Credit Scores (1 Viewer)

[Tapxe]

I did this when I was first rebuilding my credit several years ago.

I took out the smallest loan I could from a bank (it might have even been a secured loan) for a 12 month term and just stuck the money in a figurative shoe box. I think I made 6 of the payments and then paid it off in full. I then took out another loan for a bit more and did the same thing.

It helped to build a good foundation.

I assume at this point he's past that having paid regularly on cards.

 

[Tapxe]

using your CC isn't gonna drop your score 30 points "within 2 days, max"

It could. If he has 2 cards. Say 1k limit on each. 100$ debt on 2K credit is 5% while 100$ debt on 1K credit is 10% utilization. Big change in the calculation for score.

 

[Sailorsaint]

Like @Tapxe mentioned above, this is most likely the reason for the drop, assuming it was a credit card and not a charge card (meaning, it had a credit limit like a Visa or MC and not monthly full payoff but no set credit limit like the traditional AMEX cards).

The biggest component of your credit score is credit utilization. It's a simple calculation of your outstanding credit balance against your available credit. So, if you had two cards, each with a $1,000 credit limit and your outstanding balance was $500, your utilization with both cards open would be 25%, which is good because it's below the magic 30% number, but with one closed, you're now looking at 50%, which is bad because it's above the 30% threshold and you get whacked really hard when the utilization is above 30%.

I don't have an explanation for why all this happened......but using your CC isn't gonna drop your score 30 points "within 2 days, max".

Quite honestly, I don't even believe the CC companies report anything beyond once a month.....so that just doesn't sound realistic. And sometimes it takes over 2 days just for the credit card charge to hit the account.

I feel like we're missing part of the story here (not saying you're doing that intentionally, just saying info is likely missing).

It may have been closer to a week. I use Credit Karma and check it routinely to see how my score fluctuates and try to find the cause for it.

 

[zatsnzapps]

I assume at this point he's past that having paid regularly on cards.

Yeah, I added to my post above after I initially submitted it.

I agree with your overall points as well, but I might suggest fewer cards than 5-8 to start. I have 4 that I use and that seems to still be a decent number for the bureaus.

 

[DaveXA]

Well, It's funny that while I was deep in debt, so deep that I wasn't able to accumulate more until I paid off the current debt, my score was like 705 or so. I never missed any payments either. But when I finished paying everything off, my score went down about 70 points overnight. It was because I didn't have any open debt. I got rid of a CC, kept one. I have no debt right now, only monthly bills. My score climbs slowly. The minute I used my CC, within two days max, it drops another 30 points. Doesn't matter that I'll pay it off by the due date because my score won't jump 30 points overnite, it will slowly climb back to where it was over months. What am I supposed to think? They don't want to help your score, but they sure as hell don't mind hurting it.

Closing accounts and less available credit will hurt your score. You're better off leaving credit cards open or even ask for an increase in your credit limit. You'll be using a smaller percentage of your available credit. Part of the equation is percentage of your available credit you are using.

Also, you may want to consider getting a full credit report from the big 3. I've found an unauthorized credit card was opened in my name and it was in another state and the card was fraudulently charged. It hurt my credit and it took some time getting it sorted out. Worth checking.

 

[Tapxe]

I might suggest fewer cards than 5-8 to start

I probably would. I used that number because that's what credit karma says it considered normal. I have less tho and 1/2 of them are locked at any given time.

I'll also stress, add the cards slowly. Adding more than 1 every year or so will hurt more than help. So he'll have time to decide when to stop.

 

[zatsnzapps]

It may have been closer to a week. I use Credit Karma and check it routinely to see how my score fluctuates and try to find the cause for it.

Credit Karma is pretty good for what it is, but it sounds like you need to go to the source(s). If you aren't aware, you are entitled to one free credit report per credit bureau per year. Take advantage of that and be sure to get the report from all 3 bureaus individually (ignore any ads or whatnot that want to charge you a fee for it - it's totally free). Go to Annual Credit Report's website and you can order them there from each of the bureaus.

Review each of them very carefully and look for errors and you should be able to see any negative remarks that are hurting your score. One bit of advice, if (when) you find errors, don't challenge them on their websites. Handwrite letters and send them to the credit bureau via registered mail. They have 30 days to respond, and if they don't, they have to remove the negative information. There should be many examples on the Googles about the format of the letters.

 

[Sailorsaint]

All good advice, thanks!

 

[DaveXA]

Credit Karma is pretty good for what it is, but it sounds like you need to go to the source(s). If you aren't aware, you are entitled to one free credit report per credit bureau per year. Take advantage of that and be sure to get the report from all 3 bureaus individually (ignore any ads or whatnot that want to charge you a fee for it - it's totally free). Go to Annual Credit Report's website and you can order them there from each of the bureaus.

