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 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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Using Cash Reward Credit Cards for Survival & Profit

 

Introduction

I’ve talked a lot about using cash reward credit cards, lately. It actually feels like I am living in a credit card world. In fact, this for two reasons. One is because I have wanted to learn everything I could about cash reward credit cards, credit scores and credit reports, too. The other reason, probably the most important one, is that cash reward credit cards have become one of my most essential survival tools.

cash reward credit cards
Alison D. Gilbert, The Credit Card Maven
The Credit Card Maven

As a result of my intense interest and need to know everything I can about credit cards, I’ve even created a Facebook page called The Credit Card Maven. This is where I post information as I have researched and sourced it. I have found a number of websites, blog posts, Facebook pages (listed here) and groups that are extremely helpful resources in my quest for knowledge as The Credit Card Maven in my credit card world. Included are:
Credit Card Mastery
Credit Karma
CreditCards.com
NerdWallet
Wallet Hacks
Wise Bread
 

cash reward credit cards
Viper Tool Storage Box Survival Toolkit as part of My Credit Card World
Credit Cards as a Survival Tool

As I mentioned at the start of this post, credit cards have become a survival tool in my credit cards world. It was not by design that this came to be.

It was more a matter of circumstances. Once I got a feel for how useful and profitable using credit cards could be, my desire to use them and master it increased. Let me give you an example.

I have had cash reward credit cards for a number of years. I can accumulate up to about $40. in a two month period from one of them. That was a good beginning. Then I decided to get a travel rewards card in anticipation of someday going to visit my family in Colorado. I used it and kept on accumulating points.

Credit Card Currency

When I went to check on the conversion to paying for an airplane ticket, the results were not impressive. I had to find something better. This time by design, I set out to find the best deal I could for air travel benefits using a credit card. I found one that I ultimately used for my flight. It rewarded me with 30,000 points and a $100. discount on my airplane ticket. This was such a great deal that I have enough points to return to Colorado for free, right now.

cash reward credit cards
Credit cards currency from 123RF.com
Now that’s what I call using credit cards as currency. If I could do that with a travel rewards credit card, I wondered what other benefits and rewards I could manifest in my credit cards world. I familiarized myself with a few other travel rewards cards as part of getting a second ticket for my husband and having funds for other things related to our vacation. All in all, my activities resulted in a savings of between $400 and $500 for our trip.

 

 

Credit Card Investing

Let me present one more situation where the skilled use of a credit card became very profitable. I found an offer for a cash rewards credit card that would refund $100 on spending $500 within 90 days of acquiring the card. That would be a 20% profit. I had never accomplished that in the stock market. It seemed like a very good investment to me. I wasn’t sure if I would be granted another card as I had accumulated quite a few by this point. But it came through. I fulfilled the requirements. Now I am just waiting for my investment to pay off.

cash reward credit cards
Credit Card Monthly Rotation represented by a photo from blog.taxact.com
Credit Card Monthly Rotation

I made another discovery. It may seem a bit confusing. In fact, I am kind of surprised that I am even able to do this. I am calling it credit card monthly rotation. It is based upon a combination of the nature of credit cards themselves and good credit card hygiene.

Each credit card has a closing date and a payment due date. Since I have several cash reward credit cards and they have different closing and payment dates, I can stagger them and not have to pay them at the same time. If I make my purchases and schedule my payments using my monthly rotation system, I have a revolving credit situation. In other words, if my budget in a particular month needs to be exceeded, I can use a card that has a closing date that will allow payment the following month. I just have to make sure the funds will be available then. I also have to have a very good bookkeeping system to keep track of every detail of every card.
 

cash reward credit cards
Brian Cain’s Credit Card Mastery Course
Credit Card Mastery

What is credit card mastery? Have I achieved it? It turns out that this term exists. I did not invent it as I thought I had. There is actually a course called Credit Card Mastery that costs $97. Much of it seems similar to my own system. Although I have not taken that course, it looks very comprehensive. This is an introduction to the course and an explanation of it by founder, Brian Cain.

Based upon my understanding and goals to achieve Credit Card Mastery, I believe that I am on my way but I have not achieved mastery yet. When will I achieve it? There are several requirements that I have established for myself:
• My credit scores average will be over 800 again. It is only about 10-20 points from that now.
• My monthly rotation system will have proven itself to work and I will have a sense of mastery in my credit card world
• My Credit Card Management Chart will be complete and committed to memory. As a result, I will have a firm grasp on all my cards and a natural flow for their use in rotation as needed.

