Wild Swings in Credit Rating.

[rwest]

In December, I bought over $3,500 in EFI parts and a few Christmas extras. My normal spend on my credit card is about $2,000 a month and like most of you, I pay it off every month.

After that monthly increase in spending, my credit rating dropped 30 Points! I of course paid off that $5,000 plus bill before my payment due date.

Today I got a notice that my credit rating went up 25 points! Just crazy.

I do think that my credit union removed my home equity line of credit from my account since I haven’t used it in over 15 years, so that likely makes a couple thousand dollar credit usage a big percentage of my available credit.

Any of you seeing such volatile credit scores?

[Steve Carlton]

Your extra spending shouldn't affect your FICO score unless you were billed for the higher amount, which reflects a higher percentage credit utilization. If the bill didn't show a higher than normal balance, nothing should change much. A HELOC for $2,000?

[Tidybuoy]

My credit score was at 790 before I took out a 3rd mortgage for a 3rd rental property. My score instantly dropped to 680. That was a year ago and it's now back to 742. It definitely seems to be connected to total credit/usage ratio. I won't be taking out any loans for a while so the score really does not matter to me, but I do like to check it from time-to-time, and I feel better when it's in the higher range.

[rwest]

Originally Posted by Steve Carlton

Your extra spending shouldn't affect your FICO score unless you were billed for the higher amount, which reflects a higher percentage credit utilization. If the bill didn't show a higher than normal balance, nothing should change much. A HELOC for $2,000?

Sorry for the confusion Steve,

I wasn’t clear on my post. The home equity line is gone and I haven’t used it since I built my garage 15 years ago, but I believe that having it on my record showed a lot of available credit and now without it, my available credit is just several credit cards, so doubling my credit card balance in December made a big difference.

I think it’s weird that a credit rating is so easily influenced by that relatively small amount of money.

For what it’s worth, I usually have an excellent rating over 800.

[rwest]

Originally Posted by Tidybuoy

I won't be taking out any loans for a while so the score really does not matter to me, but I do like to check it from time-to-time, and I feel better when it's in the higher range.

Same here, it doesn’t really matter, although I may be in the market for a new car next year... maybe.

[GH85Carrera]

I have one bank account that is always telling me about my credit rating. I honestly can't think of any reason I much care, except insurance rates. Evidently insurance companies pay attention to clients credit rating.

My company is a LLC, and we recently renewed our lease for the airplane hangar. If we paid the entire amount up front we get one month free. So 6K on the credit card. We renewed a few software licenses in December as well. Suddenly over 10K on the card with a 25K limit. We pay it at the statement due date automatically, electronically. We have never paid one cent of interest.

My credit rating dropped a few points, but still in the excellent range. In a couple of weeks, the CC bill will be paid, and the rating will go back up.

With no debt except a aircraft loan, they only have my CC accounts to go on. The airplane loan is in one of my LLC's names. Dun and Bradstreet must see that as we get loan offers constantly for business loans that are for insane amounts, they just go into the spam folder and deleted.

[Crowbob]

Glen is correct about this. Your credit score is irrelevant if you are a conscientious money manager.

The ‘credit score’ people have designed an incomprehensible criterion that has one goal. That goal is to convince you to borrow money.

If your goal is to have a CS over 820 have at it. But of your goal is to secure a sustainable financial situation, ignore the CS people.

[masraum]

Originally Posted by rwest

Sorry for the confusion Steve,

I wasn’t clear on my post. The home equity line is gone and I haven’t used it since I built my garage 15 years ago, but I believe that having it on my record showed a lot of available credit and now without it, my available credit is just several credit cards, so doubling my credit card balance in December made a big difference.

I think it’s weird that a credit rating is so easily influenced by that relatively small amount of money.

For what it’s worth, I usually have an excellent rating over 800.

I think the amount of credit and amount of credit used gets reported much more frequently these days, and the ration of used/total impacts credit ratings which means that they can/will swing quite a bit depending upon what's going on. I'm sure that someone automated something somewhere so that it's no longer necessarily "what is on the bill", but now is "what is utilized today".

I haven't ever tracked the swings, but I do know that it can swing a fair amount up and/or down in a short period of time.

[RANDY P]

Usage is based on percentage of total revolving credit availability. To fix this increase credit limits, apply for cards, then sit on them. If you run them up suddenly it doesn't affect your FICO so much.

$250K available credit limit will do it-and totally attainable

rjp

[MBAtarga]

About 2 years ago, we had charges for my daughter's wedding on various credit cards. Because of the dollar amount - my credit took hits - even though the balances were paid off by the statement due date. To my understanding, it has everything to do with debt level and credit limits on each card.

