Here's my question -

I've got a Costco Amex card with a $10k limit that I normally charge about 3-4k/month on for business expenses. It is paid off in full every month and has a fantastic cash back program (I'm getting a check for about $700 this month in rebates).

I've got a Visa card that has a $43k limit that I put between $500-700 a month on, and pay off in full every month.

Does FICO look at each card individually with respect to credit utilization, or does it combine all the credit limits and balances and then figure out the utilization?

Looks like I might have to keep my Capital One card after I pay it off this month after all... :(

@JulesWinnfield: LOL! That is a big pet peeve of mine. Also, spelling "embarrass" wrong.

@JulesWinnfield: "Judgement" is the older and more common spelling. In fact, the oldest known form of the word is "iuggement". The "e" wasn't dropped until the 15th century.

@JulesWinnfield: Be not so quick to, ya know, because there's more than one way to spell it. "judg·ment also judge·ment" [dictionary.reference.com]

Cn't nybdy spll jdgmnt crrctly???

NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO!
I used to pay off all my credit cards and then close them because they represented evil, WTF!!!!!!! There goes my score...

I was happy with the old system, mostly because I am a cash is king kind of guy. Now because I choose not to have a credit card will have a bigger effect. Guess its time to get one so I have the super power of charge back if necessary.

@Ben Popken: According to the dictionary. Having the "e" in the middle is a British thing. Judgement is only valid if you spell color with a "u".

4. Having less available credit will drag down your score more.

6. Closing accounts will bring down the score.

So, that's a no-win situation it seems...

@Roy Hobbs: ITs a total I believe. This is why when closing out old/unused cards its important to look at how it affects your total line of credit. IE, you have 3 cards for 10 k a piece, say all have 4 k on them, thats 12k/30 k total, you consolidate to 2 cards, close the third, you now have 14k/20k which is much worse.

@Roy Hobbs:

It looks at the aggregate

Total Credit Limit = 53K
Total Credit in use = 3500-4700
Total utilization = 7-9%

Which is considered excellent

Okay, so I have two credit cards. I have a Victoria's Secret card ($500 limit and no balance) and a Visa ($900 limit, 700 balance- I know, but I'm paying it off slowly!) My credit scores aren't great, really, but they're not bad. 702 from everyone but experian, who gave me 655.

I applied for and received a student loan for this semester. So, is all of this going to raise my number or lower it? I need a little clarification.

I don't like the "diversity" bit. Someone who has a healthy financial portfolio probably won't have a student loan, and a car loan, and credit cards, and personal loans, and a mortgage. They might have a mortgage and some credit cards they pay off every month, but not a slew of various debts.

Dave Ramsey calls FICO scores an "I love debt" score. These changes do nothing but reinforce that perception.

@Corporate_guy: Actually, both spellings are used in British and American English, per the OED.

"1884 [London] Times (weekly ed.) 5 Sept. 3/1 In his judgment they..had no occasion to bow down to any one."

"2001 Bloomberg Money Dec. 31/1 There is no rule that is set in stone... I'm afraid you have to make a judgement call on each case."

How are they defining diversity? Is it just revolving vs. installment? Or are they actually distinguishing between all of those types of loans. I have credit cards and student loans, but am going to be punished for not having a car loan or a mortgage or some other type of loan?

@InfiniTrent: I agree with Dave on this one, everyone bows doen to the alter of FICO, how do i raise my score, how will this effect my score, I have to charge this much each month, and then pay off this much. Now you have to go get a car loan, mortgage, and other diversified debt, what a joke.

I don't use debt except for the house, fortunately I will not need a new one for many years, but I guess I will have to deal with my local bank that doesn't punch up the old computer and what for it to spit out my unworthiness. They look at me as a customer, and evaluate me on my income and financial well being. Last time I checked my number had gone done from 760 to 715, because I closed all my accounts.

@hoffmeister_hoff:

Wow, my wife and I going to look golden at that point.

We each have around 90k in available credit on individual cards plus the joint with is 75k, but we only charge about 6k total per month personal (and it's paid off every month). My business card won't be so nice. 50k limit (I might get that upped, but I didn't need to worry about it before), and about 15k-25k in expenses monthly. Ouch. Or is this new system just for individuals?

