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No debt. Dropping credit score. What can we do to keep our credit score up? | Ask Metafilter

No debt. Dropping credit score.

What can we do to keep our credit score up? My wife has no debt.

She has paid off her student loan and carries zero credit card debt.

She probably charges about $1500 a month to her card for every day things and then pays it off in full.

She has three credit cards but only uses one for the most part. Over the past year her credit score has dropped from the low 800s to the mid-to-low 700s.

What can she do to keep it from dropping further?

Is it a good idea to carry a small balance on her card from month to month?

How much is enough?

$10? And for how long?

Any other strategies for keeping the credit score from dropping further?

We're looking into applying for mortgages soon, so this is why it is of particular concern.

And if you ask me, it seems pretty crazy that someone so responsible with their debt can have a dropping credit score.

I would suggest talking to her bank, or banker if she has a relationship.

If not, could you consider opening an account at a credit union?

I think they're friendlier in general, and more interested in serving their customers.

I think they also offer better overall terms for mortgages, so she could approach them with her interest in establishing a credit building relationship for a possible future mortgage through them. If she were to talk to a loan officer, they may be able to make some pertinent suggestions which might even include taking out short term loans and paying them back.

I always thought that paying your bills on time was a good thing?

It shows that when you borrow money you always pay it back.

Do you have any other monthly bills?

As long as you pay them off your score should stay the same if not go up.

I would see if you have any out standing credit bills that you forgot to pay off or an open account somewhere.

It could have dropped because she paid off her student loan.

If it no longer counts as an active account, the average age of her accounts could have gone down, which hurts your credit score.

One thing to remember is that the amount on the statement of your credit cards is what is reported to the bureau, not what has interest assessed to it.

So if she has allowed her statement amounts to go up, that could hurt her credit score by increasing the debt to available credit.

To make sure it appears to the credit bureaus that you don't have much balance, you need to make sure you have almost nothing on the card when the statement date is (she might already be doing that, but "paying off in full" can mean either way). Depending on how you get your credit score, they say things that are "hurting" your score.

But who really knows because it is a big secret how all of the different scores are kept.

(This is based on what I've read and heard from either my own reports or talking to bankers.)

I would not worry about it until you talk to a loan officer or mortgage broker.

They will have the best advice for you as they are also interested in you getting the best score that you can so that you can cut the best deal that you can and buy that house already. Don't try to game it based on random advice -- just go talk to a broker.

It could be that even though she pays her $1500 in full every month, she's carrying a large balance on her card.

There's something I read about the ratios of available credit to used credit that affects a person's credit rating.

So even if you pay everything off in full, they still note that you're using a huge portion of your available credit. I'll see if I can find that article online.

If you have no debt, and plan on keeping no debt, who cares about a credit score?

I am trying to get rid of all my debt, and once I do, I will never buy on credit again - I'd rather go without.

At that point, my credit score doesn't matter.

Depending on your credit card, you might be able to ask for an increase in the limit. If you get this increase your score may go up (because then you are regularly using a smaller percentage of your available credit).

The reason for the drop may be the limit on the card, as nat alluded to.

Get the limit raised so your proportion of balance to credit limit is smaller.

Even though she is paying it off every month, the credit card company is still reporting a balance to the credit agencies once a month.

For this reason, I wouldn't try to carry any balance from month to month.

It will only cost you extra interest and you will receive no benefit to credit score. But the big picture is this: The difference between mid 700's and 800 credit scores when it comes to mortgage pricing is trivial at best.

There is zero difference if you're considering FHA.

If conventional, then you're probably making a sizable down payment and it won't matter with them either, as credit score hits to rate usually don't come into play unless you're over 80% loan to value.

Thank you all. very helpful advice.

I wasn't expecting the "talk to your broker" answer to come up as much - i sort of thought that there wasn't much room to "negotiate" these things, but what do i know - i have no experience since i've never had a mortgage.

In any event, it's good to know that that's an option. I believe she received her score from Experian, if that makes a difference. Thanks again.

First, get current copies of all her credit reports and make sure that nothing bad was posted to her report in error.

Also check to see if her credit limits have been lowered (a LOT of card companies have done this lately without warning) which would make any balance on her bill look worse in terms of utilization percentage (balance/limit). Credit scores don't distinguish between balances that are carried from month-to-month vs.

Paid off in full every month.

All credit scores care about is how much is on your card relative to your credit limit at the end of the billing period, since that's what the credit card company reports. Utilization between 0% and 10% of your credit limit is ideal.

