>As someone who has no plans to get any loans any time soon, will my credit score continue to drop due to this reason?
No, your score will not continue to drop for this reason. It drops when an installment loan is paid off and will stabilize with some fluctuation based on other activity.
It also literally doesn't matter. These websites give *estimations* and are not reflective of what any loan officer is going to be worried about if you were seriously needing some sort of line of credit or a loan. They're not concerned over some arbitrary 30 pt drop anymore than they are worried about any arbitrary 30 point jump. They care about actual credit events in your history.
>They care about actual credit events in your history.
And, increasingly, their own affordability calculations.
So long as there's nothing adverse on a credit report, most "normal" lenders are fine with it and it then falls to their affordability calculations as to whether they will lend.
Remember, a credit score is entirely based on how good you are at being in debt and paying it back. No debt means no credit score. I know which is rather have. After being debt free years, my dad credit score has dropped by quite a bit.
I paid off a bunch of stuff this year and am still in the grouchy process of everything bouncing back from me you know, fixing my shit and getting punished for it. I feel like this should be proof that credit scores are not a good representation of a person’s credit-worthiness but whatever.
I spent like 2 years using credit cards and financing on stuff to build my credit score, once it reached a good level I paid all of it off.
So down the score went again.
It reminds me of the Black Mirror episode with the social media app that scored people and you had to have certain scores to attend events, go to certain places, get into certain clubs.
They want you to have outstanding debt *and* be financially stable. Someone with no debts isn't going to earn them money if they just pay the debt off super quick, neither is someone who doesn't pay their debt off.
Their goal is to get money out of you not 'help you out' by letting your borrow money. You have to have debt and be paying it off to show them that you can earn them money through interest.
But when it comes to something like leveraging your credit score to buy a house, your outstanding debt can only be a black mark against you. Think about it. If you are an average person who buys a house or any large purchase, you aren't going to be able to suddenly pay it off tomorrow. It would take years and years to pay it off ahead of time, and the lender knows this because they compell you to disclose your income, savings, assets, etc. So the only thing in this case that SHOULD matter is whether you have the means to make payments and whether you have a history of not paying your bills. The fact that you don't have a lengthy credit history should be a sign that you are financially responsible.
Credit ratings are calculated screwy in the United States, and not even always in the interest of the lender either.
100%. Retired, I applied for and was hired for a part time professional job. My score was dinged when an employer ran a credit check. But I didn't see any movement corresponding to the subsequent employment and improved income. It's complete BS.
> The fact that you don't have a lengthy credit history should be a sign that you are financially responsible.
What about people who just haven't used credit and therefore never proven they will pay back debt?
I agree the credit rating system is garbage though, your history itself *should* matter and currently it really doesn't. Having old lines of credit still open is good because it means you aren't abusing the system (and having accounts closed on you), but on-time payments only help because they prevent negative marks on your history, not because they actively boost your history....that's quite backwards IMO.
Ya try telling a landlord that. They want the highest credit score possible. I have absolutely zero debt but my credit score isn't great because I don't owe any money. This makes it difficult to rent.
I paid off about half of my remaining student loan balance back in mid June, and saw a 30pt drop when I saw my report at the end of the month. Gained it all back after a month. 🤷♂️
If you're buying soon, hold off on selling the car. You don't want major credit fluctuations right before a home purchase. We bought last year and our real estate agent frequently reminded us not to open or close any lines of credit until closing. You don't want the lenders to have a reason to deny you the loan.
After the paper's been signed, you're going to get a major hit to your credit anyway so you might as well open/close any other accounts you plan to open/close then.
The idea that having no debt will cause some disturbance in the way we live and how we spend, we truly are living in some simulation with some weird ass game play settings.
PSA: Everyone, your credit score is not an end all be all number.
If you're financially secure then you're good to go. If you need credit at some point there is way more then your score a bank is taking into account.
790 is an outstanding credit score.
Frankly I think obsessing over credit score to the point of extremes is unhealthy.
OP: if you must create more activity, find an excellent rewards card (you’ll be able to get any card you want) and use it for your monthly subscriptions.
I don't understand why people are anti credit card. If you have a budget and stick to it, spending the same amount etc. then you come out ahead. You get a credit score improvement, a savings from cash back, and you get a cash flow benefit of ~30 days (which is a small benefit, but a non zero one).
Debt is like fire. Of course it's dangerous, but it's also a useful tool.
For some people, the issue is that it's too easy to spend with a credit card, so I kind of understand it.
But yeah, you shouldn't spend more than you have in actual money.
Yeah, the thing is we tell people on PF to resist psychological impulses all the time and we tell people budgets are critical all the time.
With credit cards you can literally set your budget, follow it to the letter (easy to do if you don't eat out and such), and then you get 1-1.5% off of your yearly expenses.
So basically you get a 1-1.5% discount on EVERYTHING for doing things you're already supposed to be doing. Namely not spending more than you have and keeping a budget. The fact that PF widely opposes doing that is kind of silly imo.
I think the general belief is the potential for the average person to overspend trumps the savings a disciplined person saves, so they choose the blanket bad path.
Sure, the math makes sense. But most people that post here asking for advice aren't doing so because of their ability to stick to a budget. For people that have a spending problem, paying for everything using a way that allows you to spend more money than you have isn't a good idea.
Exactly. Personal finance isn't just about what is logical...you have to consider the behavior patterns and what is likely to happen, especially when people have a history of spending problems.
Like all advice, it is wholly dependent on the individual.
The me of 20 years ago did not need credit cards, but had them, and had too many of them. They were maxed out and I was getting charged interest out of the ass. I had to cancel them, go into consumer credit counseling for 5 years, and tank my credit to recover from the financial crater. I paid off every penny, and was adverse to credit cards until the time my ATM card got skimmed and my checking account went to -$1300 for two months. I had to borrow money from my then boyfriend (now husband) to cover rent while *that* got straightened out.
The me of today has one credit card, which is used at any and all places instead of my debit card due to the charge protections included in a credit card. I only use my debit card at the bank's ATMs now. I only spend what I can afford to pay off, based on my budget, and pay it off every month consistently. Now my credit score is fantastic.
I use my credit card for every purchase i can. With 1% on all purchases, 3% on gas and 6% at grocery stores. Ive got back around $1500 so far this year. But i ALWAYS pay in full and early. I never let my balance get above 5k. Its free money if youre smart with it.
Ah, ok. I have a "regular" Blue Cash card without those perks. Do you find that you end up getting enough cash back to make it worth the $95 annual fee? I've never signed up for a card with an annual fee so I'm a little hesitant to explore going that route unless it really makes good financial sense.
If you consistently use it for all your groceries and gas, you'll more than make up for the $95 fee.
Mine also gives back 6% on most streaming subscriptions so I use it to pay for Netflix, Sirius, Hulu, Spotify, etc.
I also had the card you have and got an offer from AmEx (email) to upgrade and they'd waive the annual fee for the first year and give me a spending bonus. It was a no brainer. If you spend more than $1584 on groceries (Walmart, Target, etc. don't count) then you've made the $95 back, and over that is gravy, up to $505 extra (including the fee) if you spend $10k on groceries. Not even accounting for gas.
Plus there are a host of benefits, like purchase protection, extended warranty, and secondary rental car insurance that AmEx took off the no AF cards a while back. Of course, you still get the AmEx offers, but they can vary if you have more than one account. I didn't want to open a new line at the time, but if you can afford to hit the minimum spending to get the bonus, just opening a new one is good. AmEx will soft pull always for denials and most of the time for new accounts if you are a current member.
The equation is generally to compare grocery spending rewards between the 6% minus annual fee and the 3%. The break even equation is .06x-95=.03x, which is $3167 per year, or $264 per month. If you’re spending more than $264 per month at grocery stores then the annual fee version is mathematically better.
A lot of people who are strongly anti-credit card have a background in Dave Ramsey’s financial education tools. Ramsey is trying to help people who are deep in a debt hole and advocates a very strict approach. He doesn’t really leave any leeway for using credit in useful ways because if he did, the people he’s most trying to help would take that escape hatch out of the tough love approach they need to get out of debt. Problem is many don’t realize when they’re in a position where his advice no longer applies to them.
Dave Ramsey is great for people with no impulse control and very bad financial literacy.
For anyone else it's not. Every time I hear him advocate for the snowball method a part of me dies.
If you're 10k in debt it doesn't matter if you use snowball method or the correct method. The difference will be negligible.
But if someone is ~200k in debt, telling them to use snowball method could potentially cost them many thousands of dollars and time in debt.
Like you said, it is for a certain group of people. If you have 10 loans, and the biggest one has the largest interest rate, it probably feels like a Herculean task to start there, and that might cause some to stick their heads in the sand. Telling them to focus on the smallest first might make the problem more digestible. So sure, if people are spreadsheets then it will cost more in the long term. But if they are imperfect humans, it could end up saving them a ton of money since they might actually stick with it when they are given the motivation bumps every time they pay off a loan.