Review each of them very carefully and look for errors and you should be able to see any negative remarks that are hurting your score. One bit of advice, if (when) you find errors, don't challenge them on their websites. Handwrite letters and send them to the credit bureau via registered mail. They have 30 days to respond, and if they don't, they have to remove the negative information. There should be many examples on the Googles about the format of the letters.

Yeah, I tried the website route, and it's useless. The letter writing is the way to go. Document everything and it should work.

 

[Icon]

It could. If he has 2 cards. Say 1k limit on each. 100$ debt on 2K credit is 5% while 100$ debt on 1K credit is 10% utilization. Big change in the calculation for score.

But again, have the CC companies even had time to report that info to Credit Karma, etc? Doubtful.

Putting 100 on a credit card (or 100 apiece on 2 credit cards) in and of itself isn't what's going to affect your credit. Not paying it when it comes due certainly could.....and even then, a 30 point drop sounds excessive. Again, I think we're missing some key points in that story.

 

[Tapxe]

Credit Karma is pretty good for what it is, but it sounds like you need to go to the source(s). If you aren't aware, you are entitled to one free credit report per credit bureau per year. Take advantage of that and be sure to get the report from all 3 bureaus individually (ignore any ads or whatnot that want to charge you a fee for it - it's totally free). Go to Annual Credit Report's website and you can order them there from each of the bureaus.

Review each of them very carefully and look for errors and you should be able to see any negative remarks that are hurting your score. One bit of advice, if (when) you find errors, don't challenge them on their websites. Handwrite letters and send them to the credit bureau via registered mail. They have 30 days to respond, and if they don't, they have to remove the negative information. There should be many examples on the Googles about the format of the letters.

I'd add, that you can also stop your credit from being abused by sending a fraud alert letter to the agencies. Pretty sure it's all online and easy to do now compared to when my mail was stolen and I had to do it all by post. Basically, you alert the credit agencies that you don't want any new credit without them checking with you. You get a pin or they can ask you questions but anyone running a credit check won't get scores unless the agency verifies your info to approve.

 

[zatsnzapps]

Yeah, I tried the website route, and it's useless. The letter writing is the way to go. Document everything and it should work.

For clarification, the useless website is for the challenges and not about ordering the credit reports online.

But, seriously, you're completely right - not to mention, the website makes it easier for them to automate the check vs. having to actually have a human do something. In other words, it makes it easier and faster for them, and that is not our goal.

 

[Tapxe]

But again, have the CC companies even had time to report that info to Credit Karma, etc? Doubtful.

Putting 100 on a credit card (or 100 apiece on 2 credit cards) in and of itself isn't what's going to affect your credit. Not paying it when it comes due certainly could.....and even then, a 30 point drop sounds excessive. Again, I think we're missing some key points in that story.

Depends one when in the cycle it is. They run those reports as you say on a schedule. I've had purchases never show because I paid them off before that and I've had them stuck for a month because it landed right before they ran the report.

 

[DaveXA]

But again, have the CC companies even had time to report that info to Credit Karma, etc? Doubtful.

Putting 100 on a credit card (or 100 apiece on 2 credit cards) in and of itself isn't what's going to affect your credit. Not paying it when it comes due certainly could.....and even then, a 30 point drop sounds excessive. Again, I think we're missing some key points in that story.

The CC companies do report your monthly balance at least once a month. I believe that's automated. When I check the reports or current scores, it typically has the most recent statement balance. So it's possible that a charge you made a week before shows up on a report if a statement end date happened the same week.

 

[zatsnzapps]

I'd add, that you can also stop your credit from being abused by sending a fraud alert letter to the agencies. Pretty sure it's all online and easy to do now compared to when my mail was stolen and I had to do it all by post. Basically, you alert the credit agencies that you don't want any new credit without them checking with you. You get a pin or they can ask you questions but anyone running a credit check won't get scores unless the agency verifies your info to approve.

Yeah, I looked into it a while back, and it's called freezing your credit. There used to be a charge for it, but it looks like it's now a free service, but you do have to contact each bureau individually. Just have to remember to unfreeze it before applying for a credit card or loan.

[ETA] - I went through and froze my credit tonight with all three bureaus. Took maybe 5-10 minutes total for all of them combined. Easy Peasy.

How to Freeze Your Credit - NerdWallet

Learn how to freeze and unfreeze your credit at the three major credit bureaus to help prevent identity theft and fraud.

www.nerdwallet.com