Holy moly my credit score dropped like a rock!!

[Lynx310650]

With even standard bank savings hitting over 3%, I decided to play some credit card games by keeping balances on 0% APR offers, and also doing some 0% balance transfers. I've been keeping the extra savings in high interest savings and treasuries. I have been near maxing my credit on some credit cards (since those are the ones with the offers) but keeping my overall credit utilized fairly low (I have a lot of cards with pretty large maxes).

I was shocked to see my credit dropped from the low-mid 800s to the mid 600s in a matter of months!

Now I'm debating whether this was worth it and if I should just withdraw the money and pay these suckers off. Albeit I have no plans on any purchases that will utilize credit, but I'm worried this is going to impact stuff like my insurance.

If I pay off the balances will my credit score go right back up?

[exodusNH]

With even standard bank savings hitting over 3%, I decided to play some credit card games by keeping balances on 0% APR offers, and also doing some 0% balance transfers. I've been keeping the extra savings in high interest savings and treasuries. I have been near maxing my credit on some credit cards (since those are the ones with the offers) but keeping my overall credit utilized fairly low (I have a lot of cards with pretty large maxes).

I was shocked to see my credit dropped from the low-mid 800s to the mid 600s in a matter of months!

Now I'm debating whether this was worth it and if I should just withdraw the money and pay these suckers off. Albeit I have no plans on any purchases that will utilize credit, but I'm worried this is going to impact stuff like my insurance.

If I pay off the balances will my credit score go right back up?

I got dinged when I let one card get to 50%, even though it represented a fraction of my overall credit.

[Jack FFR1846]

Are you checking with Credit Karma? I find it really useful as it gives you a hint as to why your score did what it did and what you could do to make it better.

[Harmanic]

Credit utilization scores usually bounce right back up when the cards are paid off.

[prd1982]

Did you pull your credit report from the major providers to ensure no flags or unexpected cards opened?

[Lynx310650]

Did you pull your credit report from the major providers to ensure no flags or unexpected cards opened?

I check CK and Discover also gives me credit reports for free, everything looks good, no fraud. It's purely all the extra balances I've been ringing up and keeping.

[mrspock]

I find these credit scoring systems a joke once you get to significant net worth (>$3-4m liquid). They only see the liability side of the ledger and have no clue what liquid financial assets you have, which are (along with your payment history) obviously a huge factor in your "ability to pay" a given debt.

[safari]

Your score will bounce right back once you pay off those balances. The scoring model only considers the current credit utilization ratio, it has no memory.

[Invictus002]

With even standard bank savings hitting over 3%, I decided to play some credit card games by keeping balances on 0% APR offers, and also doing some 0% balance transfers. I've been keeping the extra savings in high interest savings and treasuries. I have been near maxing my credit on some credit cards (since those are the ones with the offers) but keeping my overall credit utilized fairly low (I have a lot of cards with pretty large maxes).

I was shocked to see my credit dropped from the low-mid 800s to the mid 600s in a matter of months!

Now I'm debating whether this was worth it and if I should just withdraw the money and pay these suckers off. Albeit I have no plans on any purchases that will utilize credit, but I'm worried this is going to impact stuff like my insurance.

If I pay off the balances will my credit score go right back up?

Just curious, can you share how you are taking advantage of the 0% APR arbitrage?

All my 0% APR offers have a 3% fee or is just 12-14 months.
Parking the balance transfres on high yield things just nets about 1.5% spread over 12 months with the BT fees etc (before taxes)

Would love to know more. Thanks.

BTW - once the balances are paid/per card utlization goes down, the scores come back up.

[billaster]

I find these credit scoring systems a joke once you get to significant net worth (>$3-4m liquid). They only see the liability side of the ledger and have no clue what liquid financial assets you have, which are (along with your payment history) obviously a huge factor in your "ability to pay" a given debt.

There are two separate aspects to lending -- ability to pay and willingness to pay.

Ability to pay says nothing about your willingness to pay. There are lots of people, including famous billionaires, with ability to pay that are cheapskates that either default or are chronically late in paying their bills.

Assets alone do not determine if you are a good credit risk. To get the best credit ratings you need to have a history of incurring debt and paying it off on time.

