107 point credit ding from large purchase: how long to recover?

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muffins14
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107 point credit ding from large purchase: how long to recover?

Post by muffins14 »

So I could have absolutely avoided this, but I didn’t, and I’m surprised at the magnitude of impact.

I “had to” make a large purchase for a relative who passed away (think funeral expenses and a memorial event for a large group people at a nice venue, not unlike what a wedding reception might be). I put the amount on my credit card, about $25k, and the card max was about $40k. Edit: The card is a Fidelity Visa.

I just let it auto-pay the full balance rather than paying it off early, manually, which means the statement amount was sent to credit bureaus. Somewhat to my surprise, my credit score (per credit karma) went from 795 to 688. I assumed it might go down a little, but that feels a little intense.

Any idea what the time for the road to recovery looks like there? The amount was paid off as soon as the monthly payment was auto-paid.

It is relevant because I am considering applying for financing in Q1.

Edit: Super cool credit tracker below:
11/7: Credit Karma score ~795
11/8: Statement closes for the period 10/12-11/8 that had the $25k balance
12/1: Auto payment executes, back to 0 balance
12/4: I check credit karma - score is now 687
12/8: Statement closes for the period 11/9 - 12/8
12/9: No CreditKarma update yet, also checked Chase, no update
12/12: A lender did a soft credit check for me - FICO 3 score was 724. Much better than Credit Karma's score of 687 on this date
12/23: FICO score 739 via Experian from another lender running a credit check for a mortgage. Credit Karma still at 687 for VantageScore 3.0
12/27: Credit Karma still at 687 for VantageScore 3.0
1/4/2023: Credit Karma at 686, as a hard pull came on. Still no updates from the expected reporting to the bureaus on 12/30
1/5/2023: Credit Karma got updated info from Equifax only. VantageScore is 795 with Equifax and 686 with TransUnion.
1/5/2023 2 hours later: TransUnion also updated + 105 points.

All done here
Last edited by muffins14 on Thu Jan 05, 2023 8:58 am, edited 10 times in total.
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8foot7
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Re: 107 point credit ding from large purchase: how long to recover?

Post by 8foot7 »

As soon as you pay it down, it will recover. Next month, most likely.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by yolointopants »

muffins14 wrote: Mon Dec 05, 2022 7:39 am So I could have absolutely avoided this, but I didn’t, and I’m surprised at the magnitude of impact.

I “had to” make a large purchase for a relative who passed away (think funeral expenses and a memorial event for a large group people at a nice venue, not unlike what a wedding reception might be). I put the amount on my credit card, about $25k, and the card max was about $40k.

I just let it auto-pay the full balance rather than paying it off early, manually, which means the statement amount was sent to credit bureaus. Somewhat to my surprise, my credit score (per credit karma) went from 795 to 688. I assumed it might go down a little, but that feels a little intense.

Any idea what the time for the road to recovery looks like there? The amount was paid off as soon as the monthly payment was auto-paid.

It is relevant because I am considering applying for financing in Q1.
The score you see on your credit card may or may not be the score the bank uses. I asked the difference once and the loan officer said they can slice and dice consumer credit like it's a dim sum cart and get exactly the criteria they want to establish a score specific to that institutions desire. It was within 5% of the "free credit score" things you see, but not 5% in my favor.

Second, When I use about 1/3 of my credit, my score drops too and then usually goes back up in about 1-2 months when the available credit utilization returns to 100%.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by MrJedi »

Approximately 1 month. Basically as soon as the updated balance gets reported. For most banks the reported balance is the monthly statement balance.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by Jack FFR1846 »

If you've paid it off, next credit report will show it back up. It's standard to keep your spending no more than 10% on any one card and also on your entire credit. Going above on one may jump it on the total as well, which dings you twice. I watch this spending really closely and if spending on a card gets near 10%, I go online and make at least a partial payment so that when the statement date arrives, the amount owed is under 10%.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by muffins14 »

Thanks. It’s a bit funny how binary these systems can appear. Had I paid it one day sooner, my score and, if I applied for financing now, my interest rate, would have been so much different.

I’ll report back in the thread as credit karma updates.