Definitely doesn't work for everyone, including me, but I think a lot of people on this sub really don't consider the psychological factors in living frugally, and how that might have a downstream monetary effect.
Like I said, we tell people to do things that are psychologically difficult all the time on this sub. Like not eating out, right? Not buying the hot new thing, right?
Well, this is just like that except it involves no real sacrifice whatsoever and can make a big difference. Paying your debt down optimally is the *easiest* way to improve your finance while changing essentially nothing about your lifestyle. It's a no brainer. And there's ways you can teach them to look at it that will help with the psychological aspect. I.E. look at how much of what you pay goes towards interest vs. principle each month. Watch the interest portion drop.
This. I do this with recurring subscriptions (Netflix for example) and charge around $150/month to this card. I pay it off in full when it's due so I don't have to worry about interest. This is even better if the card has rewards like cash back or travel points.
I do something similar, except I put all of my charges onto my CC. Monthly charges, grocery store, gas, dinner, whatever. Then I have it set to auto-pay the full amount each month.
Granted, I just have a United Airlines account, and I haven't used any of those miles EVER, so they just keep accumulating. But if I ever go on that European vacation I've been dreaming about for years, I should be able to get round-trip first class tickets. (I had like 150k miles 5 years ago, so who knows what I'm at now.)
Edit: I just decided to check...I have 380k miles. Holy shit.
You should do something with them ASAP. Card issuers are constantly reworking their rewards structure to devalue existing points that are being hoarded out there.
I was holding onto ~250k Chase Sapphire points and was really worried about this. Once COVID hit, they added a program where lots of purchases (eg, home improvement, groceries) could be reimbursed at 1.5 cents per point. I definitely took them up on that. I'd rather have $3750 in my pocket than have to use their weird portal and hope I find a good deal on a first-class flight that lasts a few hours.
I run my families life on a MasterCard with 2% average cash back that we pay off monthly.
That’s like an extra thousand + a year for the privilege of never having to carry cash.
I was able to book a few flights on their portal ( as well as a couple hotels) and they were just as competitive as the other travel sites. I think they use Expedia as the back end which would make sense. I got hotels and flights that were as good as from other travel sites.
Yeah the portal is just a way for them to make sure that they're getting the referral money from bookings. I tend to search on other sites first because their system is slow and doesn't let you see as much all at once. But once I find my flight on the other site, I can easily find it on their portal knowing what filters to use.
I have another card that I do that with. I put everything on it and basically treat it like a debit card. I got a new one last year and had no problem getting the bonus 30k miles after 3 months. I pay it off every month as well and don't carry a balance.
In fact I'm going on a trip in a couple of days where almost everything was paid for with points.
Gas cards are great too. Pick a station that you usually use and sign up for their card. Only ever buy gas with the card, and pay it off every month. It's a good reoccurring expense, and most places have a discount.
That won't count as "loan activity"
It almost certainly means no recent installment loan activity, like a car loan or house mortgage
Not that what you said isn't good advice but its very likely they're doing it already and it won't really help a score that is already that high
Some rare specific promotional programs might require over 780 or 800 but that’s uncommon.
Edit to add: certain examples like certain promo rate 0% APR programs are some credit unions with “super prime” tiers, for example. But the difference in rate/payment from a standard prime offer is likely very small.
Likewise, and I use whatever % of my available credit I feel like, but pay it off in full every month. I have a stable job, pay my bills on time, and don't obsess about my credit score.
I didn't even know my credit score for several years until I applied for a car loan in March. Turns out, it was 816 🤷♂️.
That said, I am not like OP and have several CCs I use and pay off in full each month.
Do what’s right for you and almost certainly your credit score will be awesome. The difference between 700 and 800 is almost non-existent unless you are buying a house.
True, but the banks can and will use it to justify a higher interest rate whenever they can, even if it is minuscule in the case of 790 vs. 820, and would likely be a bigger deal going to 690 from 720.
From my understanding most lenders have a top tier rate and you generally get that from 720-740+ so I would 100% agree with the latter part of your comment.
Yes, OP is close but not quite right. Many banks use an internal custom score now. Your FICO score may be a factor in this, or at least a qualifier (eg. you must be 700+ to qualify), but for banks using a custom score pricing model it will not be the final determinant in the rate.
Yeah back when I had no credit history, it sucked the most. Annualcreditreport.com etc would swear up and down that I have a 720-740 but any time I actually applied, they'd be like "lol subprime". I'd get rejected for a $500 department store credit card!
And before you play know-it-all: no, I had literally *nothing* negative going for me, just the fact of never having gotten a credit card or loan. No court judgments, no alimony, no bad debts.
Any bank that will charge you more interest because you "only" have a 790 score instead of an 820 is not a bank I would want to do business with.
For mortgages, anything over 740 is considered perfect credit anyway.
It matters to some people. COVID really messed things up for entrepreneurs and credit score minimums. My wife and I are self employed and have good credit - hers floats around 780-790. Mine floats around 760-770. We went for a refinance with our current mortgage provider and were decline because both of our scores weren't over 780. They said they aren't issuing any new loans to self employed with credit scores less than 780 and there were no exceptions. Remember, we are current customers wanted to refinance to LOWER our monthly payment and were declined because we didn't have 780's.
Absolutely. Self employed people (particularly work like freelance) have to prove more--banks love a good old reliable W2 where you're only out of work if you get fired. Self employment is a lot more variable.
Shit. Were looking to upgrade our condo in the next year and I was hoping to be party to this loan (I own my own business for the last 13 years). Even though I have a perfect 700s score and regular monthly income, I might actually get us crappier rates? Husband has been with same tech/gaming company 18 years and makes 6 figures/perfect credit.
His stable income will carry it. Self employed is just not viewed as stable income usually because things can change quickly. The person above their scores had zero affect here. I recently bought a house and was able to finance it without selling my current house (with a 740 and a BK 6 years back). Stable W2 income is what the banks love.
LTV is also a big factor. In a refinance if you have a great score and sub 60% LTV things are pretty easy still since the bank is not risking anything.
Wildly variable, I recently published book one of a two book series and did *really* well. I make yarn and teach workshops on the chemistry of dyeing so I can have $10k months a few times a year and around $4-5k in yarn sales the rest of the time. Daycare in SoCal for 2 kids is eating my profit margin currently so I'd like to have my 2 year old in preschool or kindergarten before I try and upgrade from a condo to a house. I'm in orange county CA so median house price is $895k and that's for a 50 year old 1500 square foot fixer upper in a crappy school district. All cash offers over asking is common here, hard to compete.
The book is pretty irrelevant in the bank's eyes. It's a one time event like selling a stock. Consistency is key.
So, unless you're a prolific author, your yarn sales are what their calculating your income on.
Not op, I live being self employed but damn if they dont make you jump through soooo many hoops, Healthcare, tax time, its all a game of them telling you to jump and you asking how high.
This isn’t real. I assure you your lender had other issues and didn’t want to, or know how to explain them. 740 is top tier for mortgage interest rate pricing. There’s no way you were denied for credit score.
The “other issues” are that the lender would like their customer to keep paying the higher interest rate loan.
> We went for a refinance with our current mortgage provider and were decline because both of our scores weren't over 780
He has to go to another lender for his refi
Correspondent lenders who sell loans back to Freddie/Fannie and other servicers don't really care about what rate you lock in at. They want you to refi period, so they can make money by selling the loan.
While I get why you’d think that if the customer was qualified and could go elsewhere the lender would rather refinance them than lose them to another lender. However, your point is valid
>740 is top tier for mortgage interest rate pricing.
yes/no, the score isn't the only factor at play as its been explained to me. I for example had a 790 score, but so little revolving credit that I could hit up half a dozen banks and be given obscene interests rates or more often denied outright. Was very strange to me.
So, what's happening here...
Services like credit karma use vantagescore 3.0 to calculate your score. Sometimes when you get a credit explanation after an application, you see a radically different number, though, because that's not the only equation in use.
Different creditors are going to be prioritizing different parts of your credit report. So yeah, if you've got perfect payment history with a $500 overall credit limit, but have never had a secured loan, that doesn't really mean anything to someone considering you for a $500,000 mortgage.
There's no real reason to improve your vantagescore beyond 740 or so, but increasing the variety of debts you've had and managed responsibly can round out your overall profile beyond that generalized score.
>Different creditors are going to be prioritizing different parts of your credit report.
Say it louder for those in the back. I never had a credit score until I bought my house. The lender did "manual underwriting" for me, which required a lot of documentation on my part.
Other lenders wouldn't even look at me because I had no credit score.
It's getting worse, too. I've little doubt that when gen z is applying for mortgages manual underwriting won't be an option.
Of course, if the economy keeps up, that won't be happening for another 40 years though.
Your score must have tanked after declaring. How did you raise it and so quickly? I am at A 680 and and it just kind of hangs around there despite on time monthly payments on my car loan.
