Credit cards and credit scores

For just about anything you want to get off your chest about credit cards.
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TambourineMan
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Credit cards and credit scores

Postby TambourineMan » Mon Mar 17, 2014 6:18 pm

I have a situation for which I would appreciate some advice. Back in December, I spoke to my Credit Union about a car loan. They pulled my credit, and I had a score of 805. I ended up not getting a car, and therefore, did not get a loan. More recently, I applied for a Discover card. I wasn't denied, but neither was I deemed eligible for the offer for which I applied. When I got the 'denial' notice, it listed my credit score as 717.

The other piece to this puzzle is that back in December (I don't recall the exact dates, but my presumption is that this was after my car loan credit check), I was in Macy's and decided to buy a coat. The salesman convinced me to sign up for the Macy's card, as I would be able to save 80%. Typically, I say 'no' reflexively in situations like that, but this time I didn't, and was able to get a $350 coat for $75 (I don't remember the real numbers, but it was that stark).

Anyway, I figured this was just a membership card, like my Barnes and Noble card, or my Walgreens card. I didn't realize it was an American Express credit card, or even that they were running my credit!

My question is, is it possible that just getting a credit card would drop my credit score nearly 90 points? If so, would closing the card raise it back up? I don't really want or need this card. I haven't even activated it! I just don't want to screw up my credit any more than I already have.

FWIW, I have requested and received my credit reports from Equifax and Experian, and as far as I can tell, everything looks correct. Everything is in good standing, so aside from the Macy's card, I don't know what could, or would have changed my credit score.


haikuginger
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Postby haikuginger » Tue Mar 18, 2014 9:50 am

TambourineMan wrote:My question is, is it possible that just getting a credit card would drop my credit score nearly 90 points? If so, would closing the card raise it back up? I don't really want or need this card. I haven't even activated it! I just don't want to screw up my credit any more than I already have.


No, opening a new card shouldn't affect your credit that substantially. More likely, your bank pulled a different type of credit score with a wider range of possible values. For example, the previous VantageScore model used scores up to 990.

TL;DR: Your score almost certainly never had a FICO value of 805.

linuxmachine
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Postby linuxmachine » Tue Mar 18, 2014 11:02 am

May not reveal much else but have you checked your transunion report? I think that's the bureau discover pulls from.

A 100 point drop is pretty significant. It's possible the car loan score was based on a different scoring model.

Also, has your utilization changed since December? Like too much Christmas shopping? Did you finish paying off a loan? Cancelled any cards 10 years ago?

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Vattené
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Postby Vattené » Tue Mar 18, 2014 1:26 pm

I would agree. For there to be a legitimate 100 point drop in such a short amount of time I would expect something fishy to be in your credit reports. Since you've checked them, though, you shouldn't have to worry too much fraud-wise beyond all the regular precautions.

I think the Credit Union using a different scoring model would be more likely. 805 is a pretty exceptional score. Did they explicitly tell you they were using a true FICO? Did they give you anything related to your score, or did they just tell you they pulled it and that it was 805 (I wouldn't be surprised if a lender did the latter so you would feel great about having such a stellar score and believe you would get great terms on a loan from them)? There are tons of scoring models used for different purposes and, while many set up ranges to be similar to FICO, if it isn't a true FICO then comparing it to a FICO score is useless.
-Vattené
FICO-8:
EX - 809 (11/16) | TU - 803 (11/16)
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

TambourineMan
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Postby TambourineMan » Tue Mar 18, 2014 7:43 pm

Thanks, everyone! My suspicion is that the 805 was not my FICO score.

Thanks to incessant marketing, I had conflated my credit report with my credit score. It wasn't until I got my reports that I realized they weren't the same thing. Similarly, I figured there was just one credit score to rule them all, I didn't know there were different types (though I did know the different agencies had different numbers).

linuxmachine wrote:May not reveal much else but have you checked your transunion report? I think that's the bureau discover pulls from.


According to the letter I got from Discover, they checked with Equifax and Experian, and got the score from Experian. Experian showed an inquiry from Macy's and Discover, and Equifax showed an inquiry from the Credit Union and Discover. Which is amusing, because one of the 'key factors' listed by Discover was 'number of inquiries on credit bureau'. Apparently two is excessive.

As to utilization, I don't have any credit cards aside from the Macy's card*, and I don't have any loans except for student loans, which have long since been paid. The CU didn't give me anything, they just told me the number. They did not explicitly say it was my FICO score. I will stand up for them, though, and say that I doubt they were up to any shenanigans. I have a small CU, and they don't play those games.

*I should say that I am listed as an 'Authorized User' on my parent's credit card. I was added a while ago, and apparently never taken off. I did not know that until now.

linuxmachine
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Postby linuxmachine » Tue Mar 18, 2014 7:59 pm

It's probably not that 2 is too many in general. Perhaps 2 is a lot for someone who has only one store credit card and a credit history of several months. You should keep the card open, and consider a capital one or a secured card to start building your credit.

