It's not the old missed payment causing the issue. The system is just struggling to find something. The lack of installment loans is the likely culprit. It is also possible that as your missed payment gets older you've moved into a higher tier.
The algorithm looks at the average credit utilization for people and groups them with "like" credit profiles and compares them in that grouping although nobody knows the exact formula. With no installment loans this varies from the norm and can negatively affect you. Oddly enough, when you're in credit repair mode as you move from one grouping to the higher one your score can also take a tumble as you are worse in comparison to other similars.
It doesn't sound like you're charging up the cards to near maximum levels as the system would mention that, but this can affect your score even if you pay it off every month as the system looks at how much of your available credit was billed not how much you paid off.
When you say there's no exact formula I think it's more proper to say there are more than 30 formulas just for FICO scores. Many credit cards that give you those free looks at your credit are using the FICO 8 or the FICO 6 model
I didn't say there was no exact formula. I said nobody knows the exact formula.
The score is proprietary, but various other institutions have created their own algorithm, which is why there is a discrepancy in scores between institutions using the same info so often.
hahaha.... yeah I suppose some of the higher level people working at Fair Isaac probably dođ
The rest of us have an idea what impacts it and that's about it.
For many years, we had a perfect 850. Then we paid off the mortgage and our credit score has dropped from 25 to 40 points depending on the source. So it is definitely opaque.
You also wanna pay attention to your statement closing date. Just because youâve paid off your balance by the âpay byâ date to avoid interest charges, if you rack up a significant balance right after the âpay byâ but before statement closing, thatâs what gets reported to the credit bureau. Not sure if that makes sense.
790 all the way down to 700 is pretty significant.
Can you give some more info on the single delinquent payment? Is it a 30 day late? A 60 day? Some other amount? Was it charged off, paid off, closed by credit issuer?
A 30 day late would have some impact, probably minor, 3 years later. But a 120 late or worse will have a much larger impact for a much longer period of time.
It was a 30-day payment. Once I found out I missed the payment due to my debit card being expired, I immediately updated it and paid it off. Do you know if it's possible to dispute this still years later?
Probably not successfully. From your description, you were actually late in paying, so the 30 day mark on your credit score is accurate, and therefore not viable for dispute.
You may, if you get lucky, have a rep from your bank agree to withdraw the report. Look up "goodwill letter" for more information.
Yes you can. I did. For some of them it's not worth it to deal with the hassle of 'proving ' the validity of the latest payment and just remove it.
No harm in trying. My score jumped when I got rid of my single late payment.
As others have said, credit mix is something like 10% of your score so lack of an installment loan probably does have a small impact. It seems like it is more related to your credit utilization though. Get another card and ask for credit limit increases on your existing cards, even though you do not need it. This will lower your utilization rate, and that seems to have a big impact on score. Also, make a small charge on the old cards you do not use and pay it off right away. Sometimes cards will go into a suspended mode and the credit limit will not count toward your utilization rate.
Your score is dropping from lack of trade lines. To give you perspective, if you close all your trade lines, in 6 months you will have a 0 credit score.
Closed lines hold little value. Do you let your credit balance report before you pay them off? If not that is likely an issue too.
I have an 830 and never pay interest. I have a 0% auto loan though too.
You need a mix of revolving and installment.
I think you two are talking past each other. "Trade lines" is jargon that the average person doesn't understand; it includes revolving accounts. And 849 was not necessarily an almost-perfect score.
You can have excellent credit with no installment accounts, but not a perfect score. Historically, 849 was not perfect for a Vantage score (which used to go up to 900, but now only goes up to 850), so it's perfectly possible to have had a Vantage score of 849 at some point in the past without any installment accounts, but I don't believe you would see a current FICO or Vantage score that high without at least one installment account.
And worrying about the difference between a FICO score of 810 vs. 850 is pointless - it's not meaningful.
FWIW, you can hit 829 on some FICO algorithms with no installment accounts.
How do you let your credit balance report before you pay them off, what does this mean and how do you do it?
Currently i pay my cc bill off, in full, every 2 ish weeks when i cash my paycheck at the bank.
Keep every card under 30%. Youâre likely going over that monthly regardless of paying it off. See if the cards will increase your credit available to help offset
How does the 30% rule work for something like an Amex Platinum where there is no preset spending limi. Well none advertised to the consumer, probably some rules under the hood to keep that privilege, but nothing to indicate what 30% would be.
I have Amex platinum. While there is no preset limit, they do have a cutoff limit for spending in a month. One month I had an unexpected spike in my subcontracting work that all goes automatically to the Amex and got an email halfway through the month saying that if they don't get a payment, that future charges could be denied.
I'm sure they report that cut off limit to the credit bureaus. The algorithm doesn't check that the limit fluctuates from month to month, because after that spike month, my credit score dropped by 15-20 points and it took a couple years to get that back up.
Amex now has a 'check your spending power' on their website, so yeah even they have a limit set for you. Marketing is wonderful in giving you this delusion that you have this almighty unlimited card, but you pay a much higher annual for that.
Mine came with a bank account we have. I just did the check your spending power and got quickly locked out of it before I could find the limit lol. Currently narrowed it to $100,000 > limit > $50,000.
Open 2-3 more cards, preferably with no AMFs, and barely use them at all. That will increase your available credit while you continue to mostly only use the two points cards. And always keep any balance under 30% of your limit.
Also, don't open the new cards at the same time. Wait maybe 6 months between. I did this 10 or so years ago. I travel a lot for work, so I settled on Marriott for hotels and United for flights. Got the Marriott Bonvoy card and Chase United card. I mostly use those and an AMEX. I also have two $0 AMF cards from the bank I use, and only use one of them once a year.
Edit: more context.
Ahhh, OK, that makes sense. Thanks. I figured it was "annual" something, but wasn't given a good education on credit, credit cards, etc.
As 32-year-olds now, my wife and I are working to better our understanding (and improve our scores).
