Help Me Understand Why My FICO Score isn't Rebounding

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MR.SVT
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Help Me Understand Why My FICO Score isn't Rebounding

Postby MR.SVT » Tue Nov 25, 2014 5:33 pm

So heres the quick rundown (I'll make it as concise as possible)...

Started fresh with a Capital One Journey 8/13 - Present
DiscoverIt 3/14-Present

FICO before applying (via DiscoverIt letter) 753
FICO score following month after applying (4/14 via DiscoverIt statement) 713

Ever since I applied for this card my FICO has been rebounding extremely slowly, I'm at 732 now - nearly a year later with perfect payment history and never more than 10% util on each card (which I always have had). If I knew it would drop my score this much I would've thought twice about applying....

So guys...what gives??


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djrez4
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Postby djrez4 » Tue Nov 25, 2014 7:28 pm

You have just over a year of credit history and 8 months since your last application. When there isn't much history, other factors can have heavier impact. With your profile, I'd expect the score to fully rebound by about month 12.
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CarefulBuilder14
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Postby CarefulBuilder14 » Tue Nov 25, 2014 10:26 pm

If you let balances report on both cards, it will hurt your FICOs a little. That could be a part of it - along with the new account and associated inquiry.

I know it's kind of silly to think 1% utilization on two cards is considered riskier than 9% on one card. It is, nonetheless, part of the scoring model.

My TU FICO was 50 points higher when I had just two cards than it is now. I have a perfect payment history, but have opened new credit and let some large balances report on month-end statements for several cards. If I were to have only one card report a balance, my FICO might be 40 points higher.
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takeshi
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Postby takeshi » Wed Nov 26, 2014 8:16 am

MR.SVT wrote:So guys...what gives??

What does your TU report look like? As stated above, you seem to have a low AAoA and what sounds like a thin credit profile. We don't have all the other details about your credit so it's difficult to give you the feedback you're looking for. Do you have any derogs? If so, those are likely to be holding you back. Do you have any other accounts? We can't pull your report so we can only use what you tell us.

MR.SVT wrote:FICO before applying (via DiscoverIt letter) 753
FICO score following month after applying (4/14 via DiscoverIt statement) 713

And did Discover pull TU for you for the approval?

MR.SVT wrote:If I knew it would drop my score this much I would've thought twice about applying....

Scores aren't everything so don't obsess over them. You can't build credit without establishing accounts and with a thin profile you'll see a drop and it will take time to build.

MR.SVT
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Postby MR.SVT » Wed Nov 26, 2014 11:52 am

Thanks for the insight everyone, much appreciated.

takeshi wrote:What does your TU report look like? As stated above, you seem to have a low AAoA and what sounds like a thin credit profile. We don't have all the other details about your credit so it's difficult to give you the feedback you're looking for. Do you have any derogs? If so, those are likely to be holding you back. Do you have any other accounts? We can't pull your report so we can only use what you tell us.


And did Discover pull TU for you for the approval?


Scores aren't everything so don't obsess over them. You can't build credit without establishing accounts and with a thin profile you'll see a drop and it will take time to build.


Clean as a whistle..no neg's, never a late payment, and at most I have let I think 7% util report on one card. I now understand what you're saying, just shocked that my score would drop that much! And yes, I believe Discover pulled TU off the top of my head.

On another note, I'm thinking of buying a new car in the next couple months and instead of paying full cash for it, I was debating whether to take a small loan (say 5-10k max). The idea behind this being that I'd pay that off within 12 months max via advanced payments just to throw on my report and hopefully build a stronger profile as the two credit cards are the only things I have reporting currently.

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CarefulBuilder14
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Postby CarefulBuilder14 » Wed Nov 26, 2014 1:02 pm

MR.SVT wrote:On another note, I'm thinking of buying a new car in the next couple months and instead of paying full cash for it, I was debating whether to take a small loan (say 5-10k max). The idea behind this being that I'd pay that off within 12 months max via advanced payments just to throw on my report and hopefully build a stronger profile as the two credit cards are the only things I have reporting currently.


I have done some research into doing something similar (a share secured loan) and my finding has been that it's on balance not a good idea for anyone with a thin but clean history. You do get credit diversity, yes, but you also take an inquiry, hurt your AAoA, and take on another loan that reduces your disposable income in the eyes of lenders. Also, a credit card account can exist for decades, but paying an installment loan off in a year means the account will have a short lifetime.

Most of the people who report big gains from a short-term (under 5 years) installment loan reporting have baddies, so they get a big benefit from any additional good information. The same benefit doesn't usually exist for someone with your profile or mine.

As far as I can tell, the situation in which an installment loan really does help is when you've been paying off a mortgage or student loan for several years. There is a long history with the account, the inquiry has long fallen off, and the balance remaining is much smaller than the original one.

http://creditcardforum.com/finance-charges-apr-compare/10889-secured-share-loan-smart-not.html

So, if you get a car - purchase it outright.
Keeping indefinitely: IHG, SchwabPlat, CSP, Discover, Freedom, ED, BCE, Hyatt
May close or PC: Prestige, Arrival, BrooksBros
AA Platinum converting into Costco

Might add: Proper business card, CSR, Ritz, Delta Gold, First Tech
Letting new accounts cool off since May

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Vattené
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Postby Vattené » Wed Nov 26, 2014 9:23 pm

I must agree and say that if you have the cash to pay for the car, use it (or use a credit card for as much as possible to get the rewards). The loan could help your score, but there are so many factors going into your score that you can't know for sure it will even improve at all. By the time you actually need your score to be good, your profile may be built up a lot anyway. You'll know there will be costs for taking out a loan and exactly what those costs are, but the benefits are just too intangible.
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FICO-8:
EX - 805 (2/17) | TU - 787 (2/17)
Primary Cards:
American Express EveryDay - $20,000 (10/14)
Discover it - $23,000 (2/14)
AU on Barclay Sallie Mae - $10,000 (8/15)
plus several store accounts of varying usefulness now



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