January 31, 2009
-
News: Puzzling Hole in FICO System.
Making sense of your FICO Score really can be puzzling. There seem to so many anomalies. What counts and what doesn't? Amex credit cards are confusing. Because they use a funky credit limit system, it's like a box of chocolates. You know, "You never know what…" For my four Amex accounts, they all show on my credit report with credit limit figures all above $7,000 even though I never use them anymore. May other other Amex credit card holders report that their max amount ever charged at one time shows up in their credit report as their limit. Still, others complain that, even though they use their Amex credit cards, their credit report doesn't even show any Amex account. Go figure.
Hard inquiries – who are these people? I show an inquiry from a credit card lender dating back two months ago. The comments section says: "Permissible purpose. This inquiry is scheduled to continue on record until Dec 2010." I had opened the credit card account (not Ames) way back in 1999 and closed it on good terms in 2002. Now, seven years later, their placing a ‘hard inquiry' in my credit report that will last through the year 2010, even though I've had no dealings with them. Who's to stop them? We've simply got to get to the bottom of this. So, in the upcoming articles, look for techniques in understanding what helps and what doesn't.
We already know that our FICO credit card scores are weighted as:
35% based on Payment History;
30% based on Amounts owed;
15% is based on Credit History;
10% is based on New credit; and
10% is based on the Types of Credit Cards we have.What about Hard Inquiries, Closing Accounts, Utilization Ratios and unrelated credit derogatories (not pertaining to credit cards)? We'll look more closely into these areas in the coming articles. When someone warns you that closing or opening a new credit card account will hurt your credit rating score, be advised that many other factors can change how these actions will effect your FICO Score. When it comes down to the effect of a changing Amex account, the safest advice is to check your credit report and see how it's affecting it now (if at all).