That is why folks who have no mortgage and no debt and pay off their credit cards each month don't necessarily have the highest credit ratings. Normally you need a history of willingly and faithfully paying off installment debt to get the highest rating.

[Lynx310650]

With even standard bank savings hitting over 3%, I decided to play some credit card games by keeping balances on 0% APR offers, and also doing some 0% balance transfers. I've been keeping the extra savings in high interest savings and treasuries. I have been near maxing my credit on some credit cards (since those are the ones with the offers) but keeping my overall credit utilized fairly low (I have a lot of cards with pretty large maxes).

I was shocked to see my credit dropped from the low-mid 800s to the mid 600s in a matter of months!

Now I'm debating whether this was worth it and if I should just withdraw the money and pay these suckers off. Albeit I have no plans on any purchases that will utilize credit, but I'm worried this is going to impact stuff like my insurance.

If I pay off the balances will my credit score go right back up?

Just curious, can you share how you are taking advantage of the 0% APR arbitrage?

All my 0% APR offers have a 3% fee or is just 12-14 months.
Parking the balance transfres on high yield things just nets about 1.5% spread over 12 months with the BT fees etc (before taxes)

Would love to know more. Thanks.

BTW - once the balances are paid/per card utlization goes down, the scores come back up.

2 are new credit cards. Another 1 was an existing card with a promotional offer. All 3 have no fees involved.

1 had a 2% fee, I figured I'd come out ahead on that one pretty easily.

The final (5th card) had a 3% fee, so that one is a bit more risky, but I still gambled I'll come out slightly ahead as interest rates rise over the year.

[Wannaretireearly]

Yep, my score went down to 750 ish. First time I carried a significant balance last year at 0%.

Did some quick math and decided to pay it off. I want my 800+ score back. I want (a better chance) of getting the Venture X credit card. Not sure this will do it, but not much lost by trying and paying off the 0% balance!

[celia]

With even standard bank savings hitting over 3%, I decided to play some credit card games by keeping balances on 0% APR offers, and also doing some 0% balance transfers.

If you do unusual things with your credit, you should expect unusual results.

[Invictus002]

Whats the use of keeping stellar credit scores, if you can't borrow to take advantage in situations like these?

Does a 650 credit score (with 100% good payment history), really affect anything else?

[lakpr]

Whats the use of keeping stellar credit scores, if you can't borrow to take advantage in situations like these?

Does a 650 credit score (with 100% good payment history), really affect anything else?

Insurance renewals.

[j.click]

+ this!

[Squirrel208]

With even standard bank savings hitting over 3%...

LOL, please tell us more about these 3%+ savings rates at standard banks. Last I looked the FDIC's Jan 17 report indicates that savings account rates are currently averaging around 0.33%, and Bankrate's Jan. 25 weekly survey last tallied them at 0.23%. The big brick-and-mortar banks likes Wells Fargo, Chase, BOA, US Bank are all even lower at a dismal 0.01%

[mrspock]

I find these credit scoring systems a joke once you get to significant net worth (>$3-4m liquid). They only see the liability side of the ledger and have no clue what liquid financial assets you have, which are (along with your payment history) obviously a huge factor in your "ability to pay" a given debt.

There are two separate aspects to lending -- ability to pay and willingness to pay.

Ability to pay says nothing about your willingness to pay. There are lots of people, including famous billionaires, with ability to pay that are cheapskates that either default or are chronically late in paying their bills.

Assets alone do not determine if you are a good credit risk. To get the best credit ratings you need to have a history of incurring debt and paying it off on time.

That is why folks who have no mortgage and no debt and pay off their credit cards each month don't necessarily have the highest credit ratings. Normally you need a history of willingly and faithfully paying off installment debt to get the highest rating.

I have two decades of payment history, not a single late payment. Clearly I have all of the above. Yet… if I close and old CC or lower my credit amount, or pay off a mortgage I held for a long period of time, my credit score will tank. Ridiculous. Honestly the dumbest system I’ve ever seen.

[Beensabu]

If I pay off the balances will my credit score go right back up?

In like 3 months, probably. You can't almost max stuff out w/o taking a hit. You're also risking other cards (the good ones) dropping your limit if you do that.