Let’s say I “discovered” the drop on 12/4, and the payment posted on 12/1. The next statement closes around 12/8
Last edited by muffins14 on Mon Dec 05, 2022 7:51 am, edited 1 time in total.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by nolesrule »

The credit utilization component is always based on the most recent reported balance. So it changes every time a credit account balance is reported to a credit bureau. it has no memory.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by Supergrover »

I took a ding, although not as big as yours. I paid the full amount when the stmt. came. Two months later the score was back to normal.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by JoMoney »

It will recover quickly (a few months, depending on your "credit score" source.)
As long as you know what the cause was, and that it wasn't from some sort of fraudulent activity, I wouldn't worry about it.
Outside of getting a home mortgage, and even that form of debt isn't exactly a good thing, I don't understand the concern with playing the credit score game. Having a high credit score also makes you a higher target for identity theft.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by muffins14 »

JoMoney wrote: Mon Dec 05, 2022 7:54 am It will recover quickly (a few months, depending on your "credit score" source.)
As long as you know what the cause was, and that it wasn't from some sort of fraudulent activity, I wouldn't worry about it.
Outside of getting a home mortgage, and even that form of debt isn't exactly a good thing, I don't understand the concern with playing the credit score game. Having a high credit score also makes you a higher target for identity theft.
Thanks. Indeed I’m interested in the score currently precisely because of a possible mortgage search in the next 3 months or so
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Re: 107 point credit ding from large purchase: how long to recover?

Post by Onlineid3089 »

JoMoney wrote: Mon Dec 05, 2022 7:54 am It will recover quickly (a few months, depending on your "credit score" source.)
As long as you know what the cause was, and that it wasn't from some sort of fraudulent activity, I wouldn't worry about it.
Outside of getting a home mortgage, and even that form of debt isn't exactly a good thing, I don't understand the concern with playing the credit score game. Having a high credit score also makes you a higher target for identity theft.
Agreed, but I do wonder about the last part. How would someone who wishes to engage in identity theft know who has a high or low credit score?
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Re: 107 point credit ding from large purchase: how long to recover?

Post by Stinky »

muffins14 wrote: Mon Dec 05, 2022 7:48 am I’ll report back in the thread as credit karma updates.
Please do post back as your credit score evolves.

I’m interested in how this works out for you.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by JoMoney »

Onlineid3089 wrote: Mon Dec 05, 2022 8:21 am
JoMoney wrote: Mon Dec 05, 2022 7:54 am It will recover quickly (a few months, depending on your "credit score" source.)
As long as you know what the cause was, and that it wasn't from some sort of fraudulent activity, I wouldn't worry about it.
Outside of getting a home mortgage, and even that form of debt isn't exactly a good thing, I don't understand the concern with playing the credit score game. Having a high credit score also makes you a higher target for identity theft.
Agreed, but I do wonder about the last part. How would someone who wishes to engage in identity theft know who has a high or low credit score?
It can be implied by credit offers or credit cards being sent to you, and found directly by simply pulling your data from the credit reporting agencies the same way you check your own "score" or through the info provided to other commercial companies offering credit. ID thieves aren't above lying about being a legitimate purpose to pull your credit dossier, and there's an unfortunate amount of that data spilled in data leaks by even those with some "legitimate" purpose for having it.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by enad »

muffins14 wrote: Mon Dec 05, 2022 7:39 am So I could have absolutely avoided this, but I didn’t, and I’m surprised at the magnitude of impact.

I “had to” make a large purchase for a relative who passed away (think funeral expenses and a memorial event for a large group people at a nice venue, not unlike what a wedding reception might be). I put the amount on my credit card, about $25k, and the card max was about $40k.

I just let it auto-pay the full balance rather than paying it off early, manually, which means the statement amount was sent to credit bureaus. Somewhat to my surprise, my credit score (per credit karma) went from 795 to 688. I assumed it might go down a little, but that feels a little intense.

Any idea what the time for the road to recovery looks like there? The amount was paid off as soon as the monthly payment was auto-paid.

It is relevant because I am considering applying for financing in Q1.

Edit: Super cool credit tracker below:
11/7: Credit Karma score ~795
11/8: Statement closes for the period 10/12-11/8 that had the $25k balance
12/1: Auto payment executes, back to 0 balance
12/4: I check credit karma - score is now 687
12/X: Statement closes for the period 11/9 - 12/X. Credit karma score is Y
Experian had this to say about credit and large balances
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Re: 107 point credit ding from large purchase: how long to recover?