Does available savings / checking balance affect this? We do keep quite a bit of dosh in the savings accounts each and a bit in the checking (to deter fraud the savings and checking are NOT linked) at 2 banks / 2 credit unions. My business account has a larger floating balance (positive) as well.

@Corporate_guy: What is this "The Dictionary" of which you speak? New Collegiate? Merriam-Webster? New World? American Heritage?

"A single repossession, for instance, won't matter as much if everything else looks good." ...

Trust me, before that car was finally repossessed, the vast majority of deadbeats stiffed plenty of other unsecured debt.

So the US has a huge credit crisis going on and the best way to get it fixed is to give better scores to people who take on more debt and most likely with no real assets to show for it. What are people thinking?

@Brittany Stewart: Nobody can tell you for sure. My guess (again, purely a guess) is that your score will probably go down because you have a high debt ratio (50% of your $1400 total credit lines), and $1400 is a pretty low overall total available credit number.

The only way to know for sure is to check your scores (your actual FICO score, not the FAKOs that some people push) after the change.

@qwijybo: Eh, I don't know if they're specifically rewarding "more debt". Having a large credit line doesn't mean you have a lot of debt. I use nowhere near my maximum credit lines on my Citi or AMEX cards (and I mean NOWHERE close). Larger credit lines show you're trustworthy in the opinion of your creditors, so that should be reflected in the FICO score.

The "diversity of debt" thing freaks me out a bit...I'd like to learn more about that.

@Brittany Stewart: I'll add that under this new system, you should keep your old credit card accounts open forever...even if you quit using them, just cut the cards up and keep the accounts open to avoid a significant credit hit.

Since you're in college, you probably don't have a lot of credit history, so if you're responsible the next few years, you'll see strong increases in your score just as your credit history gets longer.

Obsessing about your FICO is like obsessing about your IQ or your megapixels or your MPG or your batting average. It's just a number. If you live so it rules your life, it rules your life.

For those of you who follow financial guru Dave Ramsey, your credit score is meaningless if you only buy with cash and buy when you can afford to pay fully in cash. If you follow this train of thought your credit score is just a number ... nothing more!

how often is FICO score updated? I am just asking cause i am about to pay 7 k in debt this coming month, It was all from a credit card i used to pay for my last semester at school.

Another thing I noticed is this thing called Vantage Score - which apparently widens the FICO range?

My score is 785, which I thought was pretty good. But Experian places it as a "C" grade - between 300 and 950.

Yes I'm obsessing over it. Plus a high limit card, (with zero or usually under $200 balance,) is in my partner's name, but been giving me good reports for four years.

Are domestic partners considered spouses??? Or will that card go away because it's a "friends" card
How do they merit a "spouse" other than common last name - which many legally married couples don't share.

Sooooo....
I have a credit card that will start charging me an annual fee this year that I don't want to pay. I was thinking of canceling it. It doesn't have a super high credit limit anyway and wouldn't greatly affect my available credit ratio.

A) Shouldn't I cancel it to avoid the annual fee I don't want to end up paying every year?

B) Are the rules retroactive? As in, are they going to start judging by the new rules for your actions tomorrow and onward or going back thru your entire life?

@Brittany Stewart: Before we got married, my husband had absolutely no credit cards but had gotten several car/personal loans from his bank. Since those loans were paid ON TIME EVERY MONTH without fail he had a pretty good credit score despite a few missed utility/cell phone payments. If you're deferring payment until after you finish school the loan will probably bring your score down, since your total debt will increase significantly, but in the long run a consistent payment history is a good thing.

@Inglix_the_Mad: Neither cash nor dosh have any effect on your credit score. It's a *credit* score. Investment accounts (401K, other stocks) don't show up either, but if you're taking out a large loan (house usually) they'll ask about it.

@henrygates:
Amen!

I payed off my student loans in less than 12 months.

I would think that should tell a lender. "Wow this guy is really good at repaying debt."

It should address your history. "He's had a car loan and payed it off in the past, He's had a mortage and payed it off in the past, He's had a Student loan and payed it off in the past."