[feh]

With even standard bank savings hitting over 3%...

LOL, please tell us more about these 3%+ savings rates at standard banks. Last I looked the FDIC's Jan 17 report indicates that savings account rates are currently averaging around 0.33%, and Bankrate's Jan. 25 weekly survey last tallied them at 0.23%. The big brick-and-mortar banks likes Wells Fargo, Chase, BOA, US Bank are all even lower at a dismal 0.01%

All the major online banks (Ally, Synchrony, Marcus, etc) are paying 3.x% and have been for months.

[UpperNwGuy]

Pay off your balances and stop playing credit card games.

[PotashDoggerd]

VMFXX
Vanguard Federal Money Market Fund
Management style

Active
Asset class

Money Market
Category

Taxable Money Market
Risk / reward scale

1
Less

More

Expense ratio

0.11%
as of 12/21/2022

7 day SEC yield

4.29%

C

as of 01/27/2023

Investment minimum

$3,000
as of 01/27/2023

NAV price

$1.00
as of 01/27/2023

[Squirrel208]

With even standard bank savings hitting over 3%...

LOL, please tell us more about these 3%+ savings rates at standard banks. Last I looked the FDIC's Jan 17 report indicates that savings account rates are currently averaging around 0.33%, and Bankrate's Jan. 25 weekly survey last tallied them at 0.23%. The big brick-and-mortar banks likes Wells Fargo, Chase, BOA, US Bank are all even lower at a dismal 0.01%

All the major online banks (Ally, Synchrony, Marcus, etc) are paying 3.x% and have been for months.

Yes, I understand that. I have cash stored in an Ally HYSA, but only because the standard banks with brick-and-mortar branches, ATMs, bill pay capabilities, checking accounts, loan services, and safe deposit boxes etc. all offer paltry rates in comparison.

I interpreted the OP as claiming that standard banks are offering rates competitive to the service-specific online-only banks. If so, I want to get me some of that. Moving money back and forth between institutions just to get the higher rates, sometimes taking 3 or more days to do so, is a PITA that I'd like to avoid if possible.

[feh]

With even standard bank savings hitting over 3%...

LOL, please tell us more about these 3%+ savings rates at standard banks. Last I looked the FDIC's Jan 17 report indicates that savings account rates are currently averaging around 0.33%, and Bankrate's Jan. 25 weekly survey last tallied them at 0.23%. The big brick-and-mortar banks likes Wells Fargo, Chase, BOA, US Bank are all even lower at a dismal 0.01%

All the major online banks (Ally, Synchrony, Marcus, etc) are paying 3.x% and have been for months.

Yes, I understand that. I have cash stored in an Ally HYSA, but only because the standard banks with brick-and-mortar branches, ATMs, bill pay capabilities, checking accounts, loan services, and safe deposit boxes etc. all offer paltry rates in comparison.

I interpreted the OP as claiming that standard banks are offering rates competitive to the service-specific online-only banks. If so, I want to get me some of that. Moving money back and forth between institutions just to get the higher rates, sometimes taking 3 or more days to do so, is a PITA that I'd like to avoid if possible.

Ally has checking accounts. Transfers are instantaneous.

[billaster]

I find these credit scoring systems a joke once you get to significant net worth (>$3-4m liquid). They only see the liability side of the ledger and have no clue what liquid financial assets you have, which are (along with your payment history) obviously a huge factor in your "ability to pay" a given debt.

There are two separate aspects to lending -- ability to pay and willingness to pay.

Ability to pay says nothing about your willingness to pay. There are lots of people, including famous billionaires, with ability to pay that are cheapskates that either default or are chronically late in paying their bills.

Assets alone do not determine if you are a good credit risk. To get the best credit ratings you need to have a history of incurring debt and paying it off on time.

That is why folks who have no mortgage and no debt and pay off their credit cards each month don't necessarily have the highest credit ratings. Normally you need a history of willingly and faithfully paying off installment debt to get the highest rating.

I have two decades of payment history, not a single late payment. Clearly I have all of the above. Yet… if I close and old CC or lower my credit amount, or pay off a mortgage I held for a long period of time, my credit score will tank. Ridiculous. Honestly the dumbest system I’ve ever seen.