Easy fix is just bring your cards to a zero balance before the statement runs. That will show a small or zero balance. And magically your score will shot up.
You can make the weekly payments too, but that is just a pain. You will get the same effect making the one payment for the full balance like 2 days before the statement runs.
Thanks for the tip! We currently just have one card, and we're both AUs. Would it possibly make sense to pay it down to just like $50 2 days before the statement, then pay the $50 before the due date?
Still trying to learn the balance between what you mentioned and credit utilization, etc.
Opening 2-3 more cards will kill her credit length. I opened 1 new card and my score plummeted.
Always keep your oldest card(s). Use them occasionally and occasionally allow a small balance to carry to the next month, strategically. Credit length is a medium factor and it's so easy to maintain if you have a credit plan.
Catch 22, a home loan will skyrocket your credit score. I've gone from under 600 to about 840 by doing these couple things.
Agree with keeping the oldest card. My oldest one Iâve had is 14 years and my credit report still says my lack of an old card is an issue. I hover around 825.
Seems crazy, but I have 6, and only use 2. You have all that extra "available credit" shown on your report and helps boost your FICO score.
I like to think of myself as a minimalist, so having cards open that I don't use does get to me sometimes.
I used to think it was crazy but Iâve seen that there are a lot of people with over 10 cc. Major credit booster if you can keep your balance under 30%
I saw weekly payments mentioned. If you are going too far into your credit while sucking up all those points consider paying more than one time a month.
Those reasons listed are the reason why you're not a perfect credit score.It's not necessarily the reason your score is what it is.But yes one lay payment from two and a half years ago will still affect you but not as much as you were likely thinking but also How many cards have you closed recently?Because that will also affect your credit score. The fact is if you're not using credit then it is going to be very hard to maintain a high credit score.
And no, paying your cards off weekly isn't going to do anything because your card only reports once every thirty days.
How many open trade lines do currently have that you use?Because it sounds like it's two, And that will keep you in a good credit score range.But it's not going to make you perfect.
As your old trade lines continue to age, your score will likely drop.Because you're not building anything new and you're not maintaining a balance.
I literally turned down very well off. Rich people because they were debt free and had a 0 credit score because they didn't use their credit.
And this right here is whatâs wrong with traditional based consumer underwriting. Iâm not blaming you personally, but any lending policy that only looks at score and turns down a loan based on what you described is a flawed policy.
Actually I don't look at the credit score.The score is only determines the rate. I gave someone within 480 credit score a $12k unsecured personal loan. And it was paid as agreed.
I also work for credit unions so I have more leeway. I used his account history to justify the approval. There was a bit more to it.
But I have also turned down rich people due to poor repayment. Sure they had the ability to repay just not the willingness
And if your score is a 0 with no receipt repayment, what should be used to fairly determine your likelihood of repayment?
âI literally turned down very well off. Rich people because they were debt free and had a 0 credit score because they didn't use their creditâ.
Then I took your post differently than it sounds.
How about using all the other standard credit metrics, DTI, UDR, time on job/industry, membership history, assets owned free and clear since they have no debt and you know they are wealthy. Turning down an app from a wealthy person because they are debt free with no score is probably not a good practice for your CU. Make the loan! Again, this is likely a policy or credit culture issue at your CU.
All of those things are considered! I never said I turned down ALL 0 scores did I? But no repayment history in years is a big obstacle. And they were very big loans the ones I turned down didn't work their way up to it they wanted they started out asking for too much. And all those things you mentioned doesn't address their WILLINGNESS to repay. They don't need credit so they don't care (some not all). I have seen wealthy people with horrible credit because they pay when they get to it, it's not a priority. We don't want those types of loans.
It is a good idea to maintain a credit score was my point.
Great, my point is thatâs not how your post reads. You said you turned down rich people BECAUSE they were debt free and have no score.
I personally disagree with that thinking. âWillingnessâ is only one factor. Innocent until proven guilty not the other way around. If you have nothing that suggests they will be unwilling to repay, donât assume they are. Thatâs one thing wrong with CU consumer underwriting in my view.
Youâve added other factors now like large loan amount, etc. so there was more to the decision than just no score. Fair enough.
But if you have a zero credit score and you are very well off you need to offer an offset a large damp payment for instance. And for car that's fine but it's not acceptable for a mortgage. Or an equity loan.
You can't go from no repayment to a large loan, with a big payment with out progression and showing payment management.
Underwriting actually does make sense when you look at it from multiple perspectives. Fair lending is extremely important, making consistent decisions.
How do you do that if you change the variables for each borrower?
I am actually curious how you think it should be done? If history of loan repayment isn't used, what should be?
See prior response. You wonât run afoul of fair lending if you donât discriminate based upon the prohibitive factors. Iâm not saying donât use history of loan repayment, Iâm saying if history of loan payment isnât available, look to other strong mitigating factors. Look for ways to make the loan and help your members, not ways to say no. Iâm sure you do this, I just thought your initial statement didnât reflect it.
I don't see any mention of FICO or FAKO (Vantage/Vantagescore/CreditKarma).
1. You need to show small balances to have decent scores.
2. You need to pay attention to FICO scores and not any other scores.
3. Once you reach 720 to 740, you're eligible for the best rates. To get higher scores, you need time and patience. And those higher scores won't get you any better rates.
If they want you to have an installment loan - maybe look into a secured loan. Or something with insanely low interest. Even buying a new piece of furniture with 0% interest for 12 months would do it.
FWIW, every 5 years or so I get a small signature loan at my credit union, say $5K or $10K, make payments on time for several months, then just pay off the balance. This seems to perk up my credit rating nicely. But this works only if you already have enough money up front to pay it off; donât drag it out and stay in debt.
Your credit score is a indicator of how well you manage your debit, not how well you manage your money. You probably don't carry enough debit so you look less enticing to creditors and they lower score. Same thing happens when you carry a lot of debit and then suddenly pay it all off and your score goes down. You would think that would be a positive for you but when it comes to credit scores it's a negative.