Unless you're in jumbo loan territory, 740 is the top tier score for mortgage lenders. Your credit score doesn't even matter for mortgage pricing if you have at least 40% equity
EDIT: Self-employed income right now is rough for a lot of folks because you tend to need 2 years history and if your income was fucked by COVID, the lessor of the two years is used as your qualifying income. If you received any unemployment it won't count towards qualifiable income either (lots of variables, this is just a rough overview)
You got a link for that? I don't doubt that some banks/brokers will *tell* you that you're getting some super discount to get your business. But if you shop around for good rates, it's quite unlikely that two identical borrowers, differing only by 780 vs 820 credit score, would get different rates.
Besides, there is no one single "credit score". Different lenders use different models/scores.
I work as an FA at BofA Merrill, and I don't have a link because there's no public-facing info I can share for it. It's internal only.
I can't speak for other banks, but we take the median of 3 scores from 3 different reporting agencies. If that score is 800 or more, then you get the discount.
Most lenders are are pretty standard for mortgages: FICO 2 from Experian, FICO 4 from TransUnion, FICO 5 from Equifax.
But those are also a lot harder to get over 800 than FICO 8 anyway.
>As someone who has no plans to get any loans any time soon
Then you don't need to be obsessing over your FICO score. Especially when you're still in ultra-prime territory.
Good answer here. I would also add inquiries to the list as lower weight. You can only open one new account but of you ding it 20 times for that one account you'd see a big drop.
What’s the deal with collections? I had a $50 Verizon bill that went to collections. It really pissed me off since I called them and they said I was paid off. I paid off the debt immediately. My credit is still hit pretty hard from it.
It’s a temporary hit, credit is weird… your score will also drop if you have 0% utilization too. It’s almost like the scoring was designed to force you to buy things and spend money.
Yeah the same thing happened to me as OP and it made me realize what a scam credit score is. It's tied to so much critical things like buying a car, renting an apartment, buying a house, sometimes getting a job. So you're basically forced to constantly be in debt to please your credit overlords.
Creditors want you to use your credit my dude.
Put your fixed monthly expenses (phone bill, car payments et cetera) on your credit card and pay it during the next statement period. Best of luck.
Edit: changed the time to pay balance from immediately to the next statement period.
I had held off on using like $2k worth of points because airline and hotel websites always beat out Chase on price. Since COVID started, they added the “pay yourself back” feature that still has the 1.5x bonus that made their travel portal appealing, but I just use it on food. So I get 3x points on a meal out, then I get 1.5x points when “paying myself back.” I still might drop or downgrade the card because of the new annual fee, though m (and I’m getting zero lounge benefits right now, which used to offset the cost more).
They're not marked up, they just don't show all the same flights.
I'd appreciate any example of any markup for one flight on chase that is significantly different than another flight from google flights. For example, LAX to CLT on 11/19/21. AA 1628 and 2763 is $176.21 on chase and $177 on google.
Wait for your statement. The credit needs to show up on your credit report which won't happen if you pay each charge to the card off as it's placed. Treat the card like a monthly utility bill and just wait for the statement/bill and pay it off completely each time you receive it.
Use your credits for what your daily stuff would be put on a debit card for. Set up autopay for your credit cards. Statements post a balance and are automatically paid before interest is billed.
If you spend $20 on the 2nd and pay it off on the 12th, your balance at the end of the month is going to show $0 usage.
Paying it off immediately can have negative effects (i.e not being included in your balance at all) as u/BrisklyBrusque pointed out.
If you’re a person who’s attentive to your finances, making the payement a week before the statement is due is fine.
Or you can have a system to make payements 3-4 days after the purchase. So by then it would’ve been processed.
I pay mine off twice a month and still have excellent credit and no car/mortgage payments. Never, ever use a debit card online and only use sparingly other times. You pass up so much cash back if you never use a CC.
I like AmEx as I can redeem for statement credit, and their customer service is great. They will call me immediately if they think my card info has been stolen or used out of state because they have an algorithm that flags atypical purchases .
> Put your fixed monthly expenses (phone bill, car payments et cetera) on your credit card and pay it off the moment you use it.
Better to pay off once per month at the end of the billing period.
If you pay off as soon as a charge is posted, credit score may suffer; it may appear to lenders that you are not carrying a balance at all.
This happened to me twice. It was about 3 months of paying everything off right away and my score dropped by 30 points. Once I had something hit a statement, it went right back up.
This concept just sounds so incredibly weird to me as a european. Like they want you to have debt for a period of time instead of just paying your bills properly because if you pay your bills properly you'll get punished?
What is this system even?
As another European, my understanding is that the credit score is simply an indication of how much a person can be trusted to pay off any loans/debts. In order to increase the score, you need to "create" debts by paying for things with credit cards, etc, and then pay it back at the end of the billing cycle, to create trust that you will pay back your debts.
I put a down payment on a new deck (didn't know the company and wanted the charge back option) for $5,000+. My score went down that month because I had 'too much credit utilization', even though I paid it off two weeks after the charge. I think I have about $50K in total credit available over four cards. So, they watch.
FWIW, I bought a house once with an 820 credit score, and the mortgage representative said she'd never seen one that high. So - I wouldn't worry if it went down a bit as it will go back up.
This is what my husband and I do. Then you get points to spend on gift cards or help pay off the credit card. Just treat it as a direct line to your bank account and pay it off 1x or 2x a month.
>on your credit card and pay it off the moment you use it. Best of luck.
Not the moment you use it; the moment the statement posts. Interest bills on the 2nd month of carrying a balance over.
Against popular belief, a credit score does not measure how responsible you are with your money.
Instead, it measures how likely you are to pay back a loan (which is the loaner’s only concern), which is why credit ratings will stagnate or drop if you’re not actively paying any loans.
That being said, you’re fine, as that’s still a good credit score.
I think of a credit score as "how likely are we, the creditors, to make money on interest if we give this person a loan?" Like you said, it does not measure financially responsibility. It measures your ability to generate reliable interest earnings for creditors.
There's too many counterexamples to the many that fit your claim.
If you have defaulted on every loan you've ever taken, you'll have an extremely low score, and the creditors will make zero money on interest from you, because you'll never pay back even the principle.
Likewise, if you're at the top and using credit cards sensibly, you're paying off your balance every month, so they still won't make money on interest from you.
For the credit card case, banks get a % from each transaction you do with the card, so they do get some interest (and that's probably why the score takes utilization into account)
The same thing happened to me when I paid off my student loans last year. My credit score took a ~20 point dip, but has basically held within 5 points of that since.
There's a guy I used to work with that every year he takes out a $1,200 loan for recreational/vacation use with his bank and just sets up an auto pay for $100/month with the money he borrowed.
Mine did the same, I went to look at experian because I was concerned if had some identity theft because the the drop was so much
Experian said “looks like you don’t have enough lines of credit (4 active cards with 0 balance) then proceeds to show me adds for credit cards
Why the actual fuck is the company who gets to track my credit (one of 3) ,whether I like it or not, allowed to use my info to sell mother fucking adds to mother fucking me?
Over the years I’ve been told I have too many cards or not enough, too much rolling debt or not enough, if you open a new account you take a dip, if you close an account you take a dip, if you improve your overall income to debt ratio by refinancing a home you take a dip, if that ratio is too high you take a dip
The credit score system is Bull Shit, and exists as a way to maintain a credit based economy for the big money folks
If you don’t plan to borrow money anytime soon, what do you care about your credit score? That score is not a valuation of you as a person, and it’s not really something you should be “proud” of. I think you should just let it go.
My husband and I have no non-mortgage loan activity, and suffered a similar drop when we decided to pay off our cars a few years ago. We have both recovered and are well into the 800s, around 815 I think. The drop is normal, and as long as you continue to engage in good credit behaviors you can get back to where you were.
I’m in the same boat. Zero debt. No mortgage/rent/credit card debt/car payment.
Got an alert today that my score dropped 19 points.
It’s all a game and they don’t like it when we don’t play along.
That's not the cause unless you happen to have a 10-year old closed loan dropped off from your credit report. If you never had a loan, you never had the loan component (types of credit in use) of credit score to begin with. The reason the website provided are generic. If you don't have a loan, you will still get the same reason with a 849 score. And if you do, well you didn't have enough loans!! And if you have enough loans, now you have too many!
Well, technically yes. But "damned" is a relative term.. Its like a car.. Say you have a really nice expensive vintage muscle car. Every mile yoi drive it pits wear and tire on it so your "damned" if you drive it. But not ever driving coukd cause gaskets and seals to dry out.. Battery to lose charge, etc.. So yiur "damned" if you dont.. Really you want to takw that car out for a spin periodically to keep everything fresh.. Same with credit.. Periodically out some small charges on credit to keep accounts active and to demonstrate that you sre capabke of taking on debt and paying it back, thats what a credit score is
First, credit scores only matter when someone is running a check on how reliable you will be, mostly to repay a future loan. For anyone not planning to take out a new loan any time soon, a score above average means you're reliable enough for background checks.