Considering everything on my credit history is perfect and the only thing that keeps me from having a higher credit score is that I only have about $6,000 total credit limit and $1,000 in student loans, this is going to hurt my score.

For loans, does it count how much you have left on your loan, the original amount of your loan, or your amount owed on your loan compared to the original amount of the loan? My loan was originally $1,800 but I have paid off $800. Is that better or worse than having an $1,800 loan that I haven't started paying yet?

3. They will look at the total picture more. A single repossession, for instance, won't matter as much if everything else looks good.

Thank the score gods, I got screwed over by a Shop from the Future (they put the wrong address on the app and by the time I realized this the account had been sent to collections, two appeals later and still no change on my score) and it has kept me from getting any sort of decent credit at all. Hopefully this helps.

Meh. I have a mortgage, I just completed 10 years of school loan repayments, and have never missed a car payment in the same amount of time. I have an old-fashioned Amex that I pay off monthly. That's good enough for me.

If they don't want my business by giving me a bad rate based on some arbitrary score, to hell with them.

@Collie: Yes, I would like to see some kind of alternate scoring that takes in to account income, lack of other debt, and savings balances for the housing market. I will be paying cash for my vehicle and other big purchases, and don't want to be punished for such sound decisions.

So, what will happen is this:

The FICO score for scads of people will go down, causing banks to reduce credit or close credit lines, which will cause these people's FICO scores to go down, which will cause banks to reduce credit or close credit lines...

@InfiniTrent: My guess is that they won't look at the aggregate of diverse debt- say you have 30k in student loans, 30k on a car (gah, but realistic), 60k left on a house. They won't say you have 120k, but rather too much on a car and just about the right amounts on the house and student loans.

So when I pay off my car this year my score will go down :(

I only have about 20k-30k of credit card credit, should I start opening up new credit cards to get more available credit and boost my score?

Gee, am I being paranoid by thinking that banks, who issue cards, and are the largest FICO customers, had something to do with "6. Closing accounts will bring down the score?"

@sifr: well played, sifr.

The whole recessionary downward spiral is like the Prisoner's Dilemma, where everyone "defects" by saving money.

@BillyDee_CT: For those of you who follow financial guru Dave Ramsey, your credit score is meaningless if you only buy with cash and buy when you can afford to pay fully in cash. If you follow this train of thought your credit score is just a number ... nothing more!

Assuming you never rent an apartment, purchase car insurance, or apply for a job. All of those things are affected by your credit score, these days.

I'm hoping that the current financial crisis will wreck the credit of enough middle-class people that we'll finally see some pressure to end the use of credit scoring for non-debt-related transactions.

Eek, I'm a college student and unfortunately have high balances but always pay everything on time. Looks like mine is gone plummet down. :(

@qwijybo: I think you're ascribing motives to FICO that don't exist. The score is a risk-assessment tool. Presumably they're making these changes because they cause the score to better reflect the risk of making a loan. It's not because they've made some moral judgment about these actions.

@Valerie Flame: Often, they'll let you convert it to a non-annual fee card of some kind with the same card company. That way you preserve the amount of credit (and often, the date of issue) while no longer having to worry about the annual fee.

@Brittany Stewart:

Okay, so if I pay off my card more (like I intended when I got my loan money) my score will go up. This is good. However, because I don't have a really steady job I have to defer payments on my loan until I get out of school, which will be December of 2010.

It looks like my credit won't be great for a while, but at least I'm on the right track with making payments on time. Thanks everyone.

big whoop, I've already got a mortgage, a car loan, a student loan and more credit card debt than I know what to do with (but I'm paying down, thank jeebus).

Bring it on....

The diversity crap is what bugs me. I have great credit (750-790 depending on which bureau your looking at) but the 3 current items on my report are all credit cards. When I tried to get financing for a motorcycle that I bought last summer, the dealer couldn't get me financing unless I agreed to some ridiculous interest rate. They claimed that I was in a higher risk catagory, even though I have almost a two year history of NEVER EVER missing a payment. I ended up taking a balance transfer from an existing credit card and financed the whole thing at 0%.