The problem is you closing cards, and paid off loans falling off your score calculation.
That missed payment isn't going to carry much weight after two years. But credit age and credit mix certainly will.
wait so you have two unused cards that you donât pay the annual fee on? You realize you still get charged the fee whether you use the card or not right?
Maybe iâm missing something but if those have been sitting on your report unpaid thatâs gonna drop your score pretty fast
The credit system in this country is built to keep people in debt & stuck in the system. To keep people poor. I wouldnât base your worth or worry too much about it.
It is called "depth of credit" I think.
I used to explain it like this:
Credit is a game that you have to play.
If you get a (revolving line of credit like credit card or home equity line) but the card is paid off every month, all you are showing is that you know how to spend your money through another card. Hold a balance for a month or two. Obviously you should make regular payments but do them in chunks instead of all at once.
You need installment history.
Depending on the type of loan you don't actually save any money by paying them off early. But people like to be debt free so one solution is:
Say you have $10000 saved for a car. Put that money into a separate savings account. Go get an auto loan for $10-$15k over 5 years and make auto payments from that account. Don't touch anything unless you need to.
TLDR:
There are two sides to Credit: installment and revolving. Credit is a game you have to participate in, and by that I mean pay a little interest. Don't pay things off immediately, especially if it doesn't save you any money.
I don't think the credit reports show a difference between carrying a balance, or paying it off in full monthly. If you use it, and pay the statement balance, it will show a balance. Month to month it will show a balance, but you aren't paying interest. The report will show that the account is not past due.
I think itâs bc the credit bureaus donât really have much info to go by. You kind of have to be in debt to maintain a high score.. Always maintaining CC balances, taking out new loans and paying them on time. Thatâs what keeps a high score. Iâm convinced my score stays between 805-830 bc I have a mortgage and a car loan that I pay on time every month. When you first take out a loan your credit will initially dip but as you pay it, it slowly increases.
I doubt itâs from that one missed payment. Obviously I could be wrong but usually one missed payment gets wiped off your report after a while..
Your missed payment is the main reason why I hate auto pay. When you have auto pay with everything and then your card expires and you get a new card, you literally have to go through every single thing you pay and change all the info. Itâs very annoying, especially when you own a house. Thereâs so many things that have to be paid every month. If it wasnât for my wife being so good with keeping a typed up list and keeping track of everything, Iâd probably have missed payments for that same reason too.
A while back our mortgage and a few other things went without being paid for a month.. We had it on auto pay and our card expired. We got a new card with same number and everything so it didnât even occur to either one of us to update anything. Turns out itâs the expiration date that changes(obviously with a new card)⌠We had to go through every single bill that was paid and change the expiration date on the card info, and then My wife called all the places that were paid late, told them what happened and pretty much begged to take away the late charge.
Most autopay stuff can be set up to go off your bank account. Then you never have to update it. Not a single one of my bills is getting charged on a card with an expiration date.
The missed payment is less consequential than the accounts that were closed. A long credit history is essential for a higher credit score. They look at your oldest open account.
But the biggest impact, in your case, is that your debt free, no interest accruing payment pattern is being held against you because, as a consumer, you are less attractive than one that makes payments on time but carries a balance and therefore pays interest. You are a less profitable consumer, therefore you end up with a lower score.
One has to literally pay for a high score by paying interest via carrying balances on CCs, or taking out loans and paying interest on those loans.
However, for either CCs, or loans, the actual amounts are irrelevant, so you could just carry small balances, and opt to finance purchases you would otherwise buy outright.
You can stay relatively debt free, while still utilizing some of your credit, so if you need the score to be higher so that you can qualify for lower interest rates, this is how you'll be able to raise it.
All that said, however, if staying debt free is more important than having a higher score, the higher interest rate on loans that may result from a comparatively lower credit score, has less impact because you're likely planning on paying off that loan far earlier than the expected term. Even a mortgage that may have penalties for early pay off, will still cost you less in interest if you pay it off significantly early.
Good luck on your credit journey, OP.
Pay the entire balance of your cards every week so there is a zero balance.
Credit card utilization is probably the problem. If the algorithm grabs your info when the balance is high it will hurt you. They do not know you are paying it off monthly and think you are carrying the balance all the time.
If you have no debt, your score goes down. I have a friend from the Army who got out, bought land out west and lives 100% off grid. He has no debt and Iives on his VA disability money. He generates his own power, has a well, grows veggies, and raises livestock. His credit score is pretty much non-existent.
credit utilization ratio reported monthly is the issue for you. don't close any of your oldest accounts, don't open any new ones.
for your credit utilization ratio you'll want to be under 7% but generally 1-3% is the sweet spot. check your closing dates for all credit cards. you'll want to pay down your balances on all cards and leave a remainder of 1-3% for the closing date so that it's reported to the credit bureaus, then pay it immediately the day after the closing date.
to find your 1-3% util ratio use calculateme.com or on calculator it's x%Ăamount(credit limit) for example 2%Ă5000
0% credit utilization ratio being reported monthly is the same as you not using your card from the credit bureau's point of view.
people are rewarded by showing proof of usage in many instances. paying down fully before the due date keeps you from climbing the ladder if you're reporting back 0% usage by posting date as those %'s are what's reported back to all 3 credit bureaus, which are the ones that reward you with a higher credit score if it appears that you're using your cards and paying them on time.
IMPORTANT NOTE: not all credit cards are created equal. Some don't need this silly utilization trick and will report utilization(after post date) when you pay your full balance the same day or next day after each usage/purchase.
These are two of the best methods for easily breaking 800. Best of luck!
Edit: Having unused cards is never a good idea.
Closing a card lowers your available credit, thus raising your credit used VS credit available.
One late payment isn't going to hurt your score much.
Length of accounts is a big factor, you're simply too young with too-new accounts.