Post by Watty »

muffins14 wrote: Mon Dec 05, 2022 7:48 am Thanks. It’s a bit funny how binary these systems can appear. Had I paid it one day sooner, my score and, if I applied for financing now, my interest rate, would have been so much different.
It actually makes because if you suddenly have a large credit card balance and you then apply for a new credit card that could be a sign that something is going on where you are having money problems and juggling the balances on your credit cards.

Next month when it is paid off I would not be surprised if the credit score not only recovers but if it actually improves because you have a better history of paying off debt.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by Grogs »

I just had something similar happen. I charged a somewhat unexpected $12k on a card with a 20k limit. I can pay it off, but not until the due date 45 days later. My drop was only about 30 points though. A 109 point drop seems excessive. Luckily I'm not getting a mortgage or anything so I'm not too bothered by a 30-point drop.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by lstone19 »

Just went through this myself. Due to an expected $10K charge plus a $10K mistake by a hotel (quickly caught but the charge posted on the last day of the statement period and the correcting credit on the first day of the next period), my balance on one card jumped $20K and my credit score dropped about 50 points. But as soon as the next period's balance for that credit card made it to the reporting companies, it jumped right back up.

February will be very interesting. We are currently in the process of moving and expect somewhere between $30K and $50K to hit cards around then. It will all be paid in full as they become due but it will be interesting to see how much of a drop I get for that month. I will not care as we will not be applying for any credit then.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by sc9182 »

Most of the CCs allow paying debt/credit multiple times in a month.
Don’t necessarily wait for statement generation- pay as you go

We have auto pay of some low three digit amount twice a month ; in-addition will also check-transactions periodically, ensure no mysterious ones appear, then proceed to pay-off then-current full balance.

It’s a bit extra work - but prevents mystery/incorrect/fraudulent transactions charged on CC - can take care of odd-ball charges lot easier.

Good luck ..
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Re: 107 point credit ding from large purchase: how long to recover?

Post by muffins14 »

sc9182 wrote: Mon Dec 05, 2022 10:26 am Most of the CCs allow paying debt/credit multiple times in a month.
Don’t necessarily wait for statement generation- pay as you go

We have auto pay of some low three digit amount twice a month ; in-addition will also check-transactions periodically, ensure no mysterious ones appear, then proceed to pay-off then-current full balance.

It’s a bit extra work - but prevents mystery/incorrect/fraudulent transactions charged on CC - can take care of odd-ball charges lot easier.

Good luck ..
I am aware of this option, which is why I noted that it could have absolutely been avoided in my first sentence.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by lstone19 »

sc9182 wrote: Mon Dec 05, 2022 10:26 am Most of the CCs allow paying debt/credit multiple times in a month.
Don’t necessarily wait for statement generation- pay as you go
Of course they do but one reason for running a lot of stuff through credit cards is for the float. Paying it off before the due date has an opportunity cost - the foregone interest you would earn on the interest.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by exodusNH »

muffins14 wrote: Mon Dec 05, 2022 8:11 am
JoMoney wrote: Mon Dec 05, 2022 7:54 am It will recover quickly (a few months, depending on your "credit score" source.)
As long as you know what the cause was, and that it wasn't from some sort of fraudulent activity, I wouldn't worry about it.
Outside of getting a home mortgage, and even that form of debt isn't exactly a good thing, I don't understand the concern with playing the credit score game. Having a high credit score also makes you a higher target for identity theft.
Thanks. Indeed I’m interested in the score currently precisely because of a possible mortgage search in the next 3 months or so
Most banks use a completely different score when evaluating you for a mortgage. You could try looking at that score, which will probably not be free, to get an idea of how that was affected.

The scores you get for free, including those from your credit cards, are correlated to, but not the same as, the ones mortgages use. They can also vary widely. One of my CC scores is from TransUnion. It is consistently 40 points lower than the scores from Experian and Equifax, even though the free US-mandated credit report shows no differences between the three. I've even requested the full, mailed reports from the companies after an "adverse credit decision" (which in that case meant I wasn't approved for the best rate and was eligible to get a copy) and saw no differences that seemed meaningful.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by sc9182 »

lstone19 wrote: Mon Dec 05, 2022 10:31 am
sc9182 wrote: Mon Dec 05, 2022 10:26 am Most of the CCs allow paying debt/credit multiple times in a month.
Don’t necessarily wait for statement generation- pay as you go
Of course they do but one reason for running a lot of stuff through credit cards is for the float. Paying it off before the due date has an opportunity cost - the foregone interest you would earn on the interest.
We don’t play/get-cute-with float/interest games with CC companies nor Tax-authorities/Treasury.

