Credit Score and Credit Cards

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Taspy87
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Joined: Sat Dec 02, 2017 5:51 pm

Credit Score and Credit Cards

Post by Taspy87 » Mon Apr 23, 2018 7:42 pm

Hello. I've been monitoring my credit score the past several years using Credit Karma. The other day I was notified that my Equifax and Transunion scores dropped about 40+ points, putting me at "Fair" and "Good." I panicked a bit because my score had been very good...720-789 the last few years. Upon further investigating, I see it dropped due to my Capital One credit card account being closed due to inactivity.
"Well, I'd better apply for a new credit card asap!" I thought. So, I decided to apply online for the Capital One Savor card. The cash back and bonus appealed to me. I'm not sure why I thought I'd get approved, no problem. I was declined for the card. Not only that, I just checked Credit Karma and my scored dropped even more because of the credit inquiry. D'oh!!

Anyway, can anyone give me some advice on the best way to go about getting a decent credit card with no annual fee? I'm afraid to apply for anymore online, because I'll just keep getting hard inquiries on my credit report....

I've browsed various blogs and websites but am afraid to jump at any more cards that I like in fear of rejection.

Would I be best off just actually considering the many credit card "junk mail" offers I receive in the mail? Are the offers I get in the mail legitimate, as in do I still have to apply and risk being rejected again with yet another inquiry on my credit report?

I'm 30 years old and had a horrible experience with my first credit card (was very stupid with my spending), so credit cards frighten me a bit, but I feel I need to have one to improve my credit. Other info about me: I have a mortgage on my home and own my vehicle outright. No student debt. Basically, my only debt is my home. I don't plan on taking out any loans in the near future, but want the peace of mind that comes with good credit.

Thanks for reading this and giving me any advice :happy

longleaf
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Re: Credit Score and Credit Cards

Post by longleaf » Mon Apr 23, 2018 8:09 pm

Discover it secured
Frugality, indexing, time.

dustinst22
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Re: Credit Score and Credit Cards

Post by dustinst22 » Mon Apr 23, 2018 8:25 pm

An account closing shouldn't do this, as closed accounts still report for 10 years from the time they are closed. There's something else at play here. Credit Karma is crap (vantage score is useless), I'd pull a full tri-merge of your FICOs and really look under the hood of your credit profile. Should do this once a year anyway.

You might also consider calling C1 and see what the deal is, perhaps they can reactivate your old card.

I understand you're afraid of credit, but it sounds like you've learned your lesson. Not using a rewards card for everything you can is leaving money on the table. Start using a good rewards card as you would your debit card, and set it to auto-pay your full balance.
Last edited by dustinst22 on Mon Apr 23, 2018 8:43 pm, edited 1 time in total.

ragnathor
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Re: Credit Score and Credit Cards

Post by ragnathor » Mon Apr 23, 2018 8:32 pm

How old was your credit card that you closed? Do you have other open accounts besides the mortgage? How old is the mortgage?

It may be due to the length of your average credit history. Closing 1 of 2 accounts could potentially alter this significantly.

dustinst22
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Re: Credit Score and Credit Cards

Post by dustinst22 » Mon Apr 23, 2018 8:37 pm

ragnathor wrote:
Mon Apr 23, 2018 8:32 pm
Closing 1 of 2 accounts could potentially alter this significantly.
Closing an account wouldn't impact this. FICO scoring model looks at all accounts (both closed and open) when determining the average age.
Last edited by dustinst22 on Mon Apr 23, 2018 8:42 pm, edited 1 time in total.

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arcticpineapplecorp.
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Re: Credit Score and Credit Cards

Post by arcticpineapplecorp. » Mon Apr 23, 2018 8:39 pm

what was the reason for being declined for the capital one Savor card? That is important to know before you just start applying for other cards recommended by bogleheads. Because if you don't rectify that, you could just keep getting denied by other credit card carriers for the same reason.

If you don't know why you were declined, you need to go back to capital one and find out.

You need to know why you were denied. Then rectify that situation. Then and only then, apply for other card(s), preferably citibank double cash back (2% on all purchases. 1% when bill arrives, then 1% when bill is paid = 2% total cash back).
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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fortfun
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Re: Credit Score and Credit Cards

Post by fortfun » Mon Apr 23, 2018 9:41 pm

Your score probably dropped because your available credit might have gone down to nearly 0% because of your card being closed. Getting a new card opened, should bring it back up close to where it was. I've been churning credit cards and my score generally goes up with every card that I open because I have more available credit. Stupid, but that's how it works.