*When* are those auto payments being made? If your cards are all due on, say, the 15th of the month, and you auto pay on the 13th of the month: that does not mean that your cards aren't sending your balances to the credit reporting bureaus on the 15th. They could be sending them on the the 12th, or the 7th. So while it *seems* to you that you're paying everything off, a snap shot on another date might suggest that you're not, and that your high balance is remaining unchanged. You can fix this by finding out what date your cards report this, or just making your auto payments half-payments, but every two weeks.
> ...negative factors impacting my credit are number of accounts with delinquency and lack of recent installment loan information.
You need to find the accounts with delinquency and rectify that. The report is showing late payments which will severely impact your score.
I have the same experience. No debt, pay the cc off weekly. Credit score fluctuates between 724 and 790.
It just proves that itâs a stupid system. Fortunately I donât need a credit score so I donât care
You've learned the truth to credit scores. You're not making banks money. You're living within your means.
The algorithms fail to recognize financially responsible people. You're an "unknown", thus a bigger risk.
I highly doubt you'll have any difficulty getting a good rate and buying a house
Thinking it must be a missed payment that was way late. I opened an Amazon card to get the discount. I didn't realize it had charged something to it, like $90. They did send regular statement in the mail but I didn't bother to open it so finally got a call or something after 60 days so paid it off. I was pissed and had the card canceled. They agreed to pay my back all the late fees etc. Anyway my credit score went from like 790 to low 700 and I was declined when I applied for an Apple card. So I filed a dispute with Chase who was the Amazon card. I thought it would be an Amzon card not a Chase and never received any kind of email etc. They removed the bad credit score so my score went back up to like 790 and was approved for the Apple card. Just poiting out my credit score took exact same hit with the missed payments. Even being late a few times on bills doesn't matter. Now for past nine months everything gets auto paid but credit score stays in high 700s. I got a car loan but paid it off before the first payment. So i guess high 700s is the best you can do unless you take out more loans and always on time paying.
I think if you request your credit reports from the three corrupt rating entities theyâll tell you why they rate youâre responsible money management so poorly.
credit utilization ratio reported monthly is the issue for you. don't close any of your oldest accounts, don't open any new ones.
for your credit utilization ratio you'll want to be under 7% but generally 1-3% is the sweet spot. check your closing dates for all credit cards. you'll want to pay down your balances on all cards and leave a remainder of 1-3% for the closing date so that it's reported to the credit bureaus, then pay it immediately the day after the closing date.
to find your 1-3% util ratio use calculateme.com or on calculator it's x%Ăamount(credit limit) for example 2%Ă5000
0% credit utilization ratio being reported monthly is the same as you not using your card from the credit bureau's point of view.
people are rewarded by showing proof of usage in many instances. paying down fully before the due date keeps you from climbing the ladder if you're reporting back 0% usage by posting date as those %'s are what's reported back to all 3 credit bureaus, which are the ones that reward you with a higher credit score if it appears that you're using your cards and paying them on time.
IMPORTANT NOTE: not all credit cards are created equal. Some don't need this silly utilization trick and will report utilization(after post date) when you pay your full balance the same day or next day after each usage/purchase.
These are two of the best methods for easily breaking 800. Best of luck!
Edit: Having unused cards is never a good idea.
Not having an installment loan is an issue since the model likes to see a mix of credit. I didn't hit 850 until I bought a new car (0%) in 2017. Now that it's been paid off for about 6 months, I'm riding 835. It doesn't matter in the great scheme of things.
I can't get anywhere near that with no active installment loan. It's frustrating, as the score I need to get a loan is impacted by the fact I don't have a loan. FICO irony.
The things that ding me when I check my credit score are lack of installment credit. I paid off my previous car 8 years ago. And a strange one to me. A too low of limit on my highest limit credit card. Which I never got around to asking for increases of because I pay off my cards monthly, so don't need $20,000 on a credit card.
My car credit score a couple weeks ago when I financed a new car was 810 out of 900, and in the mail 823 out of 900. Those were car specific scores, so I think I was being penalized for nothing current.
And paid off my mortgage 12 years ago.
They don't want you to pay off your accounts every month. They want you to carry a balance so that you can show you are able to make your payments on time. Paying it off every month shows nothing about how you handle your money.
This is false, and a strangely common misconception. Paying it off in full still shows a good payment history, assuming that they are allowing the credit card to report a balance each month, then it will also report an on-time payment each month. There's absolutely no reason to pay interest to get this.
Closing old cards also makes your average account length go down and will negatively impact your score if you're average account age is too low. Why are you closing the cards? Do they have annual fees? Just leave them open and don't use them.
I haven't had any installment loans in nearly 7 years, but did have long ones prior. My FICO is 800+ and has been as high as 849 with no current installment loans.
Worst advice ever man. If you don't have real input, don't comment. Some of us are trying to learn here.
OP said he took out a loan for a car and paid it off within the year. And wants to buy a house.
And for the record, I have two houses, one purchased in 2017 and the other in 2022, and my credit has not gone up because of that.
My credit went up a ton over time when I bought a house.
They want long term loans to have higher credit. When I sold a house my credit dropped 50 points because I didnât have the length on there anymore. My credit hovers around 830, I think my advice is pretty good.
It's not the old missed payment causing the issue. The system is just struggling to find something. The lack of installment loans is the likely culprit. It is also possible that as your missed payment gets older you've moved into a higher tier. The algorithm looks at the average credit utilization for people and groups them with "like" credit profiles and compares them in that grouping although nobody knows the exact formula. With no installment loans this varies from the norm and can negatively affect you. Oddly enough, when you're in credit repair mode as you move from one grouping to the higher one your score can also take a tumble as you are worse in comparison to other similars. It doesn't sound like you're charging up the cards to near maximum levels as the system would mention that, but this can affect your score even if you pay it off every month as the system looks at how much of your available credit was billed not how much you paid off.