[Steve Carlton]

The bureaus get the balance and limit when your statement comes out. You can avoid the 30 day drop if you pay down the balance before the statement. That closed or unreported HELOC increased the balance to limit percentage. I think it’s measured as an overall percentage and only applies to revolving accounts, not installment loans, but the amount of installment loans affects your score.

[john70t]

It sure would be nice to have the entire banking formula laid out on paper and available. With why and who said what.
No games. No guessing.

[GH85Carrera]

Originally Posted by Steve Carlton

The bureaus get the balance and limit when your statement comes out. You can avoid the 30 day drop if you pay down the balance before the statement. That closed or unreported HELOC increased the balance to limit percentage. I think it’s measured as an overall percentage and only applies to revolving accounts, not installment loans, but the amount of installment loans affects your score.

I pay the statement balance on the due date. The CC company just drafts my checking account on that date, so it is never late. I get to use their money for as long as possible. If I charge something a day after the statement closing date, I have 30 days before the next statement comes out, and 30 days to pay that. I get "free" money for 60 days. I am sure the CC company hates it, but I am playing in by their rules.

It all get paid and costs me the same, just I got to keep my money in my account, earning me interest, and I still don't pay a penny in interest to the card company.

The fact that my score goes up or down means nothing to me at all.

[onewhippedpuppy]

Originally Posted by Crowbob

Glen is correct about this. Your credit score is irrelevant if you are a conscientious money manager.

The ‘credit score’ people have designed an incomprehensible criterion that has one goal. That goal is to convince you to borrow money.

If your goal is to have a CS over 820 have at it. But of your goal is to secure a sustainable financial situation, ignore the CS people.

Bingo, the entire thing is a scam conceived by the credit industry to incentivize bad behavior. The ultimate scenario would be to have a zero credit score because you pay cash for everything. The fact that your credit score can’t be explained definitively pretty much says it all. Math shouldn’t be ambiguous.

[RANDY P]

Rumor has it Elon has a 470 credit score. Warren Buffett's was a 610

rjp

[GH85Carrera]

Originally Posted by onewhippedpuppy

Bingo, the entire thing is a scam conceived by the credit industry to incentivize bad behavior. The ultimate scenario would be to have a zero credit score because you pay cash for everything. The fact that your credit score can’t be explained definitively pretty much says it all. Math shouldn’t be ambiguous.

When my MIL decided she wanted to travel to Ireland with a group of ladies from church she was told she needed a credit card to use on the trip. She went to he bank where she had banked for decades and asked for a credit card, as she had never had one. The new girl at the bank tried to pull up a credit report, and there was nothing, and she said sorry we can't issue you a card. They owned the house, and paid cash for cars, never any debt. The girl at the bank went to see the manager when my MIL mentioned him by name, he was a former student of my MIL from 1st grade and he known her all his life. He knew she had a comfortable saving account and several CDs with that bank. He made an override in the system to issue her a credit card. It is paid automatically, and she has never in her life paid any interest.

[onewhippedpuppy]

Originally Posted by GH85Carrera

When my MIL decided she wanted to travel to Ireland with a group of ladies from church she was told she needed a credit card to use on the trip. She went to he bank where she had banked for decades and asked for a credit card, as she had never had one. The new girl at the bank tried to pull up a credit report, and there was nothing, and she said sorry we can't issue you a card. They owned the house, and paid cash for cars, never any debt. The girl at the bank went to see the manager when my MIL mentioned him by name, he was a former student of my MIL from 1st grade and he known her all his life. He knew she had a comfortable saving account and several CDs with that bank. He made an override in the system to issue her a credit card. It is paid automatically, and she has never in her life paid any interest.

That’s pretty awesome. She also could have purchased a prepaid debit card and loaded it up.

[masraum]

Originally Posted by Steve Carlton

The bureaus get the balance and limit when your statement comes out. You can avoid the 30 day drop if you pay down the balance before the statement. That closed or unreported HELOC increased the balance to limit percentage. I think it’s measured as an overall percentage and only applies to revolving accounts, not installment loans, but the amount of installment loans affects your score.

So if the above is correct, the way that I read things is that the folks that receive a bill and then pay the bill on the due date presumably have their balance reported to the credit companies when the bill comes out. The only way to ensure that your monthly run up is not reported and used for calculation is to pay before the bill comes out.

[onewhippedpuppy]

I recall reading somewhere that if you make intermediate payments on your monthly bill that it for some reason dings your credit. Maybe that’s not accurate though?

[Cairo94507]

Just another way to convince people to spend money they do not have. I see TV commercials telling people how to increase their credit score and its is sickening. Kind of reminds me of the whole mortgage melt down when lenders were artificially inflating income on applications so they could qualify for homes they could not afford. Look where that landed.