Check the credit score requirements for Chase Sapphire. $650 travel bonus when used on the Chase travel site. If your score is good enough for the sapphire, you can get the bonus and then have it changed to a different type of card before the one year $95 fee hits. Try to keep this card open as long as possible (the new one without a fee).

dustinst22
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Re: Credit Score and Credit Cards

Post by dustinst22 » Mon Apr 23, 2018 9:46 pm

Btw, if you have a family member with a higher limit credit card (at least 2 years and 10+K limit and clean history), have them add you as an AU. This gives a nice boost to your score, then it will be easier to open a new card.

The above poster is correct, didn't think about your avail credit, thats most definitely whats hurting you if you don't have any other cards. Still, I'd pull your FICO scores on all 3 bureaus and do a sweep of whats going on just to be sure there isn't something else impacting you that you aren't aware of.

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CABob
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Re: Credit Score and Credit Cards

Post by CABob » Mon Apr 23, 2018 10:00 pm

Isn't a credit card denial a reason to get a free credit report?
Bob

dustinst22
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Re: Credit Score and Credit Cards

Post by dustinst22 » Mon Apr 23, 2018 10:02 pm

CABob wrote:
Mon Apr 23, 2018 10:00 pm
Isn't a credit card denial a reason to get a free credit report?
No, all you get is the FICO score that the creditor pulled for that specific bureau.

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whodidntante
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Re: Credit Score and Credit Cards

Post by whodidntante » Mon Apr 23, 2018 10:28 pm

dustinst22 wrote:
Mon Apr 23, 2018 10:02 pm
CABob wrote:
Mon Apr 23, 2018 10:00 pm
Isn't a credit card denial a reason to get a free credit report?
No, all you get is the FICO score that the creditor pulled for that specific bureau.
You have to request the free credit report from the bureau, not the lender.

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whodidntante
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Re: Credit Score and Credit Cards

Post by whodidntante » Mon Apr 23, 2018 10:33 pm

Go through your credit report and make sure everything is accurate. If not, file a dispute for any negative information.

Some issuers are pickier than others. I don't know who has looser lending standards but you could investigate that.

You can get a secured card at several places. Credit unions would be a place to look. You can also get a "CD secured" installment loan where you pay 2% (or whatever) over the CD rate. It can help you build a positive credit history but it's not a good idea otherwise.

PressIt
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Re: Credit Score and Credit Cards

Post by PressIt » Mon Apr 23, 2018 10:33 pm

dustinst22 wrote:
Mon Apr 23, 2018 8:37 pm
ragnathor wrote:
Mon Apr 23, 2018 8:32 pm
Closing 1 of 2 accounts could potentially alter this significantly.
Closing an account wouldn't impact this. FICO scoring model looks at all accounts (both closed and open) when determining the average age.
That's true that it will still affect his average age of accounts(although not on Credit Karma..Credit Karma only calculates based on open accounts), but if it was one of his only open cards, that can negatively affect him as well. The minimum number of credit cards for optimal FICO scoring is 3..just a wild guess from him saying he's sort of scared of credit i'd say he probably has less than that amount. So dropping an open credit card could definitely hurt his score.

If you care to share your stats, it can be fairly easy to pinpoint your problem. If you'd rather do it somewhere else, I'd recommend myfico.com forums. Just explain your situation, and post your relative stats. AAoA, Negative information (collections, late payments, etc), number of accounts currently open along with their limits and utilization.

There are lots of unknowns here. If you maxed out your one credit card for a big purchase, then paid it off a couple weeks later, your credit card might have reported while you had your balance. That balance only gets updated once a month, so even though you've paid it, you may currently look risky to a creditor. Lots of stuff in play and not really enough info to go off of here.

For future reference, prior to applying to a credit card you can "prequalify" on quite a few major sites. Discover, Chase, Citi, Capital One, BofA, US Bank, all have pre qualification features that don't affect your credit and will give you a general idea of what cards you can get approved for before you apply. Almost all of them will specifically say something along the lines of "This will not affect your credit." Make sure you see that before you proceed.

dustinst22
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Re: Credit Score and Credit Cards

Post by dustinst22 » Mon Apr 23, 2018 10:50 pm

PressIt wrote:
Mon Apr 23, 2018 10:33 pm



That's true that it will still affect his average age of accounts(although not on Credit Karma..Credit Karma only calculates based on open accounts), but if it was one of his only open cards, that can negatively affect him as well.
It does not impact average age of accounts for FICO scoring. Average age of accounts is calculated by averaging all accounts including open and closed, for as long as they report. Closed accounts continue to report for 10 years. The closed account obviously can no longe lengthen to improve your average age, but it will remain the same.