Correct. Your credit history is not permanent. If your credit history fades away, you no longer have credit history and are no longer a known risk. The only way you can demonstrate that you can handle debt is if you responsibly handle debt. A person who never has debt is not necessarily low risk. They are an unknown risk.

Some people have this weird morality issue about debt. Not having debt does not make you a better person who is a good debt risk. From the banks point of view, its not about morality. It's about business.

[lakpr]

The big brick-and-mortar banks likes Wells Fargo, Chase, BOA, US Bank are all even lower at a dismal 0.01%

Right. But these big banks offer juicy bonuses. Carpetbag these bonuses!!

Chase is right now offering $900 bonus, which requires tying up $15,000 for 90 days and a direct deposit into checking account at the same time. That's $900 yield for 90 days on $15,000 or comes to be 24% annualized yield!!

Wells Fargo has a $325 bonus offer, for opening a checking account, and direct depositing $1000 from payroll. Bonus paid out after 90 days. That's 130% annualized yield! (Maintain $500 in the checking account at all times to avoid monthly fees).

PNC Bank has $200 bonus for $2000 in direct deposit, and $400 bonus for $5000 in direct deposit.

I don't find good offers from BofA / US Bank, the other three have quite a lot of brick-and-mortar branches.

[Squirrel208]

Ally has checking accounts.

Thanks for the head-up and nudge. I just looked into that a bit and their available services for checking, mobile deposit, and online bill pay have improved considerably since we set up our HYSA there a few years ago. Definitely worth considering now.

Transfers are instantaneous.

They haven't been for us, and Ally has never promised us otherwise. There's always been a 3-day lag in EFT transfers, and they've never arrived sooner. For example, last month we moved $40K from Ally HYSA to our US Bank checking account. We initiated the transfer on 12/18 and the funds arrived on 12/20, as promised.

Regardless, Ally isn't a "standard bank" by any stretch of the generally accepted definition.

[Grogs]

I find these credit scoring systems a joke once you get to significant net worth (>$3-4m liquid). They only see the liability side of the ledger and have no clue what liquid financial assets you have, which are (along with your payment history) obviously a huge factor in your "ability to pay" a given debt.

There are two separate aspects to lending -- ability to pay and willingness to pay.

Ability to pay says nothing about your willingness to pay. There are lots of people, including famous billionaires, with ability to pay that are cheapskates that either default or are chronically late in paying their bills.

Assets alone do not determine if you are a good credit risk. To get the best credit ratings you need to have a history of incurring debt and paying it off on time.

That is why folks who have no mortgage and no debt and pay off their credit cards each month don't necessarily have the highest credit ratings. Normally you need a history of willingly and faithfully paying off installment debt to get the highest rating.

I have two decades of payment history, not a single late payment. Clearly I have all of the above. Yet… if I close and old CC or lower my credit amount, or pay off a mortgage I held for a long period of time, my credit score will tank. Ridiculous. Honestly the dumbest system I’ve ever seen.

Just FYI, my credit score didn't drop at all when I paid off my mortgage.

But yeah, when I ran up one CC to ~65% of the credit limit a few months ago, my score dropped from maybe 825 to 790 between when I made the charge and paid off the balance. If I had done that on 4-5 different cards, I'm sure I could have gotten a drop as big as the OP. As soon as I paid the one card off, my score popped right back up to where it had been.

[Invictus002]

By bogleheads standards, what ROI is worth this effort?
1%, 3% or 5%+

[Invictus002]

Whats the use of keeping stellar credit scores, if you can't borrow to take advantage in situations like these?

Does a 650 credit score (with 100% good payment history), really affect anything else?

Insurance renewals.

You mean like auto /homeowners?
Do they run credit for renewals?

When score is back up, do they drop the extra premiums?

[lakpr]

Whats the use of keeping stellar credit scores, if you can't borrow to take advantage in situations like these?

Does a 650 credit score (with 100% good payment history), really affect anything else?

Insurance renewals.

You mean like auto /homeowners?
Do they run credit for renewals?

When score is back up, do they drop the extra premiums?

Yes, like auto and homeowners insurance. Some states outlawed that but not all. Yes they run credit for renewals, it is a soft pull for existing customers and hard pull for potential new customers.

