i recently received a credit check for myself and apparently my credit score is now 610 (WEAK). this is absolutely insane. i'm somewhat at fault, but here me out. i have a few questions, because I'm extremely curious about this now.

last year my credit score was 750.

i have 2 credit cards, each with a $1,000 limit. I have never, EVER missed a payment on either card, ever. I pay off both cards, in FULL, every single month. I never reach the limit, or go over it. I usually only spend about $400 on each card. so basically, I'm VERY good with credit cards. no 'flaws' (unless I'm missing something!??)

however. two small annoyances have come up in the last year.

• the first, is a bill for $40 from EZ-PASS. apparently, one time my ez-pass didn't work at a toll, and I received a penalty for $40. I responded promptly to the state, saying that I did not cheat them, it merely did not work, and I asked them to deduct the NORMAL TOLL FAIR from my balance. I always have money on my ez-pass, so there's no reason to lie. anyway, they refused to do this, and insisted I pay the fine. I kept arguing it, and they sent the damn thing to collections. I finally gave up the fight and paid the $40 several months after it went to collections (this was in fact, today)
• the second thing. Somehow, I have an outstanding medical bill of a whopping... $6.50. thats right. less than 7 bucks. it's dated from 05/01/10. somehow I never noticed it, and got a few reminders. my idiot fault for not paying the dumb $6.50, but I moved and the bill stopped coming to me (guess the company didn't get the address change). anyway, I paid it today.

that's it though.

so now, I have no idea how credit scores work. is a total of $46.50 really enough to COMPLETELY destroy your credit score? Shouldn't the fact that I pay off 2 credit cards EVERY MONTH perfectly completely override this? It's almost like doing the right thing has zero positive effect on your score, so you're always 'flat-lined', but any little thing can cause you to drop majorly into the negative zone.

Eghad - that seems a bit odd - I'd immediately recommend getting a full credit report so you can see what all you have in your name. Typically on the report as well, they have a good view of what payments were missed and to whom, as well as who's looked into your credit.

I'd look for a couple of main things:

First - on the credit report - are there accounts for which you don't remember, or can't remember opening? If so - you may have (unfortunately) fallen victim to identity theft, and thus, will need to work with the agencies to help restore your credit and lock down your personal information.

Second, if none of the accounts seem foreign to you, how many times have you applied for a credit card or loan within the past year and were denied? If you've applied to only a couple of places, fine, but the more you apply and are rejected, this can have a negative impact on your score.

Finally, the more revolving credit (i.e. credit cards) with low balances to high limits you have the better... a $1,000 limit isn't that high and will not help much - who knows what wonky things the credit card companies have been doing over the past year to loop-hole the new federal regulations that came out, but, this might have something (although probably very little) to do with it.

Good luck!

I have no idea how credit scores work.

That is easily remedied .

Don't forget that this is for the protection of the lending institutions. It is about their likelihood of getting paid back. It is not about your value as a person.

* 35% on recent payment history stats. Missing even ONE payment can seriously harm this stat. Revolving credit, such as a credit card, has a scale from 1-9 for how often you are late or fail to pay.
* 30% on debt/capacity ratio. Many credit accounts will offer many tens of thousands of dollars, so your $1000 limit is very low. People with good credit scores can have several hundred thousand dollars in maximum credit (even into the millions if they own a good home). The more credit you have, the more likely you are to use credit responsibly.
* 15% on date of oldest accounts. If you've had credit accounts for decades and they are in good standing, you are more likely to use credit responsibly than someone who just opened their first credit account.
* 10% on variety of credit accounts. If you only have a single credit account, such as a line-of-credit tied to your checking account, you are less likely to use credit responsibly compared to somebody with somebody who has had and repaid multiple vehicle loans and student loans and mortgage loans and revolving credit and overdraft credit and more. Even phone bills and other general utilities can have credit accounts attached.
* 10% on recent credit searches and grants. The type of credit requests are important. If you apply for five different revolving credit cards that is bad because they assume all are granted. If instead you get 5 different queries about an auto loan, it is about the same as only having a single query about an auto loan since you are probably just shopping around for a good rate.

is a total of $46.50 really enough to COMPLETELY destroy your credit score?[/quote]

From looking at the above, the answer should be an obvious yes.

Perfect repayment history accounts for roughly 300 points of your credit score. (The max score is capped at 850.)

Shouldn't the fact that I pay off 2 credit cards EVERY MONTH perfectly completely override this? It's almost like doing the right thing has zero positive effect on your score, so you're always 'flat-lined', but any little thing can cause you to drop majorly into the negative zone.[/quote]

That's the opposite of credit worthiness.

If you fail to make a payment, even once, then you are a greater credit risk than those who have a perfect payment record. They offered credit in exchange for payment, and you have violated the credit agreement by not making a payment according to those terms. So by definition, you are have become a bad credit risk.


Based on your comment, you have become delinquent on not just one, but two credit accounts, and both at the same time. Having just one go bad is often a simple mistake. Having more than one go bad at the same time often shows that you are not able to manage your credit.