What was impacted, as a previous poster mentioned, was his available credit. That is a substantial portion of a credit score.
Last edited by dustinst22 on Mon Apr 23, 2018 10:52 pm, edited 1 time in total.

PressIt
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Re: Credit Score and Credit Cards

Post by PressIt » Mon Apr 23, 2018 10:52 pm

dustinst22 wrote:
Mon Apr 23, 2018 10:50 pm
PressIt wrote:
Mon Apr 23, 2018 10:33 pm



That's true that it will still affect his average age of accounts(although not on Credit Karma..Credit Karma only calculates based on open accounts), but if it was one of his only open cards, that can negatively affect him as well.
It does not impact average age of accounts for FICO scoring. Average age of accounts is calculated by averaging all accounts including open and closed, for as long as they report. Closed accounts continue to report for 10 years.

What was impacted, as a previous poster mentioned, was his available credit. That is a substantial portion of a credit score.
I meant to say "it will not", except on Credit Karma where it will affect it. my bad. the rest stands tho as the most probable reason his score dropped with the information given

dustinst22
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Re: Credit Score and Credit Cards

Post by dustinst22 » Mon Apr 23, 2018 10:54 pm

whodidntante wrote:
Mon Apr 23, 2018 10:28 pm


You have to request the free credit report from the bureau, not the lender.
Yes, you can do this once a year at no cost for each bureau. You don't need to apply for something to do this.

myfico.com is the best way to view your credit details, but it does cost money. I have found it worth it, as I do a lot of churning and like to monitor everything closely. Plus with all the stolen data happening more frequently, I like to really keep a pulse on things.

Taspy87
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Re: Credit Score and Credit Cards

Post by Taspy87 » Tue Apr 24, 2018 5:54 am

Thanks for all the suggestions and info, everyone! I'll be getting a notice from the Savor card in the mail explaining the decline. My previous Capital One card was terminated by them because I used it 1 time for a small purchase in the several years I had it. "Use it or lose it" ...I guess?

It was my only credit card, so I'd better do some more digging and make sure to be wise about applying for the next card. Also, I definitely learned my lesson on the importance of paying the credit card bill. 19-year-old me thought it was a good idea to go on a Christmas shopping spree and not pay it off for years. However, FRUGALITY all the way these days!

My mortgage is only 6 months old, have bought and sold 4 houses in the last 5 years with no damage to my score. Always had good payment history on the 2 auto loans I've had. If needed, I"ll do some more digging to find out any other culprits on lowering the score.

Thanks, Bogleheads Community!

takeshi
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Re: Credit Score and Credit Cards

Post by takeshi » Tue Apr 24, 2018 10:01 pm

Taspy87 wrote:
Mon Apr 23, 2018 7:42 pm
I've been monitoring my credit score the past several years using Credit Karma. The other day I was notified that my Equifax and Transunion scores dropped about 40+ points, putting me at "Fair" and "Good."
Be very careful using Credit Karma's scores and factors. Credit Karma is handy for free access to data from your EQ and TU reports with weekly updates but the VantageScores provided by Credit Karma are not used by many creditors for credit decisions and can vary to different degrees (they may be close or they may differ greatly -- there is no fixed offset) from the scoring models that creditors actually use. Additionally, as stated above, there are also significant differences in how Credit Karma and how FICO evaluate Average Age of Accounts and other factors.

I'd recommend that you carefully review your credit reports to verify exactly what all changes may have taken place. If you want to check your scores then take a look at your FICO 8's. Not all creditors use FICO 8's but it's still one of the mostly commonly used models in credit card approval decisions.
Taspy87 wrote:
Mon Apr 23, 2018 7:42 pm
Would I be best off just actually considering the many credit card "junk mail" offers I receive in the mail? Are the offers I get in the mail legitimate, as in do I still have to apply and risk being rejected again with yet another inquiry on my credit report?
Figure out where your credit stands first before taking more action to "fix" your problem. As someone stated above, also review the rejection letter for its reasons. In some cases it takes a bit of effort to sort out exactly what the problems are even with the letter.