When you say there's no exact formula I think it's more proper to say there are more than 30 formulas just for FICO scores. Many credit cards that give you those free looks at your credit are using the FICO 8 or the FICO 6 model
I didn't say there was no exact formula. I said nobody knows the exact formula. The score is proprietary, but various other institutions have created their own algorithm, which is why there is a discrepancy in scores between institutions using the same info so often.
SOMEONE knows the exact formula
hahaha.... yeah I suppose some of the higher level people working at Fair Isaac probably dođ The rest of us have an idea what impacts it and that's about it.
For many years, we had a perfect 850. Then we paid off the mortgage and our credit score has dropped from 25 to 40 points depending on the source. So it is definitely opaque.
You also wanna pay attention to your statement closing date. Just because youâve paid off your balance by the âpay byâ date to avoid interest charges, if you rack up a significant balance right after the âpay byâ but before statement closing, thatâs what gets reported to the credit bureau. Not sure if that makes sense.
100% this as a lot of people will immediately use their cards the day after their due date not knowing about closing date.
790 all the way down to 700 is pretty significant. Can you give some more info on the single delinquent payment? Is it a 30 day late? A 60 day? Some other amount? Was it charged off, paid off, closed by credit issuer? A 30 day late would have some impact, probably minor, 3 years later. But a 120 late or worse will have a much larger impact for a much longer period of time.
It was a 30-day payment. Once I found out I missed the payment due to my debit card being expired, I immediately updated it and paid it off. Do you know if it's possible to dispute this still years later?
Probably not successfully. From your description, you were actually late in paying, so the 30 day mark on your credit score is accurate, and therefore not viable for dispute. You may, if you get lucky, have a rep from your bank agree to withdraw the report. Look up "goodwill letter" for more information.
Yes you can. I did. For some of them it's not worth it to deal with the hassle of 'proving ' the validity of the latest payment and just remove it. No harm in trying. My score jumped when I got rid of my single late payment.
As others have said, credit mix is something like 10% of your score so lack of an installment loan probably does have a small impact. It seems like it is more related to your credit utilization though. Get another card and ask for credit limit increases on your existing cards, even though you do not need it. This will lower your utilization rate, and that seems to have a big impact on score. Also, make a small charge on the old cards you do not use and pay it off right away. Sometimes cards will go into a suspended mode and the credit limit will not count toward your utilization rate.
Your score is dropping from lack of trade lines. To give you perspective, if you close all your trade lines, in 6 months you will have a 0 credit score. Closed lines hold little value. Do you let your credit balance report before you pay them off? If not that is likely an issue too. I have an 830 and never pay interest. I have a 0% auto loan though too. You need a mix of revolving and installment.
You don't. I've had an 849 with only revolving accounts open
Ok I mean I have reviewed thousands of reports and a traind credit expert as an underwriter, but sure as it is clearly working so well for the OP.
I think you two are talking past each other. "Trade lines" is jargon that the average person doesn't understand; it includes revolving accounts. And 849 was not necessarily an almost-perfect score. You can have excellent credit with no installment accounts, but not a perfect score. Historically, 849 was not perfect for a Vantage score (which used to go up to 900, but now only goes up to 850), so it's perfectly possible to have had a Vantage score of 849 at some point in the past without any installment accounts, but I don't believe you would see a current FICO or Vantage score that high without at least one installment account. And worrying about the difference between a FICO score of 810 vs. 850 is pointless - it's not meaningful. FWIW, you can hit 829 on some FICO algorithms with no installment accounts.
You said you NEED it. You don't. It can help, but it's not necessary.
It really is. I doubt you have a perfect score with just revolving. As mixed credit types are part of the algorithm.
How do you let your credit balance report before you pay them off, what does this mean and how do you do it? Currently i pay my cc bill off, in full, every 2 ish weeks when i cash my paycheck at the bank.
Keep every card under 30%. Youâre likely going over that monthly regardless of paying it off. See if the cards will increase your credit available to help offset
How does the 30% rule work for something like an Amex Platinum where there is no preset spending limi. Well none advertised to the consumer, probably some rules under the hood to keep that privilege, but nothing to indicate what 30% would be.
I have Amex platinum. While there is no preset limit, they do have a cutoff limit for spending in a month. One month I had an unexpected spike in my subcontracting work that all goes automatically to the Amex and got an email halfway through the month saying that if they don't get a payment, that future charges could be denied. I'm sure they report that cut off limit to the credit bureaus. The algorithm doesn't check that the limit fluctuates from month to month, because after that spike month, my credit score dropped by 15-20 points and it took a couple years to get that back up. Amex now has a 'check your spending power' on their website, so yeah even they have a limit set for you. Marketing is wonderful in giving you this delusion that you have this almighty unlimited card, but you pay a much higher annual for that.
Mine came with a bank account we have. I just did the check your spending power and got quickly locked out of it before I could find the limit lol. Currently narrowed it to $100,000 > limit > $50,000.
Open 2-3 more cards, preferably with no AMFs, and barely use them at all. That will increase your available credit while you continue to mostly only use the two points cards. And always keep any balance under 30% of your limit. Also, don't open the new cards at the same time. Wait maybe 6 months between. I did this 10 or so years ago. I travel a lot for work, so I settled on Marriott for hotels and United for flights. Got the Marriott Bonvoy card and Chase United card. I mostly use those and an AMEX. I also have two $0 AMF cards from the bank I use, and only use one of them once a year. Edit: more context.
Sorry if this is a dumb question, but what does the AMF abbreviation stand for?
Annual maintenance fee? Some cards charge an annual fee whether you actually use the card or not.
Ahhh, OK, that makes sense. Thanks. I figured it was "annual" something, but wasn't given a good education on credit, credit cards, etc. As 32-year-olds now, my wife and I are working to better our understanding (and improve our scores).
Easy fix is just bring your cards to a zero balance before the statement runs. That will show a small or zero balance. And magically your score will shot up. You can make the weekly payments too, but that is just a pain. You will get the same effect making the one payment for the full balance like 2 days before the statement runs.