Not sure if they would drop extra premiums if the score is back up.

I pay for auto + home bundle during August, pay annually. Beginning in July until end of September I try to keep my debt to the barest minimum for this precise reason.

[lakpr]

By bogleheads standards, what ROI is worth this effort?
1%, 3% or 5%+

I would say 5%+ to tempt me into doing something like this, on after tax basis.

[feh]

Ally has checking accounts.

Thanks for the head-up and nudge. I just looked into that a bit and their available services for checking, mobile deposit, and online bill pay have improved considerably since we set up our HYSA there a few years ago. Definitely worth considering now.

Transfers are instantaneous.

They haven't been for us, and Ally has never promised us otherwise. There's always been a 3-day lag in EFT transfers, and they've never arrived sooner. For example, last month we moved $40K from Ally HYSA to our US Bank checking account. We initiated the transfer on 12/18 and the funds arrived on 12/20, as promised.

Regardless, Ally isn't a "standard bank" by any stretch of the generally accepted definition.

I meant transfers between Ally accounts is instantaneous, if you decide to open an account there.

[bberris]

I find these credit scoring systems a joke once you get to significant net worth (>$3-4m liquid). They only see the liability side of the ledger and have no clue what liquid financial assets you have, which are (along with your payment history) obviously a huge factor in your "ability to pay" a given debt.

The algorithm has proven reliable in its prediction of late payments and defaults. It is continuously modified for changes in creditor experiences. The situation you describe is very rare and won't influence the statistics.

If you don't like a prospective lender's opinion, you can appeal directly to the lender. They don't have to go solely by credit score, but that would require a human to act.

[dknightd]

I decided to play some credit card games . . . snip . . .

If I pay off the balances will my credit score go right back up?

Only one way to find out. Pay them off and see what happens.

[stoptothink]

With even standard bank savings hitting over 3%, I decided to play some credit card games by keeping balances on 0% APR offers, and also doing some 0% balance transfers. I've been keeping the extra savings in high interest savings and treasuries. I have been near maxing my credit on some credit cards (since those are the ones with the offers) but keeping my overall credit utilized fairly low (I have a lot of cards with pretty large maxes).

I was shocked to see my credit dropped from the low-mid 800s to the mid 600s in a matter of months!

Now I'm debating whether this was worth it and if I should just withdraw the money and pay these suckers off. Albeit I have no plans on any purchases that will utilize credit, but I'm worried this is going to impact stuff like my insurance.

If I pay off the balances will my credit score go right back up?

I'm doing the exact same thing, playing CC games with currently ~$20k on 0% APR credit cards, holding cash to pay them in HYSA and MMs. It took a while for it to hit, but my score recently went down from ~835 to 777. I assume it will go even lower before I pay these cards off sometime in '24. I have no need for more credit, so makes no difference to me.

[bling]

With even standard bank savings hitting over 3%, I decided to play some credit card games by keeping balances on 0% APR offers, and also doing some 0% balance transfers. I've been keeping the extra savings in high interest savings and treasuries. I have been near maxing my credit on some credit cards (since those are the ones with the offers) but keeping my overall credit utilized fairly low (I have a lot of cards with pretty large maxes).

can you please provide a little more detail of what is "near maxing" the credit cards, and "fairly low" utilization? are we talking > 90% maxing per card, and < 10% overall utilization or something else?

i picked up 0% APR credit card and i intend to arbitrage. even if i max out 100% of this card it will account for a whopping 3.3% credit utilization.

[michaeljc70]

Keep the balances less than 30% of the credit line per card and it won't be as big of an issue. You could have requested credit line increases before doing this. Now they probably won't raise the limits.

[bling]

Keep the balances less than 30% of the credit line per card and it won't be as big of an issue. You could have requested credit line increases before doing this. Now they probably won't raise the limits.

this is counter-intuitive. wouldn't banks be more likely to increase your credit limit if you're using 30% of it vs 1%? if the latter they would just tell you "no, you're not using the credit already given to you".