I did some googling out of curiosity, and I found out about FICO Auto Industry Option:
http://ficoforums.myfico.com/t5/Auto-Loans/FICO-Auto-Enhanced-Scores/td-p/228198

This could probably be the missing link in your situation

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Vattené
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Postby Vattené » Tue Mar 18, 2014 9:03 pm

TambourineMan wrote:Thanks to incessant marketing, I had conflated my credit report with my credit score. It wasn't until I got my reports that I realized they weren't the same thing. Similarly, I figured there was just one credit score to rule them all, I didn't know there were different types (though I did know the different agencies had different numbers).

That is a very easy and understandable mistake to make. In my opinion a lot of the marketing around credit scoring and reporting is intentionally misleading (beyond all the obviously dishonest "free" ways to get your score). They're hoping consumers will be confused.


TambourineMan wrote:According to the letter I got from Discover, they checked with Equifax and Experian, and got the score from Experian. Experian showed an inquiry from Macy's and Discover, and Equifax showed an inquiry from the Credit Union and Discover. Which is amusing, because one of the 'key factors' listed by Discover was 'number of inquiries on credit bureau'. Apparently two is excessive.

linuxmachine wrote:It's probably not that 2 is too many in general. Perhaps 2 is a lot for someone who has only one store credit card and a credit history of several months. You should keep the card open, and consider a capital one or a secured card to start building your credit.

I would agree here, too. If you have a thin credit profile - like I do - they have to give you some reason and the factors impacting your score are relative to your situation.


linuxmachine wrote:The CU didn't give me anything, they just told me the number. They did not explicitly say it was my FICO score. I will stand up for them, though, and say that I doubt they were up to any shenanigans. I have a small CU, and they don't play those games.

That's good. There are definitely good players in the market. I use a local community bank and, while I've never applied for a loan, I couldn't be happier with them and they will be the first place I go when the time comes if I'm still in the area.
-Vattené
FICO-8:
EX - 809 (11/16) | TU - 803 (11/16)
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

TambourineMan
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Postby TambourineMan » Wed Mar 19, 2014 8:00 am

That's a great link, thank you! Without more information, it's hard to say exactly what happened, but it certainly makes sense that having a different auto loan score would create this sort of confusion.

I'll go ahead and accept Discover's counter-offer. A foot in the door is better than sticking your nose in it. Plus, with the monthly FICO scores, I can avoid these types of surprises later on.

I'll also keep the Macy's card. Another reason given by Discover was "too few revolving accounts" (or something like that), so it seems that having two cards is actually a good idea.

I will say that this has been a relatively easy process for me to navigate, especially considering that I had no prior experience with anything like this. The information I got from Discover told me precisely what information they were using, and how to request copies for review. The credit reports I received were simple, well organized, and easy to read. It did bother me that they had to mail the Experian report (I was able to print the Equifax report same-day), but otherwise, I was (and am) impressed at how simple everything was. So hooray for "crippling government over-regulation" I guess.

Thank you very much for your help. I feel much better about what had been a rather concerning discrepancy. Cheers! :cheers:

takeshi
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Postby takeshi » Wed Mar 19, 2014 8:27 am

TambourineMan wrote:My question is, is it possible that just getting a credit card would drop my credit score nearly 90 points?

Seems unlikely but when comparing scores you need to consider the CRA's that the scores were based on, the specific scoring models (not only FICO versus FAKO but also the various FICO models) used and any changes that would have happened in the timeframe between the scores. All these factors combined can produce some drastically different results and the comparison may not be meaningful in some cases.

TambourineMan wrote: According to the letter I got from Discover, they checked with Equifax and Experian, and got the score from Experian. Experian showed an inquiry from Macy's and Discover, and Equifax showed an inquiry from the Credit Union and Discover. Which is amusing, because one of the 'key factors' listed by Discover was 'number of inquiries on credit bureau'. Apparently two is excessive.

Sometimes those messsages mean something, sometimes they don't. When they don't have anything else to complain about they sometimes complain about factors that have little impact on your score. Two isn't excessive unless one has a very thin file. If the Macy's card is the only card you have then you probably have a thin file.

TambourineMan wrote:If so, would closing the card raise it back up?

No. Definitely read up on credit scoring. Damage (HP and hit to AAoA) is done when you apply. Closing immediately impacts utilization but does not affect AAoA. Closing won't restore your AAoA nor will it erase the HP.

TambourineMan wrote:I didn't realize it was an American Express credit card, or even that they were running my credit!

Generally you can't get a store or credit card without a HP. There are exceptions but if you're going to operate on assumption then assume a HP.

TambourineMan wrote:I'll also keep the Macy's card. Another reason given by Discover was "too few revolving accounts" (or something like that), so it seems that having two cards is actually a good idea.

General advice is at least 2-3 revolving accounts for optimal scoring.



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