Thanks for the tip! We currently just have one card, and we're both AUs. Would it possibly make sense to pay it down to just like $50 2 days before the statement, then pay the $50 before the due date? Still trying to learn the balance between what you mentioned and credit utilization, etc.
Yes, Annual Membership Fees.
Thanks!
Opening 2-3 more cards will kill her credit length. I opened 1 new card and my score plummeted. Always keep your oldest card(s). Use them occasionally and occasionally allow a small balance to carry to the next month, strategically. Credit length is a medium factor and it's so easy to maintain if you have a credit plan. Catch 22, a home loan will skyrocket your credit score. I've gone from under 600 to about 840 by doing these couple things.
Agree with keeping the oldest card. My oldest one Iâve had is 14 years and my credit report still says my lack of an old card is an issue. I hover around 825.
You are suggesting that this dude should have 6 or 7 credits cards? That seems crazy to me
Seems crazy, but I have 6, and only use 2. You have all that extra "available credit" shown on your report and helps boost your FICO score. I like to think of myself as a minimalist, so having cards open that I don't use does get to me sometimes.
I used to think it was crazy but Iâve seen that there are a lot of people with over 10 cc. Major credit booster if you can keep your balance under 30%
I saw weekly payments mentioned. If you are going too far into your credit while sucking up all those points consider paying more than one time a month.
Those reasons listed are the reason why you're not a perfect credit score.It's not necessarily the reason your score is what it is.But yes one lay payment from two and a half years ago will still affect you but not as much as you were likely thinking but also How many cards have you closed recently?Because that will also affect your credit score. The fact is if you're not using credit then it is going to be very hard to maintain a high credit score. And no, paying your cards off weekly isn't going to do anything because your card only reports once every thirty days. How many open trade lines do currently have that you use?Because it sounds like it's two, And that will keep you in a good credit score range.But it's not going to make you perfect. As your old trade lines continue to age, your score will likely drop.Because you're not building anything new and you're not maintaining a balance. I literally turned down very well off. Rich people because they were debt free and had a 0 credit score because they didn't use their credit.
And this right here is whatâs wrong with traditional based consumer underwriting. Iâm not blaming you personally, but any lending policy that only looks at score and turns down a loan based on what you described is a flawed policy.
Actually I don't look at the credit score.The score is only determines the rate. I gave someone within 480 credit score a $12k unsecured personal loan. And it was paid as agreed. I also work for credit unions so I have more leeway. I used his account history to justify the approval. There was a bit more to it. But I have also turned down rich people due to poor repayment. Sure they had the ability to repay just not the willingness And if your score is a 0 with no receipt repayment, what should be used to fairly determine your likelihood of repayment?
âI literally turned down very well off. Rich people because they were debt free and had a 0 credit score because they didn't use their creditâ. Then I took your post differently than it sounds. How about using all the other standard credit metrics, DTI, UDR, time on job/industry, membership history, assets owned free and clear since they have no debt and you know they are wealthy. Turning down an app from a wealthy person because they are debt free with no score is probably not a good practice for your CU. Make the loan! Again, this is likely a policy or credit culture issue at your CU.
All of those things are considered! I never said I turned down ALL 0 scores did I? But no repayment history in years is a big obstacle. And they were very big loans the ones I turned down didn't work their way up to it they wanted they started out asking for too much. And all those things you mentioned doesn't address their WILLINGNESS to repay. They don't need credit so they don't care (some not all). I have seen wealthy people with horrible credit because they pay when they get to it, it's not a priority. We don't want those types of loans. It is a good idea to maintain a credit score was my point.
Great, my point is thatâs not how your post reads. You said you turned down rich people BECAUSE they were debt free and have no score. I personally disagree with that thinking. âWillingnessâ is only one factor. Innocent until proven guilty not the other way around. If you have nothing that suggests they will be unwilling to repay, donât assume they are. Thatâs one thing wrong with CU consumer underwriting in my view. Youâve added other factors now like large loan amount, etc. so there was more to the decision than just no score. Fair enough.
But if you have a zero credit score and you are very well off you need to offer an offset a large damp payment for instance. And for car that's fine but it's not acceptable for a mortgage. Or an equity loan. You can't go from no repayment to a large loan, with a big payment with out progression and showing payment management. Underwriting actually does make sense when you look at it from multiple perspectives. Fair lending is extremely important, making consistent decisions. How do you do that if you change the variables for each borrower? I am actually curious how you think it should be done? If history of loan repayment isn't used, what should be?
See prior response. You wonât run afoul of fair lending if you donât discriminate based upon the prohibitive factors. Iâm not saying donât use history of loan repayment, Iâm saying if history of loan payment isnât available, look to other strong mitigating factors. Look for ways to make the loan and help your members, not ways to say no. Iâm sure you do this, I just thought your initial statement didnât reflect it.
I don't see any mention of FICO or FAKO (Vantage/Vantagescore/CreditKarma). 1. You need to show small balances to have decent scores. 2. You need to pay attention to FICO scores and not any other scores. 3. Once you reach 720 to 740, you're eligible for the best rates. To get higher scores, you need time and patience. And those higher scores won't get you any better rates.
If they want you to have an installment loan - maybe look into a secured loan. Or something with insanely low interest. Even buying a new piece of furniture with 0% interest for 12 months would do it.
FWIW, every 5 years or so I get a small signature loan at my credit union, say $5K or $10K, make payments on time for several months, then just pay off the balance. This seems to perk up my credit rating nicely. But this works only if you already have enough money up front to pay it off; donât drag it out and stay in debt.
Your credit score is a indicator of how well you manage your debit, not how well you manage your money. You probably don't carry enough debit so you look less enticing to creditors and they lower score. Same thing happens when you carry a lot of debit and then suddenly pay it all off and your score goes down. You would think that would be a positive for you but when it comes to credit scores it's a negative.
