I’ve been subscribed to a service (MyCreditInform), which allows me to look up my credit score at any time, as well as giving me some good pointers and advice on WHY and HOW certain items in my credit report are affecting my score, and DETAILS on what accounts I have open, balances, etc.  There are also what-if tools which allow me to “test” things like “What if I cancel this particular card” or “What if I pay this card’s balance down to less than 50% max limit”, etc.  Overall I’ve been rather happy with it.

I DO know we are allowed to get a FREE report from each of the three credit reporting agencies once a year.  If you time each of the three out across the year, that’s a free report every 4 months. The government webpage describing free access to credit reports is here.  The site they refer to is AnnualCreditReport.com which will give you access to all three reporting agencies.

A new (free) site I recently heard about on Clark Howard’s national radio program is CreditKarma.com which seems to have LOTS of the same tools a MyCreditInform for evaluating why your credit score is what it is.  As well as showing what your current score is, and many other goodies.  The only thing this site doesn’t seem to do is give you all the full details about exactly what accounts you have open, and specific account history.  Again, you can get that free at AnnualCreditReport.com (total 3 times a year) or for a small monthly fee at MyCreditInform.com (unlimited).

Anyway, one of the MAIN reasons I wanted to write this particular entry was because last quarter my score had been up around 790, but has now dropped to near 760!  Of course, I had to look in to why, and found some (now obvious) information I thought I’d share to perhaps help others.

The main reasons for the rather large drop is because I was looking to get my first Discover Card and Home Depot credit card to have a few more different types of cards, and since one of my earlier cards was closed out on me (due to inactivity).  So, I have those 2 new inquiries showing on my report, PLUS now that I have them (and they are brand new), they are adding to a reduced “average age” of all my cards, which is now at about 3.5 years.  Since I got a late start with my credit (had been always paying cash), my oldest card is only 8 years.  Along with that, I got 2 other credit cards a few years ago, which now means 4 new accounts in the last 24 months which is having an additional negative effect.  On top of the credit cards, I’ve been looking to buy a new house (property) and not being very picky, so the “looking” has been going on since last October, and so now there have been 3 hard credit inquiries for that spread out over the last 12 months.  And something I hadn’t thought of…. I have a balance (owe something) on 50% of my cards.  Now THIS is a bit odd for a negative, because I do pay off the full balance of all my 12 cards each month, but because 6 of them currently have some balance (even $4 and $12) they are seeming to have an effect.  According to CreditKarma.com, 29.7% of their users have 11-20 cards, but I’m surprised to see that even 21% have 21-30 cards.  I also just finished refinancing my current house with a new lender, and while there is no clear sign of the effect, I am sure that plays in a little as well.

Overall, I’m not worried about the current drop.  As the 2 new cards get some time passed they won’t affect the average age as much, and the new cards will help to build a higher score, and help to keep current usage under 50%.  The hard inquiries will drop off in several months, and I’ll finally make it over 800 for the first time! — I’d say by next Summer that goal will be reached.

Some final info (as found on Credit.com)… Payment History accounts for 35% of your score.  Amount of Debt accounts for 30% of score, which is calculated as Total Balances / Total Credit Limits = Your Revolving Utilization, and so having more cards while keeping balances low can have a dramatic effect.  Types Of Accounts determines 10% of your credit score which can be a bit confusing, but described well here. Basically the message here is to have a wide variety of accounts (mortgage, auto, credit card, student loan, signature, etc) – and even historical (closed) accounts count.  Having a mortgage is a “must” (the page says) and auto loan counts big too.. as well as “not too many” credit cards… avoid finance companies… but a lot of this Account types section is more fuzzy than Payment History and Amount of Debt.  Age of Accounts (oldest account and average) makes up 15% of your score.  And finally, (hard) Inquiries over the last 24 months make up the last 10% of your score. A VERY good description and example of how inquires can be bad is seen near the bottom of this page.

Hope this helps someone else too!

David

This month, it looks like this:

Your Current Equifax Score is: 777

Over time, your score has changed as shown:

738   743   746   777   Apr ‘07 Jul ‘07 Oct ‘07 Jan ‘08