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Credit card usage and the FICO scam Login/Join 
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Picture of smlsig
posted
So we just had our roof replaced after almost 25 years. My former subcontractor gave us a very good price and when he sent me the bill I noticed that he offered a credit card payment option.

My wife and I have been putting almost everything on our credit cards and paying them off completely every month the day before they’re due through our brokerage account as a way to accrue miles and hotel points which go a long way to fund our vacations (we flew business class the South Africa last year as an example).

I know that the credit card companies report our balances monthly to the credit reporting agencies so on the day I paid off the roof with my credit card I went online and set up electronic payment as soon as possible which in this case was 3 days...

Well damn if the credit card company reported our balances during that 3 day period and that $20,000 charge dropped my FICO score almost 50 points!

My score has been over 800 for years and this shit just pisses me off..I know that it should bounce back next month but why don’t they report something like the percentage paid off each month as an indication of your credit worthiness?

Fortunately I don’t plan on taking out any loans in the near future but it still sucks!


------------------
Eddie

Our Founding Fathers were men who understood that the right thing is not necessarily the written thing. -kkina
 
Posts: 4571 | Location: SML & OBX | Registered: February 19, 2013Reply With QuoteReport This Post
Ammoholic
Picture of Skins2881
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The issue is that the the utilization rate was too high. Your score will go up next or the following month. Nothing to loose sleep over. Paying in full every month has no effect on Fair Isaac rating.



Jesse

Sic Semper Tyrannis
 
Posts: 16887 | Location: Loudoun County, Virginia | Registered: December 27, 2014Reply With QuoteReport This Post
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I had a FICO score drop not from credit card usage but when buying a new car and paying with a check for credit union the dealer demanded to run our credit. We were above 800 and after the report request mine dropped by 50 and after 2 years has not recovered even though no credit extended and all payments on time.
 
Posts: 92 | Location: HENDERSON, NEVADA | Registered: December 05, 2013Reply With QuoteReport This Post
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Unless you're shopping for a new mortgage … it won't matter.

Truthfully - who cares what the score is. I have a Zero, Nada, Zilch credit score for the past 10 years.

It has stopped me from doing exactly NOTHING. When everyone stops worrying/worshiping at the FICO alter, all will be better off.

Andrew



Duty is the sublimest word in the English Language - Gen Robert E Lee.
 
Posts: 723 | Registered: May 01, 2010Reply With QuoteReport This Post
safe & sound
Picture of a1abdj
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quote:
Unless you're shopping for a new mortgage … it won't matter.


Or you buy insurance, or trying to get a new job, etc, etc.


________________________



www.zykansafe.com
 
Posts: 14230 | Location: St. Charles, MO, USA | Registered: September 22, 2003Reply With QuoteReport This Post
I got a Million of 'em!
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I paid one of my car loans off (early btw) and the lender closed the account and I received a notice that my credit dropped twelve points because of the closed account. Roll Eyes
 
Posts: 8097 | Location: Hiram, GA. | Registered: October 24, 2007Reply With QuoteReport This Post
eh-TEE-oh-clez
Picture of Aeteocles
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quote:
Originally posted by gibby29:
I paid one of my car loans off (early btw) and the lender closed the account and I received a notice that my credit dropped twelve points because of the closed account. Roll Eyes


Yes.

It's a credit score. It measures how profitable you will be to a creditor.

It's not a "financial security" score. If that were the case, simply having a ton of assets and a good job would be enough to get a high score.

As it is, debt to credit ratio, credit history, and account blend are the primary factors when determining scores. Even poor people, if they use credit responsibly, can have a high credit score.

Ultimately, a poor person that uses credit responsibly, paying on time and staying within their limits, is going to be more profitable to a creditor then someone who borrows money infrequently and pays off early.
 
Posts: 11175 | Location: Orange County, California | Registered: May 19, 2002Reply With QuoteReport This Post
Ammoholic
Picture of Skins2881
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Look up Fair Issac credit scoring. Assets, paying things off timely, and things you think would make you a better risk can in some cases hurt your score.

That being said 780 will get you the best financing possible, a short term blip below 800 will not hurt you in any way. I use to fret if mine dropped below 820, it's mostly a pride thing though.

I dipped below 800 when I bought my new car, haven't checked it in months though, probably back North of 800 by now. Either way I'm not applying for anything anytime soon other than jobs, but that wouldn't matter at all anyways, it'd need to be really low for that to matter.