Don't just respond to offers. They're just marketing. Once you've figured out exactly what's going on and have addressed anything that needs to be addressed then apply for a card that suits your specific needs/wants.
Taspy87 wrote:
Tue Apr 24, 2018 5:54 am
My mortgage is only 6 months old
Here are the issues that I see after looking over all your comments but there may be more that you haven't shared with us:

You have a thin profile with few accounts. More accounts and greater aged accounts will improve your credit. However, with the shape you're in you have to gradually build.
  • You have a fairly new credit account -- your mortgage.
  • You now have a poor mix of credit since you only have an active installment (mortgage) and no active revolvers (credit cards).
  • You probably are going to see a bigger impact from each inquiry given the above and because inquiries add to credit seeking activity.
Do you have any late payments, charge offs or other derogatory information on your reports? If so, you will want to see if you can address those as they will have significant impact as they will drag down your Payment History, the biggest factor. Your new mortgage and the inquiry are impacting New Credit. To some degree your new mortgage is also having an impact to Amounts Owed since your current balance is probably very close to the original loan amount. Luckily, loan to balance ratio on installments doesn't have anywhere near as much impact as utilization (balance/limit) on credit cards. See also:
https://www.myfico.com/credit-education ... dit-score/
dustinst22 wrote:
Mon Apr 23, 2018 10:54 pm
Yes, you can do this once a year at no cost for each bureau. You don't need to apply for something to do this.
The point being made was that since the OP was denied the OP can request a free copy of the credit report used in the decision. The denial letter should even state this. Yes, one can get reports via the Annual Credit Report site as well and should make use of it if not more frequently review reports.
dustinst22 wrote:
Mon Apr 23, 2018 10:54 pm
myfico.com is the best way to view your credit details, but it does cost money. I have found it worth it, as I do a lot of churning and like to monitor everything closely.
Best and worth are highly subjective. myFICO can be a good resource but it's not the only one. I'd also suggest Credit Check Total for a paid monitoring service that offers report data and FICO 8's. CCT updates on fixed intervals where myFICO updates based on trigger activity. Be aware that not all activity with a scoring impact are triggers for myFICO and that can make determining the cause(s) of a scoring change more difficult in some cases.
dustinst22 wrote:
Mon Apr 23, 2018 10:50 pm
The closed account obviously can no longe lengthen to improve your average age, but it will remain the same.
Closed accounts do age. As long as the account is on a report it factors into AAoA the same way. When the account falls off it is no longer factored into AAoA.

ragnathor
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Re: Credit Score and Credit Cards

Post by ragnathor » Wed Apr 25, 2018 9:33 pm

dustinst22 wrote:
Mon Apr 23, 2018 8:37 pm
ragnathor wrote:
Mon Apr 23, 2018 8:32 pm
Closing 1 of 2 accounts could potentially alter this significantly.
Closing an account wouldn't impact this. FICO scoring model looks at all accounts (both closed and open) when determining the average age.
Thanks for the correction. I have been using Credit Karma for the last 2 years assuming it was the same as FICO. Taking a look at Mint, looks like it uses the Vantage 3.0 scoring system as well (like Credit Karma). Any other major differences between Vantage and FICO? Perhaps I should go back to pulling my credit reports individually every year.

dustinst22
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Re: Credit Score and Credit Cards

Post by dustinst22 » Wed Apr 25, 2018 10:00 pm

ragnathor wrote:
Wed Apr 25, 2018 9:33 pm


Thanks for the correction. I have been using Credit Karma for the last 2 years assuming it was the same as FICO. Taking a look at Mint, looks like it uses the Vantage 3.0 scoring system as well (like Credit Karma). Any other major differences between Vantage and FICO? Perhaps I should go back to pulling my credit reports individually every year.
Yes, Vantage is a completely different model and not very useful as hardly any creditor uses it. To make things even more complex, there are several versions of FICO. FICO 8 is the most commonly used version currently.

BeneIRA
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Re: Credit Score and Credit Cards

Post by BeneIRA » Thu Apr 26, 2018 4:21 pm

Credit Karma’s score is pretty worthless. If you want get approved, I would recommend Discover IT or any American Express card. They approve mostly everyone. Amex is actually accepted most places. Open an incognito window on the site and maybe apply for the no fee Blue Cash Everyday.

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