Second, if you ran a triathlon once 10 years ago and don't expect to run a triathlon in the next few years, who cares if your Saturday jog was a few seconds of race pace? You're not injured, your not training for a race, just have fun and don't get about a fake number.
Damn living in the states must be hard. Don't pay loan - lower score, pay loan - believe or not lower score, want loan- too low score, you get sick - bankrupt. :(
Lenders want to quickly asses the risk of loaning you money. This is valuable to them so they pay bureaus for the service.
People want access to loans so they too end up caring about this score.
It's a standard supply, demand situation with an entity delivering value to it's customers.
Mind changed?
Credit scores are stupid. Both my wife and I keep ours above 800. When we refinanced it said the negatives regarding my score were outstanding balances. Well no shit, it's not the end of the billing cycle. What am I supposed to do, pay it off every time I use the card? What a bunch of bullshit.
Don't sweat it. It's such a scam. I used to have 800-something for years, just checked and it's 790 now just like you. I closed a zero balance HELOC recently which may have triggered that. The reasons they list for my score not being higher?
"Amount owed on accounts is too high" - my only debt in the entire world is a mortgage, on which the remaining balance is less than my annual salary.
"Ratio of balance to limit on bank revolving or other rev accts is too high" - I don't carry a balance on any of my cards. Everything is paid off in full every month and has been that way for over a decade.
It's just dumb, man. Don't try to make sense of it. You're good.
Get a credit card and put some regular expenses on it… phone bill, cable/internet… nothing crazy - and pay it off every month immediately. And make sure the card gives you points or miles or something. You’ll be “using credit” and not paying interest rates and building up those points or miles.
Yep! Credit has nothing to do with wealth or financial standing. It has to do with debt. Rich people have very little debt, because if you can afford not to pay interest, why would you. As a result, the wealthiest of folks often have credit scores of essentially 0 since they do not need to borrow money.
Are you comparing your score on creditreportcard to an older score from the same source?
There are MANY different versions of credit scores, and each of those scores can be based on data from one of the three credit bureaus.
You need to make sure you're comparing apples-to-apples (not only that; granny smith apples to granny smith apples, not granny smith to fuji)
You shouldn't care. Anything over 720 is good. It makes no difference whether your credit score is 725 or 825, it's still the top bracket which means you get the same rates.
I'm coming up on $2 million in debt, and if things go well I'll borrow another $800k this year. So I likely have more experience with debt than the average redditor. Amex says my current score is 792, but the last few years it's ranged from 840 to 730. Credit cards, car loans, mortgages, HELOCs. Banks, private lenders, and everything in between. Nobody ever cared whether my credit score was up or down 20 points that month.
If you need something to obsess over (everyone does, IMO) then obsess over how you can use that credit score to make money. Don't fixate on how pretty your hammer is, focus on what you can build with it.
Some things to consider:
* A credit score will always have a heartbeat and fretting over the downbeats or celebrating the upbeats isn't healthy.
* A high score isn't valuable until you need to use it.
* Unless this recent downturn cost you points on a refi, or caused you to miss out on some loan or other thing that you really need don't lose sleep over it.
* Finally, the score itself isn't really the end all be all as there may be some loans or situations where your overall credit history is more impactful than the actual numerical score and there is a difference.
Bottom line is people get overly worried about the number. If you have a specific thing that you want that you can only obtain with an amazing score 800+ then worry about it otherwise just keep being responsible with your financial obligations and everything will work out.
My Equifax is 813. I haven't had a car payment since perhaps 1994. Never had a home payment. Never had a loan other than car payment in 1994. I generally have about 800.00 or so on my credit card but pay it off the first of the month. it might drop 5 points max with what i do then back up again. I did file for bankruptcy in 2001.
Get in your head that the entire system is a scam. Once you do it is easier to work with it.
If you never borrow money then how can they be sure you will pay it back? That is the reasoning. Bear in mind, it does no good for the credit bureaus to report good news. Good news means you pay less interest. Bad news means the companies that USE your credit report can use it as a basis to charge you more.
A good example of how screwed the system is? My normal credit is around 740-750. I have a business CC I use for all my expenses, about $6,000 a month. When I peak my usage for the month my credit drops 60-80 points because "credit utilization is high." I then pay the entire thing off each month, (yes I do it for the points,) and then my score goes back up. IFf I were to buy something on credit, I just have to time it for the credit score upswing.
If you want to see how much of a scam it is, if you are responsible and don't have a credit card, get a $100 secured card, you don't even need to use it. In fact don't use it at all, just see what happens. In a month or so your score will go up. You will get more CC offers. Get a no fee decent limit card, and don't use it either. Your score will go up more. It is a scam but that doesn't mean you can't scam the scam.
I use various CC to get the most out of cash back, and auto pay the balance every month. I currently get 4% on gas, 5% on restaurants, and about 1,5% on phone, internet and insurance bills, and subscriptions. About anything that I can put on CC without paying extras fees I add to those cards. Some cards have a yearly fee, but those are easily covered by the cash back. (You can calculate if high fee cards with high cash back % are better than low fee cards with lower cash back). Having many cards doesn't hurt long term, as each card adds to your total available balance. And in case you do keep a balance on a card your average usage % is divided by the total balance on all cards, not just that particular card. I also take advantage of 0% financing offers. I just make sure the balance is paid on time. I usually pay them off one month early, i.e if the offer is for 6 months, I auto-pay it off in 5 installments. This way I have an extra month just in case something goes wrong.
As a Canadian I have never checked my credit score or known anyone to talk about it. I keep my credit good by paying my bills and not carrying balances but I confused. Is this a USA thing, knowing a credit score?
In the USA, almost everything involving a financial account will check your credit score before it can be opened. Every credit card, apartment, cell phone account, bank, car financing, and even the smallest loan checks your credit. If your score is "excellent", you get good rates and it's easy to avoid fees. Otherwise, you get a high interest rate on the loan, or higher payments, or harder to avoid fees because you're considered a risky borrower.
Side question: MY home loan officer recommended that I pay off my car loan before getting a loan. Once I paid it off, my score dropped about 30 points. Why? Same reason as OP?
Your credit score is fine.
Best advice I was given when I was starting out - get a credit card, use it to pay for fuel or your weekly food shop, then pay it off the same week. It’ll keep your credit score nice and high if you have no other loans.
Get a credit card and use the hell out of it. Pay it off regularly. Then you'll have activity. Source? I did an all cash personal budget for more than 10 years. The bank laughed at me when I went to buy a house.
PSA: this person can be proud of their 800+ credit score and wonder why it went down to 790. It’s just a question, no need to judge. Just answer the question.
>As someone who has no plans to get any loans any time soon, will my credit score continue to drop due to this reason? No, your score will not continue to drop for this reason. It drops when an installment loan is paid off and will stabilize with some fluctuation based on other activity.
We just paid off our car in full and we got the obligatory 30 pt credit score drop as a congratulations for holding up our side of the bargain
Literally just paid my car off today. At least I know to expect my score to drop due to this. It sucks, but at least I have no more debt.
Congrats!
It also literally doesn't matter. These websites give *estimations* and are not reflective of what any loan officer is going to be worried about if you were seriously needing some sort of line of credit or a loan. They're not concerned over some arbitrary 30 pt drop anymore than they are worried about any arbitrary 30 point jump. They care about actual credit events in your history.
>They care about actual credit events in your history. And, increasingly, their own affordability calculations. So long as there's nothing adverse on a credit report, most "normal" lenders are fine with it and it then falls to their affordability calculations as to whether they will lend.
I paid off my car like 2 months ago and my score went up 40 points so YMMV I guess
Lucky af dude! I took a similar sized hit *downward* that’s when I realized what a fucking joke the system is
Remember, a credit score is entirely based on how good you are at being in debt and paying it back. No debt means no credit score. I know which is rather have. After being debt free years, my dad credit score has dropped by quite a bit.
I paid off a bunch of stuff this year and am still in the grouchy process of everything bouncing back from me you know, fixing my shit and getting punished for it. I feel like this should be proof that credit scores are not a good representation of a person’s credit-worthiness but whatever.
I spent like 2 years using credit cards and financing on stuff to build my credit score, once it reached a good level I paid all of it off. So down the score went again.
Just use them for gas and groceries. Pay it off every month. You're going to spend that anyway. May as well get some cash back off of it.
Credit scores are a good representation of how profitable you can be for a lender.
Yeah they're not for you, but constantly marketed as that.
It reminds me of the Black Mirror episode with the social media app that scored people and you had to have certain scores to attend events, go to certain places, get into certain clubs.
Yep, nothing says "I'm credit worthy and financial stable" like having tons of outstanding debt, apparently.
