Why Did My FICO® Score Decrease by 12 Points In One Month?

 

A Stable FICO® Score

I check my credit scores everytime I check my credit card balances. The scores are stable, fairly consistent and fluctuate a few points at most. The chart below is a clear illustration of that stability.

stable FICO® score
I usually have a consistent FICO® score as illustrated by the Transunion chart here
An Untypical FICO® Score Situation

So when I got a notification last month that my best score had dropped 12 points, I was shocked. The charts below mentions the 12 pt decrease in red.

stable fico® score
My credit score has decreased by 12 points. Why did it change so much?

Because I pay such careful attention to my score, I usually have a pretty good idea why it might change and by how much. As I mentioned, I usually have a fairly stable FICO® score. Therefore a decrease of 12 points was a red flag to me. Something was wrong. But I had no idea what it was. It was time to investigate.

Five FICO® Score Factors System

There are five or six main categories that go into determining a credit score. They are illustrated in the three examples below.

stable FICO® score
Five FICO® Score Factors
Six FICO® Score Factors System
stable FICO® score
Six FICO® factors
Primary Credit Factors

The wording may vary slightly and the scoring may as well. But it comes down to basically the same thing. Scoring may be based on a letter system like A, B, C, D or words like, Excellent, Good, Average, Below Average. In my case, my monthly grades have enough excellents that my score remains around 800 for these six categories:
• Payment history (On-time Payments)
• Credit Utilization (Credit Used)
• Age of Credit (Oldest Credit Line)
• Credit Inquiries (Recent Inquiries)(New Accounts)
• Total Accounts (Available Credit)
• Negative Marks

stable FICO® score
What Impacts Your Credit from Capital One
Searching for the FICO® Score Factor Red Flag

The above grades are good enough to rank me around an 800 FICO® score each month. Previous to last month, no action I took lowered my score by 12 points. But I knew that once I found what category was off and why this had happened, my decrease would be explained. In fact, what it was turned out to be kind of humorous.

The Solution Turned Out To Be in the Credit Utilization Category

On an average, I use between 1% and 2% of my credit utilization category. This means that if I have a $100,000 credit limit on all my credit cards, I only charge $1000 to $2000 dollar a month total. Two months ago, I had gotten a new promotional credit card. It offered a cash back reward of $200 if I charged $1,000 on it within three months. I was so excited about the cash reward that I charged the full amount within two months. That reflected a very unusual credit utilization percentage for me. It was much more than normal.

stable FICO® score
Credit Utilization Flagged

Glancing at the chart above, one can see that my normal credit utilization is 2%. But the new card that I purposely charged a large amount on had a credit utilization rate of 22%. Here’s the irony. In order to fulfill the requirements for the promotion, I charged much more in a month than normal. It did not significantly damage my credit. But it did throw both the credit rating company and me for a bit of a loop at first. I am sure that by next month everything will be back to normal since that kind of utilization is atypical for me. In addition, I will have a statement credit or a cash reward of $200. to ease the pain. Not a bad FICO® score lesson in my book!

Conclusion

I was fortunate in this case that nothing serious had happened to my credit. I did not need to contact any of the credit reporting agencies. They are Transunion®, Experian®, and Equifax®. If there is a situation that does not seem right and that you cannot figure out on your own, do not hesitate to call the particular credit card or one of the three agencies. We live in a time when we have easy access to these agencies and we should be careful as well as protect ourselves from errors and fraud.

stable FICO® score
Two published eBooks and a third on the way in the 3 eBook series about ‘The Former Middle Class’
Sources and Resources

Transunion®
Experian®
Equifax®
Using Credit Cards for Survival and Profit

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The Former Middle Class Trilogy

mastering green
The Former Middle Class eBook Series Available at Amazon.com

INTRODUCTION
There are three ebooks in The Former Middle Class Trilogy.The first ebook is called, The Poor Middle Class Crisis and the second ebook is, Using Credit Cards for Survival and Profit. The ebooks are available on Amazon.com. Mastering the Art of Green is my third ebook in the Former Middle Class trilogy.
 

The Former Middle Class Trilogy
The Poor Middle Class Crisis eBook © 2017 Alison D. Gilbert

THE POOR MIDDLE CLASS CRISIS
The Former Middle Class.The Poor Middle Class Crisis chronicles our history as people who were devastated by the 2008 stock market crash. My husband lost his job the same week as the crash. He was 62 at the time. I became very ill from all the stress.

We had become part of The Former Middle Class and did not know how we were going to survive. Our low point was when we faced the possibility of having no place to live and were, One Day From Homeless.