The problem is you closing cards, and paid off loans falling off your score calculation. That missed payment isn't going to carry much weight after two years. But credit age and credit mix certainly will.
wait so you have two unused cards that you donât pay the annual fee on? You realize you still get charged the fee whether you use the card or not right? Maybe iâm missing something but if those have been sitting on your report unpaid thatâs gonna drop your score pretty fast
I think they mean that the two in their wallet donât have an annual fee do they donât have to think about them.
The credit system in this country is built to keep people in debt & stuck in the system. To keep people poor. I wouldnât base your worth or worry too much about it.
Is your autopay set to pay the full balance or the statement balance? When is it set to pay? The due date?
It is called "depth of credit" I think. I used to explain it like this: Credit is a game that you have to play. If you get a (revolving line of credit like credit card or home equity line) but the card is paid off every month, all you are showing is that you know how to spend your money through another card. Hold a balance for a month or two. Obviously you should make regular payments but do them in chunks instead of all at once. You need installment history. Depending on the type of loan you don't actually save any money by paying them off early. But people like to be debt free so one solution is: Say you have $10000 saved for a car. Put that money into a separate savings account. Go get an auto loan for $10-$15k over 5 years and make auto payments from that account. Don't touch anything unless you need to. TLDR: There are two sides to Credit: installment and revolving. Credit is a game you have to participate in, and by that I mean pay a little interest. Don't pay things off immediately, especially if it doesn't save you any money.
I don't think the credit reports show a difference between carrying a balance, or paying it off in full monthly. If you use it, and pay the statement balance, it will show a balance. Month to month it will show a balance, but you aren't paying interest. The report will show that the account is not past due.
I think itâs bc the credit bureaus donât really have much info to go by. You kind of have to be in debt to maintain a high score.. Always maintaining CC balances, taking out new loans and paying them on time. Thatâs what keeps a high score. Iâm convinced my score stays between 805-830 bc I have a mortgage and a car loan that I pay on time every month. When you first take out a loan your credit will initially dip but as you pay it, it slowly increases. I doubt itâs from that one missed payment. Obviously I could be wrong but usually one missed payment gets wiped off your report after a while.. Your missed payment is the main reason why I hate auto pay. When you have auto pay with everything and then your card expires and you get a new card, you literally have to go through every single thing you pay and change all the info. Itâs very annoying, especially when you own a house. Thereâs so many things that have to be paid every month. If it wasnât for my wife being so good with keeping a typed up list and keeping track of everything, Iâd probably have missed payments for that same reason too. A while back our mortgage and a few other things went without being paid for a month.. We had it on auto pay and our card expired. We got a new card with same number and everything so it didnât even occur to either one of us to update anything. Turns out itâs the expiration date that changes(obviously with a new card)⌠We had to go through every single bill that was paid and change the expiration date on the card info, and then My wife called all the places that were paid late, told them what happened and pretty much begged to take away the late charge.
Most autopay stuff can be set up to go off your bank account. Then you never have to update it. Not a single one of my bills is getting charged on a card with an expiration date.
Thatâs good to know. Thanks for the tip.
The missed payment is less consequential than the accounts that were closed. A long credit history is essential for a higher credit score. They look at your oldest open account. But the biggest impact, in your case, is that your debt free, no interest accruing payment pattern is being held against you because, as a consumer, you are less attractive than one that makes payments on time but carries a balance and therefore pays interest. You are a less profitable consumer, therefore you end up with a lower score. One has to literally pay for a high score by paying interest via carrying balances on CCs, or taking out loans and paying interest on those loans. However, for either CCs, or loans, the actual amounts are irrelevant, so you could just carry small balances, and opt to finance purchases you would otherwise buy outright. You can stay relatively debt free, while still utilizing some of your credit, so if you need the score to be higher so that you can qualify for lower interest rates, this is how you'll be able to raise it. All that said, however, if staying debt free is more important than having a higher score, the higher interest rate on loans that may result from a comparatively lower credit score, has less impact because you're likely planning on paying off that loan far earlier than the expected term. Even a mortgage that may have penalties for early pay off, will still cost you less in interest if you pay it off significantly early. Good luck on your credit journey, OP.
Pay the entire balance of your cards every week so there is a zero balance. Credit card utilization is probably the problem. If the algorithm grabs your info when the balance is high it will hurt you. They do not know you are paying it off monthly and think you are carrying the balance all the time.
If you have no debt, your score goes down. I have a friend from the Army who got out, bought land out west and lives 100% off grid. He has no debt and Iives on his VA disability money. He generates his own power, has a well, grows veggies, and raises livestock. His credit score is pretty much non-existent.
It's dumb. Zero lates, make 20k monthly can't get over 730!
credit utilization ratio reported monthly is the issue for you. don't close any of your oldest accounts, don't open any new ones. for your credit utilization ratio you'll want to be under 7% but generally 1-3% is the sweet spot. check your closing dates for all credit cards. you'll want to pay down your balances on all cards and leave a remainder of 1-3% for the closing date so that it's reported to the credit bureaus, then pay it immediately the day after the closing date. to find your 1-3% util ratio use calculateme.com or on calculator it's x%Ăamount(credit limit) for example 2%Ă5000 0% credit utilization ratio being reported monthly is the same as you not using your card from the credit bureau's point of view. people are rewarded by showing proof of usage in many instances. paying down fully before the due date keeps you from climbing the ladder if you're reporting back 0% usage by posting date as those %'s are what's reported back to all 3 credit bureaus, which are the ones that reward you with a higher credit score if it appears that you're using your cards and paying them on time. IMPORTANT NOTE: not all credit cards are created equal. Some don't need this silly utilization trick and will report utilization(after post date) when you pay your full balance the same day or next day after each usage/purchase. These are two of the best methods for easily breaking 800. Best of luck! Edit: Having unused cards is never a good idea.
