Factors Affect Credit Score Negatively

Yesterday, I posted an entry on credit score with a couple of items that I feel are important in getting a good score from my own experience. Last night at home, I went through several credit reports with credit score I obtained in the past few years, trying to find out what I have done in the past actually hurt my score. Generally, from all the discussions we have seen, we can expect the credit score to drop if we, for example, have late payments, or multiple inquires in a short period of time, or owe a large amount of money relative to the credit limit. However, knowing exactly what the credit bureaus consider as negative could be helpful in maintaining and improving credit score. The following are my findings from reports from all three credit agencies:

1. FICO Score 685 with Equifax report on May 1, 2003. Negative factors:

• You have recently been seeking credit or other services, as reflected by the number of inquiries posted on your credit file in the last 12 months. Applied for credit 4 times in the last 12 months.
• The length of time your accounts have been established is relatively short. Your most established credit obligation is 64 months old and your newest credit account was opened 1 month ago.

2. FICO Score 723 with TransUnion report on March 8, 2004. Negative factors:

• You have relatively high number of accounts with balances. You have 6 accounts where your balances last reported are greater than $0.
• The proportion of balance to credit limits (high credit) on your revolving/charge accounts is too high. The proportion of balance to credit limits (high credit) on your revolving/charge account is 11%.

3. FICO Score 699 with Equifax report on June 9, 2006. Negative factors:

• The proportion of balances to credit limits on your revolving accounts is too high. The proportion of balances to credit limits on your revolving accounts is 32%.
• The time since your most recent account opening is very recent. Your most recently opened account was 4 months ago.

4. FICO Score 769 with Equifax report on February 6, 2007. Negative factors:

• The time since your most recent account opening is very recent. Your most recently opened account was 8 months ago.

5. FICO Score 788 with Experian report on August 9, 2007. Negative factors:

• You have too many credit accounts with balance. You have 7 accounts with balance.

Summary

In addition to the negative factors listed above, the credit reports (with credit score) also provide information on what “average US consumers” did regarding their credits. Though we don’t know exactly how credit score is calculated, the averages could serve as indicators on whether or not our behaviors could have a negative impact on our credit score.

• Credit application: On average, US consumers applied for credit between just 1 and 2 times in the previous 12 months.
• Application interval: Most US consumers have an average interval of 20 months between credit applications.
• Balance to credit limit ratio: The average ratio for US consumers is about 30 to 40%.
• Credit history: For the majority of US consumers, the oldest account is about 15 years.
• Cards with balances: On average, US consumers have about 3 or 4 cards with balances.

Since I never had a late payment, I don’t know how damaging it could be in the credit score calculation. If you have experienced other factors that affect your score negatively, but are not listed, maybe you can share with us.

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