Credit scores drop very quickly. It is easier to declare "This person didn't pay us back!" than it is to declare "This person has an excellent history".


You didn't drop in to the "majorly negative" zone. It isn't great, but based on what you described it won't be hard to improve.

Make sure you have a variety of credit lines open for reasonable sizes, keep them mostly empty but still active, just 1-2 transactions per year is enough for some credit accounts. As you recover your payment history your credit score will go up. As you have a wide variety of accounts the score will go up. As you have greater available credit the score will go up. Simply put: Follow your credit agreements to the letter and you will build a good credit score over the course of a few years.



Beware, however, of the opposite side: If you miss payments your score will drop, so your available credit will drop and your debt/capacity ratio will drop, further lowering your score. Or if you suddenly acquire massive debt (relative to your total credit) your debt/capacity ration will drop, harming your score and lowering your credit score, causing the cycle. (Part of the reason to have many open but unused lines of credit from a variety of sources is that it provides a buffer for your credit score.) Breaking the terms of your credit agreements or rapidly adding debt causes a very rapid spiral that can quickly lead to general default.

Since credit literacy is pretty low these days, "general default" is what happens when a major credit source defaults on your loan. It immediately propagates to ALL of your credit lines; generally this means your credit score has dropped so low or so quickly that lenders assume you will be unable or unwilling to repay them, so they will demand immediate repayment of your credit. When you default on your creditors it is often followed by bankruptcy. Don't do it; pay your debts or immediately negotiate with them if you are unable to pay something.

Erm -- it happens in Europe as well...

You just probably don't know about it so much because a lot less people deal with the agencies directly.

"What about privacy?"

Well, whenever you sign anything financial there's a bit that says "we'll discuss this with credit reference agencies". When you apply for credit there's a bit in the form that says "by signing this you're agreeing to us asking credit reference agencies about you"

Erm -- it happens in Europe as well...

You just probably don't know about it so much because a lot less people deal with the agencies directly.

Depends.

Most of the time, when taking a loan or mortgage, the approval is checked individually and you must prove that you will be able to pay back (6 month salary history, employment record + 1 or 2 "witnesses" that will pay back the debt if something happens to you). In addition, any loan debts are most often automatically deducted from your paycheck, so nonpayment is a non-issue unless you do go bankrupt and the people covering for you do so as well.

If you don't have the above in advance, you won't be able to get a loan at all. Credit cards matter much less and the limits tend to be very strict so your payment history matters much less, once you hit the 200 or 500 EUR initial limit (first 2 or so years) it's simply blocked until you repay (see automatic deduction) or you default.

While credit scores might be kept internally for increases in limits, I don't recall hearing people having trouble with actual "credit score" for credit cards or bills. The biggest limiting factor will be full-time employment salary and your employer's approval.

In many ways this is quite annoying. If starting your own business, not having full-time job, being a student, getting first job or similar you can basically forget about a standard loan and a mortgage obviously requires property.

YMMV, these systems are changing, but for typical "working man" the credit will usually be managed very conservatively and safely as far as banks are concerned. Most people will never take anything riskier so their credits will remain within safe limits determined by bank.

Europe is also diverse, lots of differences between countries and UK might be a bit more US-like, continental tends to be somewhat conservative. Anything debt or credit related will tend to be tied to salary.

Erm -- it happens in Europe as well...

It doesn't in the UK. People think it does but there is no such thing here as a literal "credit score", instead there are different organisations who maintain data about you which can be requested to help companies decide how risky you are.

i recently received a credit check for myself and apparently my credit score is now 610 (WEAK). this is absolutely insane. i'm somewhat at fault, but here me out. i have a few questions, because I'm extremely curious about this now.

last year my credit score was 750.

What are the reasons given with the scores that they were not higher? You might see something like "Derogatory public record or collection filed" or "Proportion of balances to credit limits on bank/national revolving or other revolving accounts is too high."

What are the names of the scores' models? Did you get FICOs or Fake-Os?

[quote name='frob']
Perfect repayment history accounts for roughly 300 points of your credit score.[/quote]
What is the calculation that results in roughly 300?

It doesn't in the UK. People think it does but there is no such thing here as a literal "credit score", instead there are different organisations who maintain data about you which can be requested to help companies decide how risky you are.

Wikipedia seems to disagree.

edit: I have a relevant question though. I never had a credit card through college as I was fine just using debit. Would that negatively affect a credit score or do nothing at all? I just got one when I moved to Canada, would that be reported to the US credit bureaus?

[font=sans-serif][size=2]It is very difficult for a consumer to know in advance whether they have a high enough credit score to be accepted for credit with a particular lender. This is due to the complexity and structure of credit scoring, which differs from one lender to another.[/quote]i.e. there is no literal score in some central database. I've paid the $5 for a check before and it's interesting, but it can also depend which source lenders use to get their data. The same principles apply, you can see in surprising detail the things which are held on file as good/bad.[/font]