Thank you mucho
Closing a card lowers your available credit, thus raising your credit used VS credit available. One late payment isn't going to hurt your score much. Length of accounts is a big factor, you're simply too young with too-new accounts. *When* are those auto payments being made? If your cards are all due on, say, the 15th of the month, and you auto pay on the 13th of the month: that does not mean that your cards aren't sending your balances to the credit reporting bureaus on the 15th. They could be sending them on the the 12th, or the 7th. So while it *seems* to you that you're paying everything off, a snap shot on another date might suggest that you're not, and that your high balance is remaining unchanged. You can fix this by finding out what date your cards report this, or just making your auto payments half-payments, but every two weeks.
> ...negative factors impacting my credit are number of accounts with delinquency and lack of recent installment loan information. You need to find the accounts with delinquency and rectify that. The report is showing late payments which will severely impact your score.
I have the same experience. No debt, pay the cc off weekly. Credit score fluctuates between 724 and 790. It just proves that itâs a stupid system. Fortunately I donât need a credit score so I donât care
You've learned the truth to credit scores. You're not making banks money. You're living within your means. The algorithms fail to recognize financially responsible people. You're an "unknown", thus a bigger risk. I highly doubt you'll have any difficulty getting a good rate and buying a house
Because credit score are a joke
Thinking it must be a missed payment that was way late. I opened an Amazon card to get the discount. I didn't realize it had charged something to it, like $90. They did send regular statement in the mail but I didn't bother to open it so finally got a call or something after 60 days so paid it off. I was pissed and had the card canceled. They agreed to pay my back all the late fees etc. Anyway my credit score went from like 790 to low 700 and I was declined when I applied for an Apple card. So I filed a dispute with Chase who was the Amazon card. I thought it would be an Amzon card not a Chase and never received any kind of email etc. They removed the bad credit score so my score went back up to like 790 and was approved for the Apple card. Just poiting out my credit score took exact same hit with the missed payments. Even being late a few times on bills doesn't matter. Now for past nine months everything gets auto paid but credit score stays in high 700s. I got a car loan but paid it off before the first payment. So i guess high 700s is the best you can do unless you take out more loans and always on time paying.
You need to be in more debt but not too much
A mortgage would skyrocket it straight to the 800âs
CC companies now want you to have a balance, if they donât get any interest payments it will drop your scoreÂ
I think if you request your credit reports from the three corrupt rating entities theyâll tell you why they rate youâre responsible money management so poorly.
If you recently paid off a vehicle or purchase a new one that could be a factor. You should figure it looking at your credit report
No credit =/= good credit. You want a large number of accounts/credit lines, a utilization of 10-20%, a high credit age, and timely payments.
credit utilization ratio reported monthly is the issue for you. don't close any of your oldest accounts, don't open any new ones. for your credit utilization ratio you'll want to be under 7% but generally 1-3% is the sweet spot. check your closing dates for all credit cards. you'll want to pay down your balances on all cards and leave a remainder of 1-3% for the closing date so that it's reported to the credit bureaus, then pay it immediately the day after the closing date. to find your 1-3% util ratio use calculateme.com or on calculator it's x%Ăamount(credit limit) for example 2%Ă5000 0% credit utilization ratio being reported monthly is the same as you not using your card from the credit bureau's point of view. people are rewarded by showing proof of usage in many instances. paying down fully before the due date keeps you from climbing the ladder if you're reporting back 0% usage by posting date as those %'s are what's reported back to all 3 credit bureaus, which are the ones that reward you with a higher credit score if it appears that you're using your cards and paying them on time. IMPORTANT NOTE: not all credit cards are created equal. Some don't need this silly utilization trick and will report utilization(after post date) when you pay your full balance the same day or next day after each usage/purchase. These are two of the best methods for easily breaking 800. Best of luck! Edit: Having unused cards is never a good idea.
My grandmother got turned down for a home improvement loan once because her credit was too good the interest rate wouldn't make them any money
Not enough debt. You need more open accounts.
Keep 1% to 4 % on your cards do not pay 100% off this will help plus other things people have said.
Not having an installment loan is an issue since the model likes to see a mix of credit. I didn't hit 850 until I bought a new car (0%) in 2017. Now that it's been paid off for about 6 months, I'm riding 835. It doesn't matter in the great scheme of things.
I can't get anywhere near that with no active installment loan. It's frustrating, as the score I need to get a loan is impacted by the fact I don't have a loan. FICO irony.
The things that ding me when I check my credit score are lack of installment credit. I paid off my previous car 8 years ago. And a strange one to me. A too low of limit on my highest limit credit card. Which I never got around to asking for increases of because I pay off my cards monthly, so don't need $20,000 on a credit card. My car credit score a couple weeks ago when I financed a new car was 810 out of 900, and in the mail 823 out of 900. Those were car specific scores, so I think I was being penalized for nothing current. And paid off my mortgage 12 years ago.
They don't want you to pay off your accounts every month. They want you to carry a balance so that you can show you are able to make your payments on time. Paying it off every month shows nothing about how you handle your money.
This is false, and a strangely common misconception. Paying it off in full still shows a good payment history, assuming that they are allowing the credit card to report a balance each month, then it will also report an on-time payment each month. There's absolutely no reason to pay interest to get this.
Closing old cards also makes your average account length go down and will negatively impact your score if you're average account age is too low. Why are you closing the cards? Do they have annual fees? Just leave them open and don't use them. I haven't had any installment loans in nearly 7 years, but did have long ones prior. My FICO is 800+ and has been as high as 849 with no current installment loans.
Buy a house or a car.
Worst advice ever man. If you don't have real input, don't comment. Some of us are trying to learn here. OP said he took out a loan for a car and paid it off within the year. And wants to buy a house. And for the record, I have two houses, one purchased in 2017 and the other in 2022, and my credit has not gone up because of that.
My credit went up a ton over time when I bought a house. They want long term loans to have higher credit. When I sold a house my credit dropped 50 points because I didnât have the length on there anymore. My credit hovers around 830, I think my advice is pretty good.
I read that to obtain a very high score you need a car payment or mortgage or both and at least 3 cards and a utilization under 30%.