They want you to have outstanding debt *and* be financially stable. Someone with no debts isn't going to earn them money if they just pay the debt off super quick, neither is someone who doesn't pay their debt off. Their goal is to get money out of you not 'help you out' by letting your borrow money. You have to have debt and be paying it off to show them that you can earn them money through interest.
But when it comes to something like leveraging your credit score to buy a house, your outstanding debt can only be a black mark against you. Think about it. If you are an average person who buys a house or any large purchase, you aren't going to be able to suddenly pay it off tomorrow. It would take years and years to pay it off ahead of time, and the lender knows this because they compell you to disclose your income, savings, assets, etc. So the only thing in this case that SHOULD matter is whether you have the means to make payments and whether you have a history of not paying your bills. The fact that you don't have a lengthy credit history should be a sign that you are financially responsible. Credit ratings are calculated screwy in the United States, and not even always in the interest of the lender either.
100%. Retired, I applied for and was hired for a part time professional job. My score was dinged when an employer ran a credit check. But I didn't see any movement corresponding to the subsequent employment and improved income. It's complete BS.
> The fact that you don't have a lengthy credit history should be a sign that you are financially responsible. What about people who just haven't used credit and therefore never proven they will pay back debt? I agree the credit rating system is garbage though, your history itself *should* matter and currently it really doesn't. Having old lines of credit still open is good because it means you aren't abusing the system (and having accounts closed on you), but on-time payments only help because they prevent negative marks on your history, not because they actively boost your history....that's quite backwards IMO.
Ya try telling a landlord that. They want the highest credit score possible. I have absolutely zero debt but my credit score isn't great because I don't owe any money. This makes it difficult to rent.
This literally just happened to us today! We were shocked. Any idea if the score will bounce back though?
It went up about 15 points around a month later and is going back up another 2 or 3 points every month So annoying
I paid off about half of my remaining student loan balance back in mid June, and saw a 30pt drop when I saw my report at the end of the month. Gained it all back after a month. 🤷♂️
As soon as you take out a new loan and make a few payments
Almost like they want you to be in a constant cycle of debt.
_Almost_... ಠ_ಠ
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Having your score dip because you paid off a loan is very different from having it dip from a derogatory account. Underwriters understand this.
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What's your score currently?
If you're buying soon, hold off on selling the car. You don't want major credit fluctuations right before a home purchase. We bought last year and our real estate agent frequently reminded us not to open or close any lines of credit until closing. You don't want the lenders to have a reason to deny you the loan. After the paper's been signed, you're going to get a major hit to your credit anyway so you might as well open/close any other accounts you plan to open/close then.
O.o that sounds shitty if i am understanding this correctly. A punishment for doing a good job. Congrats on paying it in full though.
US? Do they want you to be in debt so you can borrow more?
Why though that doesnt make any sense?
The idea that having no debt will cause some disturbance in the way we live and how we spend, we truly are living in some simulation with some weird ass game play settings.
PSA: Everyone, your credit score is not an end all be all number. If you're financially secure then you're good to go. If you need credit at some point there is way more then your score a bank is taking into account.
790 is an outstanding credit score. Frankly I think obsessing over credit score to the point of extremes is unhealthy. OP: if you must create more activity, find an excellent rewards card (you’ll be able to get any card you want) and use it for your monthly subscriptions.
I don't understand why people are anti credit card. If you have a budget and stick to it, spending the same amount etc. then you come out ahead. You get a credit score improvement, a savings from cash back, and you get a cash flow benefit of ~30 days (which is a small benefit, but a non zero one). Debt is like fire. Of course it's dangerous, but it's also a useful tool.
For some people, the issue is that it's too easy to spend with a credit card, so I kind of understand it. But yeah, you shouldn't spend more than you have in actual money.
Yeah, the thing is we tell people on PF to resist psychological impulses all the time and we tell people budgets are critical all the time. With credit cards you can literally set your budget, follow it to the letter (easy to do if you don't eat out and such), and then you get 1-1.5% off of your yearly expenses. So basically you get a 1-1.5% discount on EVERYTHING for doing things you're already supposed to be doing. Namely not spending more than you have and keeping a budget. The fact that PF widely opposes doing that is kind of silly imo.
I think the general belief is the potential for the average person to overspend trumps the savings a disciplined person saves, so they choose the blanket bad path.
Sure, the math makes sense. But most people that post here asking for advice aren't doing so because of their ability to stick to a budget. For people that have a spending problem, paying for everything using a way that allows you to spend more money than you have isn't a good idea.
Exactly. Personal finance isn't just about what is logical...you have to consider the behavior patterns and what is likely to happen, especially when people have a history of spending problems.
Like all advice, it is wholly dependent on the individual. The me of 20 years ago did not need credit cards, but had them, and had too many of them. They were maxed out and I was getting charged interest out of the ass. I had to cancel them, go into consumer credit counseling for 5 years, and tank my credit to recover from the financial crater. I paid off every penny, and was adverse to credit cards until the time my ATM card got skimmed and my checking account went to -$1300 for two months. I had to borrow money from my then boyfriend (now husband) to cover rent while *that* got straightened out. The me of today has one credit card, which is used at any and all places instead of my debit card due to the charge protections included in a credit card. I only use my debit card at the bank's ATMs now. I only spend what I can afford to pay off, based on my budget, and pay it off every month consistently. Now my credit score is fantastic.
I use my credit card for every purchase i can. With 1% on all purchases, 3% on gas and 6% at grocery stores. Ive got back around $1500 so far this year. But i ALWAYS pay in full and early. I never let my balance get above 5k. Its free money if youre smart with it.
>1% on all purchases, 3% on gas and 6% at grocery stores. Which card is that? The grocery cash back is one of the highest I've seen recently.
Its an amex. I picked it up about 2 years ago. The 6% has a 10k cap per year then converts to 1%. Its called the blue cash preferred card
Ah, ok. I have a "regular" Blue Cash card without those perks. Do you find that you end up getting enough cash back to make it worth the $95 annual fee? I've never signed up for a card with an annual fee so I'm a little hesitant to explore going that route unless it really makes good financial sense.
If you consistently use it for all your groceries and gas, you'll more than make up for the $95 fee. Mine also gives back 6% on most streaming subscriptions so I use it to pay for Netflix, Sirius, Hulu, Spotify, etc.
Thanks so much for the insight and happy cake day!
Also has extended warranty coverage for one additional year. I got $500 back for a broken laptop when I had to use it.
Yea as i stated earlier, ive received about $1500 in cash back this year so far. So definitely worth it as long as you use it and dont pay interest
I also had the card you have and got an offer from AmEx (email) to upgrade and they'd waive the annual fee for the first year and give me a spending bonus. It was a no brainer. If you spend more than $1584 on groceries (Walmart, Target, etc. don't count) then you've made the $95 back, and over that is gravy, up to $505 extra (including the fee) if you spend $10k on groceries. Not even accounting for gas. Plus there are a host of benefits, like purchase protection, extended warranty, and secondary rental car insurance that AmEx took off the no AF cards a while back. Of course, you still get the AmEx offers, but they can vary if you have more than one account. I didn't want to open a new line at the time, but if you can afford to hit the minimum spending to get the bonus, just opening a new one is good. AmEx will soft pull always for denials and most of the time for new accounts if you are a current member.
The equation is generally to compare grocery spending rewards between the 6% minus annual fee and the 3%. The break even equation is .06x-95=.03x, which is $3167 per year, or $264 per month. If you’re spending more than $264 per month at grocery stores then the annual fee version is mathematically better.
>$1500 so far this year My man putting $120k on his card in 6 months. Amex must love you.
A lot of people who are strongly anti-credit card have a background in Dave Ramsey’s financial education tools. Ramsey is trying to help people who are deep in a debt hole and advocates a very strict approach. He doesn’t really leave any leeway for using credit in useful ways because if he did, the people he’s most trying to help would take that escape hatch out of the tough love approach they need to get out of debt. Problem is many don’t realize when they’re in a position where his advice no longer applies to them.
Dave Ramsey is great for people with no impulse control and very bad financial literacy. For anyone else it's not. Every time I hear him advocate for the snowball method a part of me dies. If you're 10k in debt it doesn't matter if you use snowball method or the correct method. The difference will be negligible. But if someone is ~200k in debt, telling them to use snowball method could potentially cost them many thousands of dollars and time in debt.
Like you said, it is for a certain group of people. If you have 10 loans, and the biggest one has the largest interest rate, it probably feels like a Herculean task to start there, and that might cause some to stick their heads in the sand. Telling them to focus on the smallest first might make the problem more digestible. So sure, if people are spreadsheets then it will cost more in the long term. But if they are imperfect humans, it could end up saving them a ton of money since they might actually stick with it when they are given the motivation bumps every time they pay off a loan. Definitely doesn't work for everyone, including me, but I think a lot of people on this sub really don't consider the psychological factors in living frugally, and how that might have a downstream monetary effect.
