Here’s a little bit of consumer info that surprised me.
I got an email reminder that our Costco VISA card issued by Citi Bank includes monthly access to our FICO credit score. I thought it might be interesting to check it out, so I clicked through to see what I could learn.
We have always been financially conservative, and have assumed that if you didn’t carry a lot of debt, and paid off your bills every month on time, you would be considered a fine credit risk.
But now I learn that it might actually hurt our credit score.
It’s not that our credit score was bad, but according to City Bank, it was “impacted”–I presume they mean it was lower than it otherwise would have been–by two factors.
But both of these apparently negative factors are things that seem positive to me in my apparently naive “avoid debt-pay bills” approach to financial life.
First “key factor” reported–They say we don’t have enough “non-mortgage installment” debt, “such as auto or student loans.” Apparently if you don’t have enough consumer debt, they can’t quantify how well you manage your debt.
Well, that’s true. We try to pay our bills off as they are due, rather than accumulating debt. But it seems puzzling that this would result in a lower credit rating.
The second negative factor also caught me by surprise. Our credit cards and other monthly balances, like for broadband, telephone, and similar services, are paid off automatically each month on or before the due dates.
According to the notice, our score “was impacted by having too many accounts with balances,” even though they were all paid off on time, and always have been.
Live and learn, I guess.
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Is the whole credit score thing only in America? A friend of mine in Australia said they don’t have that kind of a system there, and was baffled that we do.
It’s a system rated by banks who WANT you to borrow: thru credit cards, bank loans for some new all-frills car, or to buy a house beyond your means. It’s so transparent a scheme.?
I made the mistake of cancelling my American Express (then the Costco approved card). Payments were due 19-20-21 days after the billing, not always 30 days like all others. I missed 1 day. They charged a fee for that late charge and another the month following, so I let them know. What they don’t tell you is that YOUR credit score gets dinged; the card co assumes no fault. Costco must’ve gotten more than my complaint, as they are now VISA. Lesson: just cut up the cards you don’t use.
Costco changed from Amex to Visa not because of complaints like yours, but because Visa offered a higher bid to Costco.
Your credit score is high, but the listed factors affecting it are all negative? That may just be how they do it. I don’t think they ever list the reasons why your score is high. You get those reports, you feel like you’ve done something wrong. You haven’t done anything wrong.