So if you have a card with a $5000 credit limit, you want to have more than $0 but less than $500 on your card at the end of your billing period.

You want to do this on EACH card. Here is the easiest way to do this: 1.

Set up at least one small recurring monthly bill to be auto-paid from each charge.

Like, your cell phone to card A, your cable bill to card B, and your car insurance to card C. 2.

Set up your cards to all autopay in full every month. 3.

Instead of charging other things to your credit card, charge them to your debit card, so the only thing posting to your credit cards are those small monthly charges. If you do that your cards will report low utilization and on-time payments and your credit score should rise.

Yes, you give up taking advantage of the float and any reward points for that $1500 she was charging to her card every month, but it saves you from remembering to have to log in and pay down your balance before the end of your billing period, and you only have to do this until after you purchase your house. Recommended reading: Your Credit Score Mortgages For Dummies Personal Finance For Dummies Responses to some of the other advice and information/misinformation given here: "if you pay your debts before interest accrues, credit card companies label you a "deadbeat".

" False. That has nothing to do with your credit score. "It could have dropped because she paid off her student loan." True, this is very possible.

Credit scorers like to see a mix of types of debt, both revolving (credit cards) and installment (student loans, car loans, etc.). "Don't try to game it based on random advice -- just go talk to a broker." Actually, a lot of brokers don't know crap about how credit scores work, and will give you terrible advice, like suggesting you close open accounts.

(DON'T CLOSE ANY ACCOUNTS!) "If you have no debt, and plan on keeping no debt, who cares about a credit score?" OP wants to get a mortgage.

Mortgage interest rates are HUGELY influenced by credit scores.

The difference can be tens or hundreds of thousands of dollars over one's lifetime. Insurance rates are also affected by credit scores.

So even if you never plan to carry debt ever again, if you plan to purchase car insurance, you want to have a good credit score. "Get the limit raised so your proportion of balance to credit limit is smaller." Normally I would suggest this too but the credit market is so tight right now that very few people are getting approved for credit limit increases, and many are actually having their credit limits abruptly slashed without warning despite always paying on time and having good credit.

A limit increase request might trigger a "hard" credit pull, which will knock points off your score, and since your chances of actually being granted the limit increase are so small right now I don't think it's worth the risk.

Since OP's fiance doesn't carry a balance she can adjust her utilization percentage in less risky ways (use her debit card instead of credit card for most expenses, or pay off most of the balance before the end of the billing period).

People way over think the FICO thing.

If you are above 720 or so you will get the best mortgage rates available.

No need to worry about it.

Consider a credit union for a good mortgage value.

Chiming in to support the credit union thing. Credit unions have no incentive to bleed their customers dry for the benefit of their shareholders, because every credit union customer is a shareholder.

A contrary view on credit unions: ours sold our mortgage.

I think (though I don't know) that this is fairly common, since many credit unions don't have the capital to retain their mortgages.

The sale included a no resale clause, but that didn't prevent the buyer from being snapped up by a larger company.

We've had no problems, but I regret not having gone to the local mutual savings bank, which keeps its own mortgages (and is in great financial shape right now). My advice would be to find a bank (or credit union, if they exist) that will keep and service the mortgage.

That way you know who owns the mortgage (not trivial, given the securitization craze) and, therefore, whom to approach if you ever have problems.

Seconding- don't worry about it.

It's not like a performance review or a test score where perfection is possible.

As long as you are on the low risk end of the scale, you are fine.

If a lender says your score is too low, ask them to reinvestigate or find another lender.

I wouldn't be surprised to find that a mortgage broker might try to sell someone a higher rate simply because they believe they can convince them that 750 isn't a "perfect" score and that the best rate isn't available.

When in reality, they are just selling you a more profitable loan. (Credit unions have different ownership structures, but still have the same fiduciary obligation to their shareholders and operate in the same marketplace as commercial banks.

So they won't necessarily be appreciably different.

My experience has been that they are usually less well-run than good banks on average, and have different regulatory oversight.

Who the board of directors is and what their goals and direction are is very important to find out before entrusting them with your money.)

GJC brings up a good point which is that you should go in informed and know as much about the process ahead of time as possible -- there are books and there are a lot of threads here about buying a house.

Go in knowing how much money you think you want and at what rate.

Your broker or lender will tell you what they're offering.

You can press them for a better deal.

It *is* a negotiation and you are able to walk away from a deal that you don't like.

I'm guessing that a good borrower right now may be pretty valuable to a lender so don't feel like you don't have leverage. Anyway, good luck!




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