Jesse

Sic Semper Tyrannis
 
Posts: 16887 | Location: Loudoun County, Virginia | Registered: December 27, 2014Reply With QuoteReport This Post
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Picture of smlsig
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When I had my company I always had a couple of loans at any given time be it construction loans, equipment purchases etc.

Now that I’ve retired all that is gone. The mortgages are paid off and my only debt is a small loan on my recently purchased Gladiator which I took out just to have a loan and to try and maintain my credit rating...

I guess I should say F%$k it and move on but it’s still a scam...


------------------
Eddie

Our Founding Fathers were men who understood that the right thing is not necessarily the written thing. -kkina
 
Posts: 4571 | Location: SML & OBX | Registered: February 19, 2013Reply With QuoteReport This Post
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Picture of ridewv
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Don't get me started on the stupid FICO score and how they arrive at it.


No car is as much fun to drive, as any motorcycle is to ride.
 
Posts: 5164 | Location: Northern WV | Registered: January 17, 2005Reply With QuoteReport This Post
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quote:
Originally posted by Aeteocles:
quote:
Originally posted by gibby29:
I paid one of my car loans off (early btw) and the lender closed the account and I received a notice that my credit dropped twelve points because of the closed account. Roll Eyes


Yes.

It's a credit score. It measures how profitable you will be to a creditor.

It's not a "financial security" score. If that were the case, simply having a ton of assets and a good job would be enough to get a high score.

As it is, debt to credit ratio, credit history, and account blend are the primary factors when determining scores. Even poor people, if they use credit responsibly, can have a high credit score.

Ultimately, a poor person that uses credit responsibly, paying on time and staying within their limits, is going to be more profitable to a creditor then someone who borrows money infrequently and pays off early.


Your credit score is to determine your credit worthiness and ability to repay the loan/credit card etc. It measures risk of someone not paying back the loan/credit card etc.. It does NOT measure how profitable you will be to creditors.

Most people with very high FICO scores are the least profitable for creditors, but also the least risk. They receive the lowest interest rates on loans/credit cards, generally pay off credit cards in full each month, pay loans off early etc.

The most profitable group for creditors are the people in the 600-675 FICO section. They pay much higher interest rates on everything than your 800+ fico score customers, carry credit card balances they're paying interest on, generally pay a bill or two late every month and have to pay the late payment fees, but 95%+ of the time still pay their bills and don't walk away from them.

OP, yes your credit will drop a little but in a few months will bounce right back. Using a large amount of your available credit all at once could indicate someone lost a job, is bleeding money and about to go bankrupt etc. thus causing the dip.
 
Posts: 19536 | Registered: June 12, 2005Reply With QuoteReport This Post
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Picture of mcrimm
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Every credit card grantor seems to report a credit report on their website. I have 3 credit cards plus Quicken. Between the 4 scores, I’m between 830 and 850. We pay our credit cards every month.

Miss a payment and see how fast things fall.



I'm sorry if I hurt you feelings when I called you stupid - I thought you already knew - Unknown
...................................
When you have no future, you live in the past. " Sycamore Row" by John Grisham
...................................
Liberalism is a failure to find pathways to intelligence in your brain. - David Lawrence
 
Posts: 2494 | Location: Kalispell Montana & Florida’s Emerald Coast for the Winter | Registered: December 24, 2013Reply With QuoteReport This Post
In the yahd, not too
fah from the cah
Picture of ryan81986
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How many credit cards do you have? Request a $20k credit line increase on one of them, or request smaller increases on multiples. This will eliminate the debt ratio swing.




 
Posts: 5826 | Location: Just outside of Boston | Registered: March 28, 2007Reply With QuoteReport This Post
In the yahd, not too
fah from the cah
Picture of ryan81986
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quote:
Originally posted by mcrimm:
Every credit card grantor seems to report a credit report on their website. I have 3 credit cards plus Quicken. Between the 4 scores, I’m between 830 and 850. We pay our credit cards every month.

Miss a payment and see how fast things fall.


Been there, had an Amex CC that I didn't use and I forgot about the $12 annual fee until I got the late payment notice and it already hit my account. Dropped like a rock.