[michaeljc70]

Keep the balances less than 30% of the credit line per card and it won't be as big of an issue. You could have requested credit line increases before doing this. Now they probably won't raise the limits.

this is counter-intuitive. wouldn't banks be more likely to increase your credit limit if you're using 30% of it vs 1%? if the latter they would just tell you "no, you're not using the credit already given to you".

When you hit around 30% they start dinging your credit score. That means they think you are more likely to default. People request credit line increases with no balance all the time because they want to make a large purchase (like a vacation or something). Would you be more or less likely to lend someone money that already owes you money?

[SconnieBro]

OP: try business credit cards. I’ve been doing the same thing while collecting large SUBs. No negative impact on my personal credit score. Chase actually just doubled the limit on two of my Inks that I’ve been carrying balances on and was near max.

My balances being carried is a small percentage of our HHI though so that may be a factor here.

[H-Town]

With even standard bank savings hitting over 3%, I decided to play some credit card games by keeping balances on 0% APR offers, and also doing some 0% balance transfers. I've been keeping the extra savings in high interest savings and treasuries. I have been near maxing my credit on some credit cards (since those are the ones with the offers) but keeping my overall credit utilized fairly low (I have a lot of cards with pretty large maxes).

I was shocked to see my credit dropped from the low-mid 800s to the mid 600s in a matter of months!

Now I'm debating whether this was worth it and if I should just withdraw the money and pay these suckers off. Albeit I have no plans on any purchases that will utilize credit, but I'm worried this is going to impact stuff like my insurance.

If I pay off the balances will my credit score go right back up?

There‘s 2 other factors:

1) average age of your revolving credit accounts. Since you open new cards, this number decrease significantly.

2) every time you open a new card, bank will pull a credit check. It can impact negatively to your credit score

But over a period of time, you should see your score increase. Just not right away.

[EddyB]

I find these credit scoring systems a joke once you get to significant net worth (>$3-4m liquid). They only see the liability side of the ledger and have no clue what liquid financial assets you have, which are (along with your payment history) obviously a huge factor in your "ability to pay" a given debt.

There are two separate aspects to lending -- ability to pay and willingness to pay.

Ability to pay says nothing about your willingness to pay. There are lots of people, including famous billionaires, with ability to pay that are cheapskates that either default or are chronically late in paying their bills.

Assets alone do not determine if you are a good credit risk. To get the best credit ratings you need to have a history of incurring debt and paying it off on time.

That is why folks who have no mortgage and no debt and pay off their credit cards each month don't necessarily have the highest credit ratings. Normally you need a history of willingly and faithfully paying off installment debt to get the highest rating.

I have two decades of payment history, not a single late payment. Clearly I have all of the above. Yet… if I close and old CC or lower my credit amount, or pay off a mortgage I held for a long period of time, my credit score will tank. Ridiculous. Honestly the dumbest system I’ve ever seen.

I paid off the mortgages on a rental house and my primary home and watched my credit score fall from a consistent 845-850 to 740 or so, with 25 years of no missed payments. I was surprised.

[billaster]

I paid off the mortgages on a rental house and my primary home and watched my credit score fall from a consistent 845-850 to 740 or so, with 25 years of no missed payments. I was surprised.

That is because your credit score is based on your performance on two types of credit -- revolving credit like credit cards and installment loans like a mortgage or car loan.

If you only have one of these two types of credit, you can get an acceptably high score near 800 but to get the really high scores near 850, you need both.

The reason for this is because some borrowers treat the two type of credit differently. For example some people will pay their credit cards but let their mortgage payment slide because they can get away with that for a while. Others will always pay their mortgage to save their home but let their credit cards slide in order to do it. Because of these differences in the way borrowers handle credit, the best scores are based on performance on both types of credit.

Credit scores are based on demonstrating how well you handle credit. Credit scores are not based on having no debt because having no debt says nothing about how you will handle debt.

[michaeljc70]

I paid off the mortgages on a rental house and my primary home and watched my credit score fall from a consistent 845-850 to 740 or so, with 25 years of no missed payments. I was surprised.

That is because your credit score is based on your performance on two types of credit -- revolving credit like credit cards and installment loans like a mortgage or car loan.

If you only have one of these two types of credit, you can get an acceptably high score near 800 but to get the really high scores near 850, you need both.

