Let's talk credit scores
02-03-2010, 12:42 PM
#1
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Let's talk credit scores
Well I paid off all of my revolving (i.e. store cards, credit cards) credit debt down to $0. However after pulling my credit score it went from 738 to 729, what gives? Nothing else changed on my credit report for that time period. I thought paying off all of your debt as quickly as possible was a good thing? I still have my car payment and I don't have anything derogatory anywhere on my credit report. Just looking for any possible explanations, thanks!
02-03-2010, 12:52 PM
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If you actually pay off your debt consistently over a long time period, your credit score will be better.
For example:
Pay $100 per month on $1,200 worth of debt will get you a higher credit score than paying $1,200 all at one-time.
This shows that you can consistently pay off your bills on-time without volatility.
I did this on my CC debt on myFICO.com. It will actually give you a hypothetical credit score based on the frequency you pay it off. It is a pretty useful tool.
For example:
Pay $100 per month on $1,200 worth of debt will get you a higher credit score than paying $1,200 all at one-time.
This shows that you can consistently pay off your bills on-time without volatility.
I did this on my CC debt on myFICO.com. It will actually give you a hypothetical credit score based on the frequency you pay it off. It is a pretty useful tool.
02-03-2010, 01:56 PM
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Originally Posted by GRUNTS2K,Feb 3 2010, 06:40 PM
Thanks for the advice Adam but why would paying debt quickly cause my score to drop?
e consistently. I sure there are other factors but I would imagine that is a big reason why paying over time is better than all at once
02-03-2010, 02:02 PM
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Originally Posted by GRUNTS2K,Feb 3 2010, 05:40 PM
Thanks for the advice Adam but why would paying debt quickly cause my score to drop?
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02-03-2010, 02:34 PM
#8
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Those aren't bad scores Dave. People have WAY worse.
Why the concern anyway, buying a house?
Why the concern anyway, buying a house?
02-03-2010, 03:37 PM
#10
Dave, I've heard of this before, too. The credit bureaus look at it as a one-time fluke when debt is paid rapidly. Maybe you got your tax refund check, maybe you scored big in AC, etc. It doesn't show the long-term planning and income that lenders like to see when judging how much money they can lend you. But don't be discouraged, you can certainly get those points back and there are other benefits to not having interest-bearing debt to worry about every month (like more money to save).