 
Posts: 5826 | Location: Just outside of Boston | Registered: March 28, 2007Reply With QuoteReport This Post
I Wanna Missile
Picture of tanksoldier
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The problem is you used too much of your available credit... your debt to credit availability ratio is too high.

Request limit increases on your cards, then the $20k won’t be as much of your available credit and your score won’t drop as much. Don’t do it now, they will probably do a hard pull and that will damage your rating further. Get thru this, then slowly increase your credit limit on 2-3 cards over the next year, one every few months.

Try to keep your credit utilization below 10%, not counting your mortgage.

quote:
I have a Zero, Nada, Zilch credit score for the past 10 years.

It has stopped me from doing exactly NOTHING. When everyone stops worrying/worshiping at the FICO alter, all will be better off


Credit isn’t really a scam, and it isn’t unimportant. You may get a loan with little or no credit history, or poor credit, but you’ll pay more over the life of the loan.

Contrary-wise, having a long credit history and good rating saves you money in the long run.



"I am a Soldier. I fight where I'm told and I win where I fight."
GEN George S. Patton, Jr.
 
Posts: 21473 | Location: Eastern plains of Colorado | Registered: January 25, 2006Reply With QuoteReport This Post
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I popped open my credit thing this morning and was going to come in here and rant then I saw this thread on the top.

I was going to say credit is a joke. I have done nothing in the last month except pay my monthly payments. I haven’t spent more on my cards, I didn’t buy anything new, I made my payments on time and my score went down 8 points. It doesn’t really matter because it’s still hovering right around 800 so if I need to use my credit for something it’s still good but I don’t understand how NOTHING can change except making your payments and your score goes down

I understand this is not how it works, but I picture a guy, or girl, sitting in a room with a couple hats. If you have excellent credit they grab the excellent credit hat and pull out a random number between 775-825. Boom, here’s your monthly score.
 
Posts: 936 | Location: Arizona | Registered: January 31, 2014Reply With QuoteReport This Post
Oriental Redneck
Picture of 12131
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quote:
Originally posted by ridewv:
Don't get me started on the stupid FICO score and how they arrive at it.

Start, please.
 
Posts: 19651 | Location: TEXAS | Registered: September 04, 2008Reply With QuoteReport This Post
Ammoholic
Picture of Skins2881
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Out of curiosity I just checked mine. 838.

Noted on the things adversely affecting my score:

Too many consumer finance company accounts

If I close one, it will lower my score as it would bring down my average length of credit

Time since most recent account opening is too short

Only opened one account in last year for my car, that was 11 months ago.

Too many inquiries last 12 months

See above

Length of time accounts have been established

See above



Couldn't they just say, nice job? Changing anything on my credit would actually lower my credit rating. If I just paid off my car in one lump sum, lower rating. If I closed any accounts, lower rating.



Jesse

Sic Semper Tyrannis
 
Posts: 16887 | Location: Loudoun County, Virginia | Registered: December 27, 2014Reply With QuoteReport This Post
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Picture of mcrimm
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The trouble with the whole concept of credit scores is that it doesn't always show a true picture of a persons ability to pay. It does not take into account income, liquidity or net worth. As a retired career banker, we used to assess ones ability to pay based on credit reports, income, liquidity and net worth. Credit scores weren't invented at that time. Even when credit bureaus started reporting scores, we ignored them for years. Why? Because we were trained to focus on ones ability to pay the money back. The larger the credit limit, the more important this becomes - along with collateral.

A department store looking at a $1,000 credit limit is pretty free with their cards because they have huge markups on their products. Plus 21% interest to help them along. A bank lending that same $1,000 has $1,000 cost and will only yield, maybe, 8% interest - probably less.

It's just a very inexpensive way for small credit limits to be granted without expensive staff and training.



I'm sorry if I hurt you feelings when I called you stupid - I thought you already knew - Unknown
...................................
When you have no future, you live in the past. " Sycamore Row" by John Grisham
...................................
Liberalism is a failure to find pathways to intelligence in your brain. - David Lawrence
 
Posts: 2494 | Location: Kalispell Montana & Florida’s Emerald Coast for the Winter | Registered: December 24, 2013Reply With QuoteReport This Post
The cake is a lie!
Picture of Nismo
posted Hide Post
What does it take to get the maximum score of 850?
 
Posts: 6400 | Location: CA | Registered: April 08, 2004Reply With QuoteReport This Post
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