Our journey became one of survival. That became our priority. We had to learn to live all over again under very different financial circumstances. We explored many different avenues and began to build our financial survival tool kit.

The Former Middle Class
The Financial Survival Toolkit for Living a Consciously Frugal Life from the Viper Tool Storage Company
 
OUR FINANCIAL SURVIVAL TOOL KIT
Building our kit involved many lifestyle changes. We went from a two bedroom apartment to subsidized senior housing. Access to food was a big challenge. Instead of the opportunity to purchase expensive, organic foods and eat out on occasion, we had to depend on the generosity of others and the government. Food pantries and food stamps are crucial financial survival tools. But they may be hard to swallow.

We went from middle class comfort to former middle class frugal living. It was a huge adjustment. We explored many tools that didn’t work for us. Things like couponing and taking surveys. Many more thrifty tools are mentioned in the first ebook. Eventually we found one tool that not only helped us survive but also became profitable. That tool is credit cards.
 

former middle class trilogy
Using Credit Cards for Survival & Profit eBook © 2017 Alison D. Gilbert
USING CREDIT CARDS FOR SURVIVAL AND PROFIT
Let me make very clear right from the start that our use of credit cards has involved a very responsible set of guidelines. We pay all our bills on time and in full. Our credit rating fluctuates between 775 and 800 depending upon which credit reporting agency you ask.

Credit cards have given us a financial cushion between sign up promotional bonuses and monthly cash rewards. My refinement of credit cards as a financial survival tool lasted about eight months. What I have learned, and continue to learn about credit cards is fascinating and extremely informative. I have my accounts charted with spreadsheets for each month. Read My Credit Card Accounts Maintenance System for the details of my system.
 

Former Middle Class Trilogy
Part of My Credit Cards Accounts Maintenance System

In less than a year, I had become sophisticated in the financially lucrative use of the credit card benefits tools. All of a sudden, the additional hefty promotional signup bonus credit card memberships applications began receiving denial letters. My stellar tool of acquiring credit cards with promotional sign up bonuses of $100-$200 had lost its winning streak. Clearly, it was time to rest that tool, re-examine some of the other financial survival tools that I had discarded in the past and to research additional new tools. I was at a loss and needed new financial fertilizer.
 

Former Middle Class Trilogy
Mastering the Art of Green, The Third ebook in the Former Middle Class Trilogy @2018 Alison D. Gilbert
MASTERING THE ART OF GREEN
Mastering the art of green is a process. For me, it has involved taking stepping backwards to get a different, larger view on what ‘green’ means. It can refer to money. It can refer to food, lush grassy fields, innocence and inexperience.

Sure enough, once I stepped back and started to look at green in a new way, as fertility and productivity, new tools started to sprout. I started growing food indoors calling it, Table Top Farming. I am growing microgreen in soil and hydroponics in water.

This project is of major importance to us since healthy, live food sources can be scarce for seniors on fixed incomes. Food pantries tend to offer the lowest quality packaged/processed food. The SNAP (food stamp) program provides a miniscule amount of money to supplement nutritious food. So growing one’s own live, local greens can be better than money in one’s pocket.
 

RECONSIDERING COUPONS, STORE SALES AND SELLING SITES
Coupons and other money saving programs do have their value. They are not as lucrative as credit card sign up promotional bonuses. But what is? There again, when I took a step back to get a better perspective on what made sense for me to pursue, I found many options.

Former Middle Class Trilogy
A great savings of 50% at Michael’s Art & Craft Supplies in store and online

Some coupons like the specials CVS Pharmacy and Michaels Stores-Art Supplies, Crafts and Framing offer can be as high as 40-70%. A Bed, Bath and Beyond 20% coupon get help a lot on a $100 plus purchase. Target, Walmart and Amazon vie for top savings. In addition, there are programs that will automatically check to see if there is a savings special when an online purchase is made. These include Ebates, honey, and cently and piggy. Other apps exist that I have not yet had a chance to explore. Two of the most popular are ibotta and Groupon.

Decluttering, Sarah Mueller style can provide lots of potential items you no longer need and want to sell. The above video is from a workshop she did with an expert at selling stuff. Two of the most popular selling sites are Ebay and Etsy. I have not sold on Ebay. I do have an Etsy store, Tin Can Ali. It displays some of my painted items for fun. I have not really tried to sell anything. But Ebay can be a great place to sell things especially if you watch the Kathy Terrill videos from I Love To Be Selling.
 

