Sudden fall in FICO score

[TheWowEffect]

What could be some of the reasons when your FICO score suddenly falls by 25-30 points. I have this free score monitoring from one of my cards and it happened to me within just one month?

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[The White Coat Investor]

25 points doesn't mean much. That's just statistical noise in my opinion. Could be your % of available credit went down a tad, maybe you had a "pull" on your credit report...wouldn't worry about it much unless you're planning on getting a loan in the next few months and that 30 points drops you below a threshold the bank is using to determine prime from subprime.

Someone at Fatwallet.com could probably tell you exactly the reason it went down. They're really into that stuff.

 

[TMP-SMX]

Could be loans getting onto your report, you using a higher percentage of your credit limit, using more of your cards, a credit pull, or many other things.

 

[DoctorWannaBe]

Along the same lines, do you guys know if the score is recalculated every month or is it cumulative? I put all my residency interview travel expenses on my credit card, so I was using maybe 1/3 of my available credit every month for several months (although I was paying it off). Now that interviews are over, my credit card debt has dropped a lot and I'm using maybe 5-10% of my available credit. Will my score still be affected by those several months of higher debt, or will it be calculated solely on my current debt?

 

[elderjack21]

Along the same lines, do you guys know if the score is recalculated every month or is it cumulative? I put all my residency interview travel expenses on my credit card, so I was using maybe 1/3 of my available credit every month for several months (although I was paying it off). Now that interviews are over, my credit card debt has dropped a lot and I'm using maybe 5-10% of my available credit. Will my score still be affected by those several months of higher debt, or will it be calculated solely on my current debt?

It is updated pretty often. And using a bunch of your "revolving" credit like from a credit card can actually hit your credit score pretty hard in the short run, even if you pay it off in full each month. For instance. In November I put a down payment on a car using my credit card (I had the money in the bank, but if I used my card I get 1% cash back, so I figured it would be another 150$ in my pocket). Well a couple weeks later, even though I had already paid off my credit card in full, my score was down around 720 or so. I just checked it again as I am preparing to buy a home, nothing has really changed save I haven't used my credit card much lately and my score is back up to 797.

So...these things do happen. I was told by a lender yesterday that just shopping for a home loan will knock your score down by 5pts or so. Not a big deal...but good to know.

 

[Stroganoff]

Along the same lines, do you guys know if the score is recalculated every month or is it cumulative?

FICO is calculated in real-time whenever it is requested. But the actual data on your 3 credit reports updates whenever the creditors feel like it -- typically once per billing cycle. So in the end, one's credit report changes quite a few times per month as each of the trade lines updates with a new month's information.

One thing that isn't dependent on the original creditors' updating that factors into the FICO formula is time. Average age of accounts, age of oldest account, time since last "baddie" or negative information on your report (like a 30-day late, if any), time each account has been open.

Edit: 3/27/08 to add the quote above^ plus the entire section below:

I put all my residency interview travel expenses on my credit card, so I was using maybe 1/3 of my available credit every month for several months (although I was paying it off). Now that interviews are over, my credit card debt has dropped a lot and I'm using maybe 5-10% of my available credit. Will my score still be affected by those several months of higher debt, or will it be calculated solely on my current debt?

Since the formula is company secret, nobody knows for sure, but based on tens of thousands of peoples' own experiences on other forums, it's reasonable to conclude that current [revolving] debt is pretty much all that matters. There are a bunch of known variables that people have discovered (or Fair Isaac has publicly revealed), but nobody knows just how much each truly factors. So when you say you're using 5-10%, I'm assuming you're talking about (sum of all credit card balances) / (sum of all credit limits) * 100% (known as "total utilization"). "Individual Utilization" on each credit card matters as well.

For example, say your total utilization is at 10%. Say that is $1000 total credit card debt on $10,000 total limits. But say for example that that $1000 in debt is $1000 balance on a $1000 limit card and $0 balance on a $9000 limit card. That gives individual utilizations of 100% and 0%, respectively. That'll definitely sting, even though your overall is an impressive 10%.

 

[Stroganoff]

What could be some of the reasons when your FICO score suddenly falls by 25-30 points. I have this free score monitoring from one of my cards and it happened to me within just one month?

"Free score monitoring from one of [your] cards" sounds like WaMu's PFICO, but I'm just taking a guess. It's vital to realize that there is a major difference between the official FICO scores ( www.myfico.com ) that use Fair Isaac Co.'s official top-secret algorithms and fake FICO "FAKO" scores, which are 3rd-party FICO imitation scores that try to model the actual FICO. It all boils down to profit, and every company wants a slice of the pie of people buying or monitoring their credit scores.

Thing is, FAKO scores are notoriously inaccurate. Other people have commented that they can be ± 100 points. It is a common phenomenon for people to monitor FAKO and FICO at the same time and they might even move in opposite directions. The FICO formula is proprietary information, and FAKO formulas offered by so-called credit monitoring companies are using their own best guess calculations.

In the end, don't sweat it at all.

If you really wanted to nitpick why, you'd have to give us more information and really analyze the heck out of your credit reports. Balances on each trade line, total balances, balance history, utilization % on each trade line, total utilization %, fixed loans like: mortgages, student loans, auto loans, home equity all factor in. Any new hard inquiries since last time you checked your score? Those factor in. Presence of consumer finance trade lines (like rent-to-own places or furniture stores), oil cards, and others have "negative stigma" and hurt a little.