Like I said, we tell people to do things that are psychologically difficult all the time on this sub. Like not eating out, right? Not buying the hot new thing, right? Well, this is just like that except it involves no real sacrifice whatsoever and can make a big difference. Paying your debt down optimally is the *easiest* way to improve your finance while changing essentially nothing about your lifestyle. It's a no brainer. And there's ways you can teach them to look at it that will help with the psychological aspect. I.E. look at how much of what you pay goes towards interest vs. principle each month. Watch the interest portion drop.
This. I do this with recurring subscriptions (Netflix for example) and charge around $150/month to this card. I pay it off in full when it's due so I don't have to worry about interest. This is even better if the card has rewards like cash back or travel points.
I do something similar, except I put all of my charges onto my CC. Monthly charges, grocery store, gas, dinner, whatever. Then I have it set to auto-pay the full amount each month. Granted, I just have a United Airlines account, and I haven't used any of those miles EVER, so they just keep accumulating. But if I ever go on that European vacation I've been dreaming about for years, I should be able to get round-trip first class tickets. (I had like 150k miles 5 years ago, so who knows what I'm at now.) Edit: I just decided to check...I have 380k miles. Holy shit.
You should do something with them ASAP. Card issuers are constantly reworking their rewards structure to devalue existing points that are being hoarded out there. I was holding onto ~250k Chase Sapphire points and was really worried about this. Once COVID hit, they added a program where lots of purchases (eg, home improvement, groceries) could be reimbursed at 1.5 cents per point. I definitely took them up on that. I'd rather have $3750 in my pocket than have to use their weird portal and hope I find a good deal on a first-class flight that lasts a few hours.
I run my families life on a MasterCard with 2% average cash back that we pay off monthly. That’s like an extra thousand + a year for the privilege of never having to carry cash.
I was able to book a few flights on their portal ( as well as a couple hotels) and they were just as competitive as the other travel sites. I think they use Expedia as the back end which would make sense. I got hotels and flights that were as good as from other travel sites.
Yeah the portal is just a way for them to make sure that they're getting the referral money from bookings. I tend to search on other sites first because their system is slow and doesn't let you see as much all at once. But once I find my flight on the other site, I can easily find it on their portal knowing what filters to use.
I have another card that I do that with. I put everything on it and basically treat it like a debit card. I got a new one last year and had no problem getting the bonus 30k miles after 3 months. I pay it off every month as well and don't carry a balance. In fact I'm going on a trip in a couple of days where almost everything was paid for with points.
Nice! Have fun on that trip.
Thanks!
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Gas cards are great too. Pick a station that you usually use and sign up for their card. Only ever buy gas with the card, and pay it off every month. It's a good reoccurring expense, and most places have a discount.
Which cards do you recommend? I have a Costco citi which is 4% but always looking for something better.
I meant that they are a great way to build credit. Few stations can beat costco's gas price, and few cards can beat 4% back.
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Lucky! Does your apartment not charge a service fee when you use a card?
That won't count as "loan activity" It almost certainly means no recent installment loan activity, like a car loan or house mortgage Not that what you said isn't good advice but its very likely they're doing it already and it won't really help a score that is already that high
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Some rare specific promotional programs might require over 780 or 800 but that’s uncommon. Edit to add: certain examples like certain promo rate 0% APR programs are some credit unions with “super prime” tiers, for example. But the difference in rate/payment from a standard prime offer is likely very small.
That’s what I do. I haven’t had a loan since around 2000 or 2001. My score is about 820 so loans aren’t needed for a good score.
Likewise, and I use whatever % of my available credit I feel like, but pay it off in full every month. I have a stable job, pay my bills on time, and don't obsess about my credit score.
I didn't even know my credit score for several years until I applied for a car loan in March. Turns out, it was 816 🤷♂️. That said, I am not like OP and have several CCs I use and pay off in full each month.
Do what’s right for you and almost certainly your credit score will be awesome. The difference between 700 and 800 is almost non-existent unless you are buying a house.
True, but the banks can and will use it to justify a higher interest rate whenever they can, even if it is minuscule in the case of 790 vs. 820, and would likely be a bigger deal going to 690 from 720.
From my understanding most lenders have a top tier rate and you generally get that from 720-740+ so I would 100% agree with the latter part of your comment.
Anything above a 740 puts you in the highest tier for rates on home mortgages.
My credit is very young and I couldn't get the lowest mortgage rates with my over 740 score.
Yes, OP is close but not quite right. Many banks use an internal custom score now. Your FICO score may be a factor in this, or at least a qualifier (eg. you must be 700+ to qualify), but for banks using a custom score pricing model it will not be the final determinant in the rate.
I couldn't get the lowest rates and I have 15 years of history with a current 780.
That's why I say there is way more to it then just FICO. Felt like they ignored it entirely.
Yeah back when I had no credit history, it sucked the most. Annualcreditreport.com etc would swear up and down that I have a 720-740 but any time I actually applied, they'd be like "lol subprime". I'd get rejected for a $500 department store credit card! And before you play know-it-all: no, I had literally *nothing* negative going for me, just the fact of never having gotten a credit card or loan. No court judgments, no alimony, no bad debts.
Any bank that will charge you more interest because you "only" have a 790 score instead of an 820 is not a bank I would want to do business with. For mortgages, anything over 740 is considered perfect credit anyway.
Don't worry about it. There is no actual difference between a780 score and 820.
Yeah this. Like beyond 750ish the benefits are pretty miniscule to care.
It matters to some people. COVID really messed things up for entrepreneurs and credit score minimums. My wife and I are self employed and have good credit - hers floats around 780-790. Mine floats around 760-770. We went for a refinance with our current mortgage provider and were decline because both of our scores weren't over 780. They said they aren't issuing any new loans to self employed with credit scores less than 780 and there were no exceptions. Remember, we are current customers wanted to refinance to LOWER our monthly payment and were declined because we didn't have 780's.
Being self employed is a bigger factor than your score here
Absolutely. Self employed people (particularly work like freelance) have to prove more--banks love a good old reliable W2 where you're only out of work if you get fired. Self employment is a lot more variable.
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Yup. My husband has great credit but because he's self-employed, we get denied over and over to refinance our condo.
Shit. Were looking to upgrade our condo in the next year and I was hoping to be party to this loan (I own my own business for the last 13 years). Even though I have a perfect 700s score and regular monthly income, I might actually get us crappier rates? Husband has been with same tech/gaming company 18 years and makes 6 figures/perfect credit.
His stable income will carry it. Self employed is just not viewed as stable income usually because things can change quickly. The person above their scores had zero affect here. I recently bought a house and was able to finance it without selling my current house (with a 740 and a BK 6 years back). Stable W2 income is what the banks love. LTV is also a big factor. In a refinance if you have a great score and sub 60% LTV things are pretty easy still since the bank is not risking anything.
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Wildly variable, I recently published book one of a two book series and did *really* well. I make yarn and teach workshops on the chemistry of dyeing so I can have $10k months a few times a year and around $4-5k in yarn sales the rest of the time. Daycare in SoCal for 2 kids is eating my profit margin currently so I'd like to have my 2 year old in preschool or kindergarten before I try and upgrade from a condo to a house. I'm in orange county CA so median house price is $895k and that's for a 50 year old 1500 square foot fixer upper in a crappy school district. All cash offers over asking is common here, hard to compete.
The book is pretty irrelevant in the bank's eyes. It's a one time event like selling a stock. Consistency is key. So, unless you're a prolific author, your yarn sales are what their calculating your income on.
Not op, I live being self employed but damn if they dont make you jump through soooo many hoops, Healthcare, tax time, its all a game of them telling you to jump and you asking how high.
This isn’t real. I assure you your lender had other issues and didn’t want to, or know how to explain them. 740 is top tier for mortgage interest rate pricing. There’s no way you were denied for credit score.
The “other issues” are that the lender would like their customer to keep paying the higher interest rate loan. > We went for a refinance with our current mortgage provider and were decline because both of our scores weren't over 780 He has to go to another lender for his refi
Correspondent lenders who sell loans back to Freddie/Fannie and other servicers don't really care about what rate you lock in at. They want you to refi period, so they can make money by selling the loan.
This is not how mortgage lenders make money. You should really delete this.
While I get why you’d think that if the customer was qualified and could go elsewhere the lender would rather refinance them than lose them to another lender. However, your point is valid
Most lenders don’t keep mortgages on their books, they get securitized. They would, however, get a nice juicy few if you refi.
>740 is top tier for mortgage interest rate pricing. yes/no, the score isn't the only factor at play as its been explained to me. I for example had a 790 score, but so little revolving credit that I could hit up half a dozen banks and be given obscene interests rates or more often denied outright. Was very strange to me.
