Credit scores and Debt

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Credit scores and Debt

A few years ago, I had to max out a credit card because our A/C unit gave up and we had to get it replaced. Our home insurance didn't cover it (check your policy folks!)

 

I no longer use this credit card but I make three times the minimum monthly payment on it every time. If I have a little surplus cash at the end of the month, I make an additional payment.

 

The only other debt I have is my mortgage with my wife and we make that payment without fail on the first of every month.

 

I recently signed up for a credit monitoring service with my bank and they email me my FICO credit score with every monthly statement. I'm confused though, does anyone know why my credit score go up 2 points and then down 2 points, up 3 points, and then down 2 points? There seems to be no reason for this. 

 

I'm making above and beyond the payments required, I just can't understand credit scores as the debt that I owe is being paid off quicker than expected. 

 

Any insight would be greatly appreciated.

1 Best Answer

Accepted Solutions

Re: Credit scores and Debt

My congratulations on being almost debt free.  One credit element that you have overlooked is the fact that you are over the 30% of the entire credit limit on your credit card.  It's recommended to stay below 30% of your credit limit.  As you stated, you nearly maxed out the credit card to pay for a new AC system.  Yes, you are paying on time and 3x over the minimum monthly amount.  From my understanding, Credit scores are created by algorithms that use a variety of data. One of the data points is How timely and consistently you pay your outstanding credit card debt.  You appear to be doing very well.  I can guarantee that once your outstanding balance drops below the 30% of the entire credit limit, your score will increase nicely. As to the 2-3 points variance every month...I wouldn't worry, you and your wife appear to be very responsible and careful with the debt you incur. Credit Score algorithms are are like a living organism...they are continually changing. 

3 REPLIES

Re: Credit scores and Debt

I wonder if it has anything to do with the soft inquiries from credit institutions against your credit score.  I have noticed on my report that CapitalOne and AMEX pings my credit score at least once a month, even though I have no credit card with them, nor have I ever requested one (yet they keep sending me offers to sign up). I am not sure if that's the case ... but I find it suspicious business practices anyway.

Re: Credit scores and Debt

My congratulations on being almost debt free.  One credit element that you have overlooked is the fact that you are over the 30% of the entire credit limit on your credit card.  It's recommended to stay below 30% of your credit limit.  As you stated, you nearly maxed out the credit card to pay for a new AC system.  Yes, you are paying on time and 3x over the minimum monthly amount.  From my understanding, Credit scores are created by algorithms that use a variety of data. One of the data points is How timely and consistently you pay your outstanding credit card debt.  You appear to be doing very well.  I can guarantee that once your outstanding balance drops below the 30% of the entire credit limit, your score will increase nicely. As to the 2-3 points variance every month...I wouldn't worry, you and your wife appear to be very responsible and careful with the debt you incur. Credit Score algorithms are are like a living organism...they are continually changing. 

Re: Credit scores and Debt

good ideal