Why is my Fico score so low?

The following is my Facebook post today, which I am interested to get thoughts on.

I just checked my Fico score and was unpleasantly surprised to see how low it is. If we assume scores are distributed on a uniform basis from 250 to 900, then that would mean 21% of people have a higher score. To put it in comparison to Texas Hold 'Em starting hands, my score is a Q-10 off-suit.

Maybe I should be thankful, but I don't see any reason why it shouldn't be a perfect 900. I absolutely loathe debt. Most bills I overpay and on my credit card I'm on auto-pay for the full balance. House payments I have always made on time and usually paid off well ahead of schedule.

On the plus side, I don't really care. I just feel insulted.

The question for the poll is what is your Fico score?

805-810 usually. Part of the score depends on how long you've had your longest piece of current credit. I just dropped an old credit card and it knocked my score down to 790. I loathe debt too, and having no debt is a bad thing for your credit score.

Quote: Wizard

The following is my Facebook post today, which I am interested to get thoughts on.

I just checked my Fico score and was unpleasantly surprised to see how low it is. If we assume scores are distributed on a uniform basis from 250 to 900, then that would mean 21% of people have a higher score. To put it in comparison to Texas Hold 'Em starting hands, my score is a Q-10 off-suit.

Maybe I should be thankful, but I don't see any reason why it shouldn't be a perfect 900. I absolutely loathe debt. Most bills I overpay and on my credit card I'm on auto-pay for the full balance. House payments I have always made on time and usually paid off well ahead of schedule.

On the plus side, I don't really care. I just feel insulted.

The question for the poll is what is your Fico score?

it's also how much credit you use compared to the overall credit you have.
ie: my FICO credit score as of 2 months ago is 825 out of 850, according to Capital One. (When did fico start using a 900 rating???)

like you, im debt free.
i have over a dozen credit cards, all with zero balance. I have maybe $100k worth of combined credit on those cards.
i use maybe $1k a month.
1k/100k = 1% usage.

the lower usage of your overall credit line, the higher your score.
also, length of credit card ownership helps too.
my oldest credit card is like 20 years old.

also, 6/2(2+1) = 6/2*3 = 9
but 20years ago, it would have been 6/6 = 1

Why did it change in that time???

My first question is how much revolving credit do you have? Personally, I have lots of credit cards because I try to AP all of the good airline offers. I keep about 20 credit cards in my safe (thankfully, none have a balance unless it is a 0% introductory offer). I just replaced the flooring in my house and put it all on a 0% card so that is the one card with a balance. Keeping a balance on your accounts actually helps the score a little as long as the ratio is less tan 10%.

I believe the current FICO scores max out at 850. Any FICO score over 740 will generally get you the best interest rates on future loans. My credit score usually hovers in the low 800's but recent late payments by my daughter on her student loan has lowered mine (I co-signed for her).

If you haven't tried CreditKarma, it is a great free site that will show you your scores and any derogatory remarks on your file. It will also warn you anytime new accounts are opened and any new negative remarks on the account.

FICO scores are not uniformly distributed. See figure 3:

https://www.fico.com/blogs/average-u-s-fico-score-hits-new-high

I find that the big drivers of score from my own historical experience:

1) Paying everything on time
2) Having a high Ratio of available credit to unused credit (so credit cards with a high limit but not very used).
3) never canceling a credit card

discovercard says my score is 844, showing a max of 850, and has been 850 at times

they also say:

Quote:

Your Score is calculated using positive and negative information on your TransUnion® credit report. It summarizes your risk to lenders at a specific point in time. FICO® Scores consider the following 5 categories of information. The breakdown below illustrates the significance of these categories for the general population. Note, however, that your individual score may give some factors more or less importance based on the information in your credit report.

Payment history: 35%
Amount you owe: 30%
Length of credit history: 15%
New credit opened: 10%
Types of credit you have: 10%

they also show a chart indicating average scores increase with age alone, and I am getting a bit long in the tooth

Thanks for the great comments everybody.

As to the max score, What Is a Perfect Credit Score? gets into the 900. Briefly, my interpretation is there is a separate fico score for auto loans, that goes to 900.

As to canceling credit cards, yes, I do that sometimes. I have been known to take advantage of some promotion, use the card once, pay it off ASAP, never use it for about a year, and then cut it in half and send it to the company.

Currently I have one credit card with a $500 limit and another with $19,000. Strange.

Quote: Wizard

Thanks for the great comments everybody.

As to the max score, What Is a Perfect Credit Score? gets into the 900. Briefly, my interpretation is there is a separate fico score for auto loans, that goes to 900.

As to canceling credit cards, yes, I do that sometimes. I have been known to take advantage of some promotion, use the card once, pay it off ASAP, never use it for about a year, and then cut it in half and send it to the company.

Currently I have one credit card with a $500 limit and another with $19,000. Strange.

I would suggest that you apply for more no annual fee credit cards. When they show up activate them and tuck them away to never be used. Or, just use them enough to achieve the signup bonus and then put them away.

Quote: Wizard

Maybe I should be thankful, but I don't see any reason why it shouldn't be a perfect 900. I absolutely loathe debt. Most bills I overpay and on my credit card I'm on auto-pay for the full balance. House payments I have always made on time and usually paid off well ahead of schedule.

I'm the same way, and mine is usually around 800. I am under the impression that it's not higher than that because I don't have debt - which means there is no evidence that if I did need to have debt for some reason, then I would be able to pay it off.

I bought a new car recently, and paid cash for it, but as part of the process, I had to put in a credit application - which ended up being turned down because I had a poor history of auto loans. In this case, "poor history of auto loans" means, "I haven't made car payments since 1988"; when I bought my first car in 1984, somehow I ended up with a 19%/year note, so ever since then, it has always been cash up front.

Quote: ThatDonGuy

I'm the same way, and mine is usually around 800. I am under the impression that it's not higher than that because I don't have debt - which means there is no evidence that if I did need to have debt for some reason, then I would be able to pay it off.

I bought a new car recently, and paid cash for it, but as part of the process, I had to put in a credit application - which ended up being turned down because I had a poor history of auto loans. In this case, "poor history of auto loans" means, "I haven't made car payments since 1988"; when I bought my first car in 1984, somehow I ended up with a 19%/year note, so ever since then, it has always been cash up front.

I don't know your exact situation, but it is generally not the best to pay cash for the car. Many manufacturers offer a 0% loan for 60 months and by financing it you can get a better price on the car as the dealer makes a few hundred dollars for selling the loan. When I can I finance the car and pay it off when the first bill comes. I am an ardent believer in saving every dollar possible when buying a car and if the dealer can make a couple hundred dollars off me from selling the loan, then I expect to get the car for a couple hundred dollars less and it didn't cost me anything to finance.