Too many variables. Don't stress it. Is this PFICO you're talking about from Washington Mutual? 'Cause that's a helluva lot closer to consumer FICO than any FAKO score provided from AMEX Credit Secure, TransUnion PrivacyMatters/TrueCredit, etc.

Don't worry about it!

 

[Diazomethane]

I'm so glad I found this forum because I'm faced with this issue of taking out loans for pharmacy school and the possibility that my credit score may be too low. According to Wamu (again I realize it is just a rough estimation), I have a FICO score of 799. Today, however, I found out that UCLA, my undergrad school, referred me to collection because I had $105.97 balance on my student account that I am not aware of after my graduation. I immediately paid the balance upon finding out and the college said it won't affect my credit score. I am still skeptical, so my question is, does anyone know or have similar experience on how badly this will affect my FICO score? Will lenders see that the amount is minimal compared my other spending such that they won't look at this 1 time delinquency in my credit history?

 

[Stroganoff]

I won't comment until you provide more info re: your three FICO scores from myfico.com . I will ask, however, 1) did UCLA hire or sell the debt to a 3rd party CA (collection agency) or is it an in-house collections department? This is important. Also: 2) Where did you send your $105.97?

Get back to us with more info if you can.

 

[Diazomethane]

Thank you for responding. I will find out what my score is from myfico.com at a later time. To give you some answers promptly, I paid the balance directly to UCLA so it may be possible that it wasn't submitted to a 3rd party collection agency. I called the UCLA financing office and they said that because my balance was paid completely, I have nothing to worry about. They did, however, charge me $12 for a referral to collection. Can this mean that it is an in-house collections department? If it is, what does it mean for my credit?

 

[Stroganoff]

Thank you for responding. I will find out what my score is from myfico.com at a later time. To give you some answers promptly, I paid the balance directly to UCLA so it may be possible that it wasn't submitted to a 3rd party collection agency. I called the UCLA financing office and they said that because my balance was paid completely, I have nothing to worry about. They did, however, charge me $12 for a referral to collection. Can this mean that it is an in-house collections department? If it is, what does it mean for my credit?

Like I said, more information is needed before anyone can accurately comment. I'll need to know if a new [negative] trade line was created in any of your three credit reports in reference to this collection account, or if it wasn't even reported. If it wasn't reported, then of course there is no effect on your credit.

Edit: But FWIW, in many cases it's ideal to pay the OC (original creditor) rather than a CA or JDB (junk debt buyer) since your money is going to the root source as well as for certain legal reasons. I really think your credit will still be fine for pharm school loans and if you have a fresh collection trade line from UCLA, it might be worth calling their in-house collections department and asking for a [retroactive, since you already paid] PFD (pay-for-delete) to have it removed from your reports. Or request that they not validate and you can dispute the trade line via the credit bureaus and after the 30-day period is up, it will get deleted.

But all this is moot if it's not even showing on your reports. Need more info.

 

[elderjack21]

how we can increase FICO score?

thanks

Itzik Ziv
Smart Seating Solutions @ www.officemasterchairs.com

From http://www.myfico.com/CreditEducation/Questions/Increase-Score.aspx

How can I increase my FICO score?
Increasing your FICO® score may take time and often there is no quick fix. FICO scores reflect credit payment patterns over time with more of an emphasis on recently reported information than older information. Below are some general tips to follow that may increase your FICO score:

Focus on the negative factors provided with your FICO score. These represent the main areas where your score could be higher.

Apply for and open new credit accounts only as needed. Don't open accounts for the purpose of providing a better credit picture – it probably won't raise your FICO score and, in some instances, may even lower your score.

Pay off your bills on time. Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO score.

If you have missed payments, get current and stay current. The longer you pay your bills on time after being late, the more your FICO score should increase. Older credit problems count for less, so poor credit performance won't haunt you forever. The impact of past credit problems on your FICO score fades as time passes and as recent good payment patterns show up on your credit report. And good FICO scores weigh any credit problems against the positive information that says you're managing your credit well.

If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor. This will not improve your FICO score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. And seeking assistance from a credit counseling service will not hurt your FICO score.

Keep balances low on credit cards and other "revolving credit". High outstanding credit card debt can negatively impact your FICO score.

Pay off debt rather than move it around from one credit card to another. The most effective way to increase your FICO score in this area is by paying down your total revolving (credit card) debt.

If you have had problems in the past, re-establish your credit history by opening new accounts responsibly and paying them on time.
Manage credit cards responsibly by keeping balances well under the credit limit. In general, having credit cards and installment loans (and making timely payments) will raise your FICO score. People with no credit cards, for example, tend to be higher risk than people who have managed credit cards responsibly.

Do your rate shopping for a loan within a focused period of time. FICO scores distinguish between a search for a mortgage or auto loan, where it is customary to shop for the best rate, and a search for many new credit cards.

Don't close unused credit cards as a short-term strategy to raise your FICO score. This approach could backfire and actually lower your FICO score.

If you have been using credit for only a short time, don't open a lot of new accounts too quickly, as rapid account build-up can look risky to a lender.