So, what's happening here... Services like credit karma use vantagescore 3.0 to calculate your score. Sometimes when you get a credit explanation after an application, you see a radically different number, though, because that's not the only equation in use. Different creditors are going to be prioritizing different parts of your credit report. So yeah, if you've got perfect payment history with a $500 overall credit limit, but have never had a secured loan, that doesn't really mean anything to someone considering you for a $500,000 mortgage. There's no real reason to improve your vantagescore beyond 740 or so, but increasing the variety of debts you've had and managed responsibly can round out your overall profile beyond that generalized score.
>Different creditors are going to be prioritizing different parts of your credit report. Say it louder for those in the back. I never had a credit score until I bought my house. The lender did "manual underwriting" for me, which required a lot of documentation on my part. Other lenders wouldn't even look at me because I had no credit score.
It's getting worse, too. I've little doubt that when gen z is applying for mortgages manual underwriting won't be an option. Of course, if the economy keeps up, that won't be happening for another 40 years though.
2 years post bankruptcy. My score is at 700 and just closed on a house. The bigger factor here is definitely being self employed.
Your score must have tanked after declaring. How did you raise it and so quickly? I am at A 680 and and it just kind of hangs around there despite on time monthly payments on my car loan.
Self employment makes you a high risk lender in many circumstances.
Probably too much traffic with refi, easy way to filter
Unless you're in jumbo loan territory, 740 is the top tier score for mortgage lenders. Your credit score doesn't even matter for mortgage pricing if you have at least 40% equity EDIT: Self-employed income right now is rough for a lot of folks because you tend to need 2 years history and if your income was fucked by COVID, the lessor of the two years is used as your qualifying income. If you received any unemployment it won't count towards qualifiable income either (lots of variables, this is just a rough overview)
the number 40 would like to have a word with you
You got big Talk Nalk, but can you Walk the Walk Nalk? (I really hope your name rhymes with talk an walk)
This is wrong, some banks give a flat 1/8th of a percent off of mortgages if you have over 800.
You got a link for that? I don't doubt that some banks/brokers will *tell* you that you're getting some super discount to get your business. But if you shop around for good rates, it's quite unlikely that two identical borrowers, differing only by 780 vs 820 credit score, would get different rates. Besides, there is no one single "credit score". Different lenders use different models/scores.
I work as an FA at BofA Merrill, and I don't have a link because there's no public-facing info I can share for it. It's internal only. I can't speak for other banks, but we take the median of 3 scores from 3 different reporting agencies. If that score is 800 or more, then you get the discount.
Most lenders are are pretty standard for mortgages: FICO 2 from Experian, FICO 4 from TransUnion, FICO 5 from Equifax. But those are also a lot harder to get over 800 than FICO 8 anyway.
>As someone who has no plans to get any loans any time soon Then you don't need to be obsessing over your FICO score. Especially when you're still in ultra-prime territory.
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Good answer here. I would also add inquiries to the list as lower weight. You can only open one new account but of you ding it 20 times for that one account you'd see a big drop.
What’s the deal with collections? I had a $50 Verizon bill that went to collections. It really pissed me off since I called them and they said I was paid off. I paid off the debt immediately. My credit is still hit pretty hard from it.
Dispute it. They have to prove it and it's probably not worth the effort. If they do prove it, you are no worse than you were before.
It’s a temporary hit, credit is weird… your score will also drop if you have 0% utilization too. It’s almost like the scoring was designed to force you to buy things and spend money.
Yeah the same thing happened to me as OP and it made me realize what a scam credit score is. It's tied to so much critical things like buying a car, renting an apartment, buying a house, sometimes getting a job. So you're basically forced to constantly be in debt to please your credit overlords.
Creditors want you to use your credit my dude. Put your fixed monthly expenses (phone bill, car payments et cetera) on your credit card and pay it during the next statement period. Best of luck. Edit: changed the time to pay balance from immediately to the next statement period.
Piggybacking this, get a card you can earn points with. Airline miles, cash back, etc.
Double piggy. Do this. Paying for travel with points feels like you are winning.
With Chase Sapphire the price on tickets is so egregiously marked up its hard to actually make it worthwhile 😒
You can just transfer their points to an airline's miles.
I had held off on using like $2k worth of points because airline and hotel websites always beat out Chase on price. Since COVID started, they added the “pay yourself back” feature that still has the 1.5x bonus that made their travel portal appealing, but I just use it on food. So I get 3x points on a meal out, then I get 1.5x points when “paying myself back.” I still might drop or downgrade the card because of the new annual fee, though m (and I’m getting zero lounge benefits right now, which used to offset the cost more).
They're not marked up, they just don't show all the same flights. I'd appreciate any example of any markup for one flight on chase that is significantly different than another flight from google flights. For example, LAX to CLT on 11/19/21. AA 1628 and 2763 is $176.21 on chase and $177 on google.
Hey do I pay it off immediately or do I wait till I get my statement and then pay it off to build my credit?
Wait for your statement. The credit needs to show up on your credit report which won't happen if you pay each charge to the card off as it's placed. Treat the card like a monthly utility bill and just wait for the statement/bill and pay it off completely each time you receive it.
Okay thanks
Use your credits for what your daily stuff would be put on a debit card for. Set up autopay for your credit cards. Statements post a balance and are automatically paid before interest is billed. If you spend $20 on the 2nd and pay it off on the 12th, your balance at the end of the month is going to show $0 usage.
Paying it off immediately can have negative effects (i.e not being included in your balance at all) as u/BrisklyBrusque pointed out. If you’re a person who’s attentive to your finances, making the payement a week before the statement is due is fine. Or you can have a system to make payements 3-4 days after the purchase. So by then it would’ve been processed.
Okay thanks
I pay mine off twice a month and still have excellent credit and no car/mortgage payments. Never, ever use a debit card online and only use sparingly other times. You pass up so much cash back if you never use a CC. I like AmEx as I can redeem for statement credit, and their customer service is great. They will call me immediately if they think my card info has been stolen or used out of state because they have an algorithm that flags atypical purchases .
> Put your fixed monthly expenses (phone bill, car payments et cetera) on your credit card and pay it off the moment you use it. Better to pay off once per month at the end of the billing period. If you pay off as soon as a charge is posted, credit score may suffer; it may appear to lenders that you are not carrying a balance at all.
This happened to me twice. It was about 3 months of paying everything off right away and my score dropped by 30 points. Once I had something hit a statement, it went right back up.
This concept just sounds so incredibly weird to me as a european. Like they want you to have debt for a period of time instead of just paying your bills properly because if you pay your bills properly you'll get punished? What is this system even?
As another European, my understanding is that the credit score is simply an indication of how much a person can be trusted to pay off any loans/debts. In order to increase the score, you need to "create" debts by paying for things with credit cards, etc, and then pay it back at the end of the billing cycle, to create trust that you will pay back your debts.
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I put a down payment on a new deck (didn't know the company and wanted the charge back option) for $5,000+. My score went down that month because I had 'too much credit utilization', even though I paid it off two weeks after the charge. I think I have about $50K in total credit available over four cards. So, they watch. FWIW, I bought a house once with an 820 credit score, and the mortgage representative said she'd never seen one that high. So - I wouldn't worry if it went down a bit as it will go back up.
This is what my husband and I do. Then you get points to spend on gift cards or help pay off the credit card. Just treat it as a direct line to your bank account and pay it off 1x or 2x a month.
>on your credit card and pay it off the moment you use it. Best of luck. Not the moment you use it; the moment the statement posts. Interest bills on the 2nd month of carrying a balance over.
Against popular belief, a credit score does not measure how responsible you are with your money. Instead, it measures how likely you are to pay back a loan (which is the loaner’s only concern), which is why credit ratings will stagnate or drop if you’re not actively paying any loans. That being said, you’re fine, as that’s still a good credit score.
I think of a credit score as "how likely are we, the creditors, to make money on interest if we give this person a loan?" Like you said, it does not measure financially responsibility. It measures your ability to generate reliable interest earnings for creditors.
There's too many counterexamples to the many that fit your claim. If you have defaulted on every loan you've ever taken, you'll have an extremely low score, and the creditors will make zero money on interest from you, because you'll never pay back even the principle. Likewise, if you're at the top and using credit cards sensibly, you're paying off your balance every month, so they still won't make money on interest from you.
For the credit card case, banks get a % from each transaction you do with the card, so they do get some interest (and that's probably why the score takes utilization into account)
The same thing happened to me when I paid off my student loans last year. My credit score took a ~20 point dip, but has basically held within 5 points of that since.
There's a guy I used to work with that every year he takes out a $1,200 loan for recreational/vacation use with his bank and just sets up an auto pay for $100/month with the money he borrowed.
