Why is it that when I pay down my debts(ie pay off credit cards) my credit score drops and when I make big purchases(ie $1,000 or more) my FICO score goes up? Shouldn't it be the opposite? One month I paid off most of my debts and my score went from 789 to 704 the next month. Then last month I charged $1,500 on my credit card and this month my score jumped back up 40 points. Keep in mind I have montiored my credit and I don't have any negative feedback from creditors. Any ideas??
2007-09-20 10:48:57 · 4 answers · asked by Mike 2 in Business & Finance ➔ Credit
They post one month behind, So your 789 showed before you paid them off, your 704 showed before you charged. pay them off then wait for another month
2007-09-20 11:17:05 · answer #1 · answered by Pengy 7 · 0⤊ 0⤋
Are you closing the accounts when you pay them off? This can have a negative impact. The scoring system looks at the ratio of revolving debt to available revolving credit limits. If you are closing out accounts you are eliminating available credit limits. It is good to maintain a LOW percentage of current debt owed to available limits.
Also, the age of your accounts is important. The longer you have had an account the better. If you closed an old account, that may have something to do with it.
What you are describing does not seem normal. There has to be other factors.
2007-09-20 18:02:27 · answer #2 · answered by Chuck92121 2 · 0⤊ 0⤋
Your FICO score is not there to serve you. Fair Isaac's customers are the financial institutions of the country, not the consumer. So it follows that they are only interested in providing the banks with a metric to increase their profits. When you pay off debt, the lender no longer collects interest on it. Most people falsely belive that your FICO score represents your ability to pay back a loan. It doesn't. What it does show is how profitable your borrowing habits are to a lender, plain and simple.
2007-09-21 00:45:02 · answer #3 · answered by Anonymous · 0⤊ 0⤋
This doesn't make any sense. Mine does just the opposite.
The only thing I can think of is maybe you have a Capital One credit card. They report current balance and available credit different from anyone else, and that tends to screw things up.
2007-09-20 18:09:59 · answer #4 · answered by Uncle Pennybags 7 · 0⤊ 0⤋