Conclusion

To many people, understanding credit scores and reading credit reports are overwhelming and confusing. There is no need to not have transparency and clarity about your credit cards world. Credit cards are an important tool and can even be crucial for personal survival and business development. Study the resources provided. Take the Credit Card Mastery Course if you can. Having one’s finances in order and being able to live solvently in a credit card world are not luxuries. They are necessities and everyone deserves to have them.

cash reward credit cards
The Cool Piggy Bank property of The WalletHacks.com and the cover image of their facebook page
Sources & Resources

CreditCardMastery.com, a course developed by Brian Cain
CreditCards.com, find a credit card that’s right for you
CreditKarma.com, free credit scores and more
NerdWallet.com, Best Credit Cards of 2017
NextAdvisor.com, all about finances
WalletHacks.com, founded by Jim Wang
WiseBread.com, great blog post advice about credit cards and everyday frugal living

FICO SCORE AND CREDIT REPORTING AGENCIES
Equifax
Experian
Transunion
Identity Guard

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Using Credit Cards for Survival and Profit

 

financial survival tools
My two published eBook on Amazon.com

My second eBook, USING CREDIT CARDS for Survival & Profit is now available on Amazon along with my first, The Poor Middle Class Crisis. The second eBook temporarily is available in the older version entitled, Mastering Credit Cards for Survival & Profit.

Introduction

I am The Credit Card Maven. I have learned ways to use credit cards for survival and profit. This post is designed to share these techniques with my friends and followers.

I started using charge cards many years ago. I never abused them. The bills were always paid on time. But they were not credit cards. They were charge cards for department stores. At one point, I decided to eliminate most of them.
 

credit card maven

The Credit Score Scale from Shutter Stock®
Credit Cards Replace Charge Cards

My FICO score has always been in the excellent range. In spite of that, I had no idea how FICO scores worked. It was just one of those mysteries of life. I continued to carry a limited number of cards as well as having a credit score of over 800. When our financial situation changed in 2008, credit cards took on a totally new meaning for us.

Credit Cards Become Currency

Due to circumstances which I detail in my first eBook, The Poor Middle Class Crisis Introduction, our financial profile changed drastically. Our equity was gone as well as our income. We no longer had savings. Suddenly credit cards became a way to earn money and derive other benefits from them, as well.

The biggest incentive to use credit cards as currency was our need to take a trip to Colorado to visit our families. Because of that, I signed up for a total of four travel rewards cards. One of them was the airline travel rewards card. I signed up during a promotion. If I spent $1,000 in three months using this card, I would get 30,000 bonus points and $100. off the airfare. I have earned enough points for a free trip to Colorado and back, again. Hopefully it won’t take six years to see our families again.

credit card maven
The Gold Delta SkyMiles® Credit Card Offer from Creditcards.offers.com
Mastering Credit Card Use

As you can imagine, using so many cards can become very confusing. I am still perfecting my system. But I can tell you what I have learned so far. We are fortunate enough to have excellent credit. So we were easily able to secure all the cards we wanted. If you don’t have great credit, do everything you can to improve it. There is a link to an article from NextAdvisor.com in the Sources and Resources section about paying down if not getting out of debt. Do read it.

Treasure An Excellent FICO Score

For the person with excellent credit, you want to keep it. Great credit is precious. Here are some golden rules on how to train yourself to use your credit cards wisely.
• Sign up for cards that best meet you needs and spending habits. There are websites that show you which to use.
• Always pay bills in full and on time.
• Make a chart of closing and payment due dates for all your cards.
• Keep an accounting of how much you spend each month so that you do not exceed your budget.
• Use no more than 30% of the credit limit you have on each card.
• It is better to charge larger amounts on a few cards than to charge small amounts on many cards.
• For cash rewards cards, write on the card itself the cash back % you get on each category of purchases.
• Do not close old credit card accounts. It is best to have as long a credit history as possible.
• Avoid fee based cards unless the benefits greatly outweigh the out-of-pocket expense.

Credit Card Myths and Tips
credit card maven
‘Treat Your Cards Like Your Best Friends’. Man Holding A Credit Card from 123RF.com

Myths about credit cards abound. So here are some tips to dispel them.
• A credit score will not necessarily be lowered by having numerous cards. But don’t sign up for too many too close together. That can appear to the credit card score companies like you are in crisis.
• Almost every credit card company has a ‘Check Your FICO score’ feature. You can use it without negatively impacting your score. This is a ‘soft’ check.
• A ‘hard’ check can negatively impact your score. That could be checking by a loan company, a future employer,etc.

 

Conclusion

There is so much more that can and will be said about credit cards, their use and mastery in future posts. Credit cards can be like a loaded gun. They can be dangerous, even deadly if you do not know how to use it. On the other hand, they can be a lifesaver when properly trained.

Sources and Resources

0% Interest Card Offerings Now, from NextAdvisor

Getting the Right Card for Your Balance Transfer
Credit Cards Dos and Don’ts

The Ten Best Cash Rewards Cards from CreditKarma.com

How To Pick The Best Credit Card for You from NerdWallet.com

Find The Best Credit Card Offers for You

5 Money Problems You Can Solve With A Good Attitude

There are so many invaluable posts on the WalletHacks.com site, I am linking to their archive

Using Credit Cards from The Alison D. Gilbert Blog

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