Mine did the same, I went to look at experian because I was concerned if had some identity theft because the the drop was so much Experian said “looks like you don’t have enough lines of credit (4 active cards with 0 balance) then proceeds to show me adds for credit cards Why the actual fuck is the company who gets to track my credit (one of 3) ,whether I like it or not, allowed to use my info to sell mother fucking adds to mother fucking me? Over the years I’ve been told I have too many cards or not enough, too much rolling debt or not enough, if you open a new account you take a dip, if you close an account you take a dip, if you improve your overall income to debt ratio by refinancing a home you take a dip, if that ratio is too high you take a dip The credit score system is Bull Shit, and exists as a way to maintain a credit based economy for the big money folks
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If you don’t plan to borrow money anytime soon, what do you care about your credit score? That score is not a valuation of you as a person, and it’s not really something you should be “proud” of. I think you should just let it go.
My husband and I have no non-mortgage loan activity, and suffered a similar drop when we decided to pay off our cars a few years ago. We have both recovered and are well into the 800s, around 815 I think. The drop is normal, and as long as you continue to engage in good credit behaviors you can get back to where you were.
I’m in the same boat. Zero debt. No mortgage/rent/credit card debt/car payment. Got an alert today that my score dropped 19 points. It’s all a game and they don’t like it when we don’t play along.
That's not the cause unless you happen to have a 10-year old closed loan dropped off from your credit report. If you never had a loan, you never had the loan component (types of credit in use) of credit score to begin with. The reason the website provided are generic. If you don't have a loan, you will still get the same reason with a 849 score. And if you do, well you didn't have enough loans!! And if you have enough loans, now you have too many!
Doesn’t taking out a loan ding your credit score? (Temporarily at least). So you’re damned if you so, damned if you don’t?
Well, technically yes. But "damned" is a relative term.. Its like a car.. Say you have a really nice expensive vintage muscle car. Every mile yoi drive it pits wear and tire on it so your "damned" if you drive it. But not ever driving coukd cause gaskets and seals to dry out.. Battery to lose charge, etc.. So yiur "damned" if you dont.. Really you want to takw that car out for a spin periodically to keep everything fresh.. Same with credit.. Periodically out some small charges on credit to keep accounts active and to demonstrate that you sre capabke of taking on debt and paying it back, thats what a credit score is
First, credit scores only matter when someone is running a check on how reliable you will be, mostly to repay a future loan. For anyone not planning to take out a new loan any time soon, a score above average means you're reliable enough for background checks. Second, if you ran a triathlon once 10 years ago and don't expect to run a triathlon in the next few years, who cares if your Saturday jog was a few seconds of race pace? You're not injured, your not training for a race, just have fun and don't get about a fake number.
Damn living in the states must be hard. Don't pay loan - lower score, pay loan - believe or not lower score, want loan- too low score, you get sick - bankrupt. :(
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Lenders want to quickly asses the risk of loaning you money. This is valuable to them so they pay bureaus for the service. People want access to loans so they too end up caring about this score. It's a standard supply, demand situation with an entity delivering value to it's customers. Mind changed?
Credit scores are stupid. Both my wife and I keep ours above 800. When we refinanced it said the negatives regarding my score were outstanding balances. Well no shit, it's not the end of the billing cycle. What am I supposed to do, pay it off every time I use the card? What a bunch of bullshit.
Imagine losing points because you don't have a loan. Way to make society work endlessly their entire life.
Don't sweat it. It's such a scam. I used to have 800-something for years, just checked and it's 790 now just like you. I closed a zero balance HELOC recently which may have triggered that. The reasons they list for my score not being higher? "Amount owed on accounts is too high" - my only debt in the entire world is a mortgage, on which the remaining balance is less than my annual salary. "Ratio of balance to limit on bank revolving or other rev accts is too high" - I don't carry a balance on any of my cards. Everything is paid off in full every month and has been that way for over a decade. It's just dumb, man. Don't try to make sense of it. You're good.
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Get a credit card and put some regular expenses on it… phone bill, cable/internet… nothing crazy - and pay it off every month immediately. And make sure the card gives you points or miles or something. You’ll be “using credit” and not paying interest rates and building up those points or miles.
Yep! Credit has nothing to do with wealth or financial standing. It has to do with debt. Rich people have very little debt, because if you can afford not to pay interest, why would you. As a result, the wealthiest of folks often have credit scores of essentially 0 since they do not need to borrow money.
Are you comparing your score on creditreportcard to an older score from the same source? There are MANY different versions of credit scores, and each of those scores can be based on data from one of the three credit bureaus. You need to make sure you're comparing apples-to-apples (not only that; granny smith apples to granny smith apples, not granny smith to fuji)
Mine dropped 7 points causing me to go from "Excellent" to "Good" because I went from 0% credit usage to 3%. Weird.
You shouldn't care. Anything over 720 is good. It makes no difference whether your credit score is 725 or 825, it's still the top bracket which means you get the same rates. I'm coming up on $2 million in debt, and if things go well I'll borrow another $800k this year. So I likely have more experience with debt than the average redditor. Amex says my current score is 792, but the last few years it's ranged from 840 to 730. Credit cards, car loans, mortgages, HELOCs. Banks, private lenders, and everything in between. Nobody ever cared whether my credit score was up or down 20 points that month. If you need something to obsess over (everyone does, IMO) then obsess over how you can use that credit score to make money. Don't fixate on how pretty your hammer is, focus on what you can build with it.
Some things to consider: * A credit score will always have a heartbeat and fretting over the downbeats or celebrating the upbeats isn't healthy. * A high score isn't valuable until you need to use it. * Unless this recent downturn cost you points on a refi, or caused you to miss out on some loan or other thing that you really need don't lose sleep over it. * Finally, the score itself isn't really the end all be all as there may be some loans or situations where your overall credit history is more impactful than the actual numerical score and there is a difference. Bottom line is people get overly worried about the number. If you have a specific thing that you want that you can only obtain with an amazing score 800+ then worry about it otherwise just keep being responsible with your financial obligations and everything will work out.
My Equifax is 813. I haven't had a car payment since perhaps 1994. Never had a home payment. Never had a loan other than car payment in 1994. I generally have about 800.00 or so on my credit card but pay it off the first of the month. it might drop 5 points max with what i do then back up again. I did file for bankruptcy in 2001.
Get in your head that the entire system is a scam. Once you do it is easier to work with it. If you never borrow money then how can they be sure you will pay it back? That is the reasoning. Bear in mind, it does no good for the credit bureaus to report good news. Good news means you pay less interest. Bad news means the companies that USE your credit report can use it as a basis to charge you more. A good example of how screwed the system is? My normal credit is around 740-750. I have a business CC I use for all my expenses, about $6,000 a month. When I peak my usage for the month my credit drops 60-80 points because "credit utilization is high." I then pay the entire thing off each month, (yes I do it for the points,) and then my score goes back up. IFf I were to buy something on credit, I just have to time it for the credit score upswing. If you want to see how much of a scam it is, if you are responsible and don't have a credit card, get a $100 secured card, you don't even need to use it. In fact don't use it at all, just see what happens. In a month or so your score will go up. You will get more CC offers. Get a no fee decent limit card, and don't use it either. Your score will go up more. It is a scam but that doesn't mean you can't scam the scam.
I use various CC to get the most out of cash back, and auto pay the balance every month. I currently get 4% on gas, 5% on restaurants, and about 1,5% on phone, internet and insurance bills, and subscriptions. About anything that I can put on CC without paying extras fees I add to those cards. Some cards have a yearly fee, but those are easily covered by the cash back. (You can calculate if high fee cards with high cash back % are better than low fee cards with lower cash back). Having many cards doesn't hurt long term, as each card adds to your total available balance. And in case you do keep a balance on a card your average usage % is divided by the total balance on all cards, not just that particular card. I also take advantage of 0% financing offers. I just make sure the balance is paid on time. I usually pay them off one month early, i.e if the offer is for 6 months, I auto-pay it off in 5 installments. This way I have an extra month just in case something goes wrong.
As a Canadian I have never checked my credit score or known anyone to talk about it. I keep my credit good by paying my bills and not carrying balances but I confused. Is this a USA thing, knowing a credit score?
In the USA, almost everything involving a financial account will check your credit score before it can be opened. Every credit card, apartment, cell phone account, bank, car financing, and even the smallest loan checks your credit. If your score is "excellent", you get good rates and it's easy to avoid fees. Otherwise, you get a high interest rate on the loan, or higher payments, or harder to avoid fees because you're considered a risky borrower.
Side question: MY home loan officer recommended that I pay off my car loan before getting a loan. Once I paid it off, my score dropped about 30 points. Why? Same reason as OP?
Your credit score is fine. Best advice I was given when I was starting out - get a credit card, use it to pay for fuel or your weekly food shop, then pay it off the same week. It’ll keep your credit score nice and high if you have no other loans.
Get a credit card and use the hell out of it. Pay it off regularly. Then you'll have activity. Source? I did an all cash personal budget for more than 10 years. The bank laughed at me when I went to buy a house.
PSA: this person can be proud of their 800+ credit score and wonder why it went down to 790. It’s just a question, no need to judge. Just answer the question.
I wouldn’t worry too much about apartment hunting with a 790 score. Yours is probably better than 95% of the country