70. Why did my Equifax go down 2 pts. and my transunion 8 pts? My utilization decreases on all my credit accts monthly and I'm never late. This baffles me because I just want better credit.
OP, you've got two posts, two threads, similar topic. In order to answer both the questions (both the threads) we, as usual, need more information. Otherwise, we are headed off on tangents that may or may not be relevant to the topic at hand.
Which cards do you have? When was each card opened?
Have you apped for any cards recently or had any HP for any reason?
What is the limit on each card and the balance open that was reported on the last statement for each card?
Where are you getting your FICO scores? From myFICO or elsewhere?