The reason for this is because some borrowers treat the two type of credit differently. For example some people will pay their credit cards but let their mortgage payment slide because they can get away with that for a while. Others will always pay their mortgage to save their home but let their credit cards slide in order to do it. Because of these differences in the way borrowers handle credit, the best scores are based on performance on both types of credit.

Credit scores are based on demonstrating how well you handle credit. Credit scores are not based on having no debt because having no debt says nothing about how you will handle debt.

Presumably, you had a mortgage for 15 or 30 years and paid it on time so that does tell you something about how you will handle debt. Paying it off doesn't change that - but they do penalize you. If you have a paid off house creditors have something they can go after, but that is a different story.

[EddyB]

I paid off the mortgages on a rental house and my primary home and watched my credit score fall from a consistent 845-850 to 740 or so, with 25 years of no missed payments. I was surprised.

That is because your credit score is based on your performance on two types of credit -- revolving credit like credit cards and installment loans like a mortgage or car loan.

If you only have one of these two types of credit, you can get an acceptably high score near 800 but to get the really high scores near 850, you need both.

The reason for this is because some borrowers treat the two type of credit differently. For example some people will pay their credit cards but let their mortgage payment slide because they can get away with that for a while. Others will always pay their mortgage to save their home but let their credit cards slide in order to do it. Because of these differences in the way borrowers handle credit, the best scores are based on performance on both types of credit.

Credit scores are based on demonstrating how well you handle credit. Credit scores are not based on having no debt because having no debt says nothing about how you will handle debt.

I understand that, but I’d made timely payments—to satisfaction—on two mortgages from 2005 until 2021, so the degree to which my credit-worthiness was judged to decline seemed surprising—what’s the better proof than having actually repaid them?

[michaeljc70]

My mortgage has been paid off for around 2 years. My Vantage score (which is what Amex and Credit Karma give you) is around 820 and hasn't fallen much in the two years. My FICO score is just under 800 and that has been falling due to the mortgage being paid off.

[dickyboy]

I find these credit scoring systems a joke once you get to significant net worth (>$3-4m liquid). They only see the liability side of the ledger and have no clue what liquid financial assets you have, which are (along with your payment history) obviously a huge factor in your "ability to pay" a given debt.

Great analogy mrspock...you are absolutely right.

[lakpr]

My mortgage has been paid off for around 2 years. My Vantage score (which is what Amex and Credit Karma give you) is around 820 and hasn't fallen much in the two years. My FICO score is just under 800 and that has been falling due to the mortgage being paid off.

This was already addressed above by another poster. Mortgage is an installment credit, whereas credit cards are revolving credit. You need to have both and at least one of them needs to be current. It sounds like you have no more installment credit, and also that your revolving credit is thin too.

As someone who paid off the mortgage about three years ago (5 years early on a 15 year loan) my FICO score stayed at around 820 steady, plus or minus 5 points. I tend to churn credit cards, while hanging on to my oldest credit cards. The score drop is about 5 points when I apply for a new card, and rises back 1 point at a time as I use it. After the bonus period ends and I have no use for the card anymore, I cancel them.

I think the lack of installment credit is strongly overcome by more than 36 cards I opened/closed in my credit profile during the past decade.

[michaeljc70]

My mortgage has been paid off for around 2 years. My Vantage score (which is what Amex and Credit Karma give you) is around 820 and hasn't fallen much in the two years. My FICO score is just under 800 and that has been falling due to the mortgage being paid off.

This was already addressed above by another poster. Mortgage is an installment credit, whereas credit cards are revolving credit. You need to have both and at least one of them needs to be current. It sounds like you have no more installment credit, and also that your revolving credit is thin too.

As someone who paid off the mortgage about three years ago (5 years early on a 15 year loan) my FICO score stayed at around 820 steady, plus or minus 5 points. I tend to churn credit cards, while hanging on to my oldest credit cards. The score drop is about 5 points when I apply for a new card, and rises back 1 point at a time as I use it. After the bonus period ends and I have no use for the card anymore, I cancel them.

I think the lack of installment credit is strongly overcome by more than 36 cards I opened/closed in my credit profile during the past decade.

I'm not sure how opening and closing credit cards helps your credit score.