CONCLUSION
As you can see, the possibilities are endless. Prioritize your options. Find what is most beneficial and takes the least time to execute it. New savings hacks are invented all the time. Be resourceful. Do the research. Continue to read my and other blog posts for the latest information.
 

SOURCES AND RESOURCES
Wallet Hack’s article Target’s Store Shopping Hacks
Wallet Hack’s Article 10 Sites That Pay You Money for Things You’re Already Doing For Free
Ann Gibson The Micro Gardener
Sarah Mueller Decluttering Club
Kathy Terrill I Love To Be Selling – Kathy Terrill
Alison Gilbert’s Facebook pages and groups:
Table Top Farming
Survival Comes First
Savvy Saving Survivalism

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The Principles of Good Credit Card Hygiene

 

Introduction

Good Credit Card Hygiene is based upon several principles. They are the focus of and shall be reviewed in this blog post. Before any discussion can be held about extreme credit card benefits, one must have a firm grasp of the basic principles especially the components of your credit score.

Good credit card hygiene
Credit Score Chart Showing the Components of your Credit Score from TFD
The Components of Your Credit Score

To start with, it is very important to gain and maintain between a very good to excellent credit rating. Even if your credit is poor to start with, there are many resources, both nonprofit and professional that can help you to raise your credit or FICO® score. See the pie chart below for the breakdown of components.

Payment History

Payment history has top billing in the equation. It is crucial to always pay your monthly bills in full and on time. This is the first of the five components of your credit score and counts for 35% of the credit score algorhythm. You could say that it is the key player in good credit card hygiene.

Level of Debt

The next component that counts for 30% of your credit score is your level of debt. What this means is that the amount you owe or your monthly debt should not comprise more than 30% of the entire amount of credit that has been made available to you. If your total credit allocation is $100,000 then you should charge less than $30,000 each month. Actually, the most recent numbers I have heard, are that the credit reporting agencies are looking for a percentage of between 6-9%. This means that one’s monthly debt (credit card charges, loans, mortgage payments, etc.) should not exceed between $6,000 to $9,000.

Age of Credit

The first two factors make up 65% of your score so clearly they are the most important ones in obtaining and maintaining good credit card hygiene. Next is the age of your credit which makes up 15% of your score. Start applying for a credit card as early on as you can so that you will have a long credit history. In order to increase your chances of getting one, apply for a card for which you have been pre-approved. That way your credit score will not go down because of your application. Picking out a card that has not be pre approved will result in the reduction of your credit score whether you get the card or not. But it may not be a serious problem. You can still have good credit card hygiene and a decent FICO score.

Types of Debt and Credit Inquiries

Now you have 80% of your credit score accounted for. These are the three most important factors. But don’t ignore the others. It is good credit card hygiene and good for your score to have a mix of types of debt, credit card, loans, and/or mortgage. Here again, since this makes up only 10% of your score, it is not crucial. Likewise, credit inquiries also make up 10% of your score. So they are not crucial either.

good credit card hygiene
What Is A Good Credit Score? From Experian.com
More About Good Credit Card Hygiene

There are numerous types of credit score systems, each with its own algorhythm. Two of the most popular systems are shown above FICO and Vantage. FICO® was created by the Fair Isaac Corporation. VantageScore is comprised of the input from these three reporting agencies, TransUnion, Equifax and Experian. They do not have the same exact rating scales but the difference is not far off. So let’s continue with the characteristics of good credit card hygiene.

Good Credit Card Hygiene Do’s and Do Not’s

Do not apply for too many cards in a short period of time. You will know that you are applying for too many in too short a time if you start getting rejections and that is the reason the credit card company gives for it.

Be mindful to not do anything that will result in negative comments on your credit report. If you do, these will reflect poorly on your credit score. This is not considered good credit card hygiene.

Check your credit card activity often and your credit scores regularly. Now that most, if not all credit card companies have this as a free feature, it is very easy to do. If you find any errors on your credit card, contact the company immediately. If you suspect fraud, contact the police as well as the credit reporting agencies. This can be very serious. Do this in a timely matter.

It is recommended not to close credit card accounts especially old ones. But if you must, wait until you have zero debt to do so. You don’t want to negatively affect you debt to available credit ratio.

good credit card hygiene
15 Credit Card Do’s and Don’ts from Time.com
Conclusion

That’s about it for a review of what good credit card hygiene is. Once you have established a level of comfort and confidence with it, you can move on to the exciting part, Extreme Credit Card Benefits. That is the topic of the next blog post. I promise you will be WOWed by it.

Sources and Resources

What Is A Good Credit Score?

Using Credit Cards for Survival and Profit

15 Credit Card Do’s and Don’ts

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