Nor, do we charge $10k,20k,30k monthly to cards either (once in random, yes, not each month) - so any float we are talking., is peanuts (for us anyway, sorry not trying to generalize) - also, allow us to repeat - “we don’t get cute with” CC/tax entities. If any., we may over-pay a little (than underpay) and try-to avoid getting into many-a-kinds of issues.

BTW - we still receive fully our 2.65% reward (or higher in some categories) — no need to wait for statement balance for “rewards points/cash”
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Re: 107 point credit ding from large purchase: how long to recover?

Post by exodusNH »

lstone19 wrote: Mon Dec 05, 2022 10:31 am
sc9182 wrote: Mon Dec 05, 2022 10:26 am Most of the CCs allow paying debt/credit multiple times in a month.
Don’t necessarily wait for statement generation- pay as you go
Of course they do but one reason for running a lot of stuff through credit cards is for the float. Paying it off before the due date has an opportunity cost - the foregone interest you would earn on the interest.
Will an extra 5 days of float really have a meaningful impact on your finances? And if it's a meaningful amount, you likely have so much money that it's irrelevant to your success.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by lstone19 »

exodusNH wrote: Mon Dec 05, 2022 11:01 am
lstone19 wrote: Mon Dec 05, 2022 10:31 am
sc9182 wrote: Mon Dec 05, 2022 10:26 am Most of the CCs allow paying debt/credit multiple times in a month.
Don’t necessarily wait for statement generation- pay as you go
Of course they do but one reason for running a lot of stuff through credit cards is for the float. Paying it off before the due date has an opportunity cost - the foregone interest you would earn on the interest.
Will an extra 5 days of float really have a meaningful impact on your finances? And if it's a meaningful amount, you likely have so much money that it's irrelevant to your success.
Five days? Not much. Almost two months? More so. Some charges I can time to be just after the statement period closes so it doesn't need to be actually paid for almost two months. Regardless, in the current interest rate environment, I estimate the credit card float is getting us an extra $200 per year in interest. Not make or break but better than worrying about eking out a few extra points on an 800+ credit score.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by billaster »

muffins14 wrote: Mon Dec 05, 2022 7:48 am Thanks. It’s a bit funny how binary these systems can appear. Had I paid it one day sooner, my score and, if I applied for financing now, my interest rate, would have been so much different.
There is no easy way of knowing exactly what date your bank reports your current credit balance to the credit agencies. It is once a month but it is not necessarily the date of the statement balance. That is a common misunderstanding. Whatever your current balance is on the day the bank runs it balance report, that's the snapshot balance that gets reported. If you are concerned about a high balance, pay it off early and hope you are before the bank runs their reporting program.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by lstone19 »

billaster wrote: Mon Dec 05, 2022 11:23 am
muffins14 wrote: Mon Dec 05, 2022 7:48 am Thanks. It’s a bit funny how binary these systems can appear. Had I paid it one day sooner, my score and, if I applied for financing now, my interest rate, would have been so much different.
There is no way of knowing exactly what date your bank reports your current credit balance to the credit agencies. It is once a month but it is not necessarily the date of the statement balance. That is a common misunderstanding. Whatever your current balance is on the day the bank runs it balance report, that's the snapshot balance that gets reported. If you are concerned about a high balance, pay it off early and hope you are before the bank runs their reporting program.
From my own experience mentioned earlier, Chase reports the statement closing balance. Due to a hotel clerk error (poorly trained who was supposed to charge us for the first week of a planned three month stay (waiting for new house to be completed) but charged us for the entire stay*), we were overcharged over $10K. It was reversed the next day but the charge posted the last day of the statement period and the credit the first day of the next statement period (fortunately, unlike some banks, Chase reduces pay-in-full auto pays by the amount of any credits posted during the period) and it was the statement balance that was reported. Might have been able to get Chase to re-report it but it wasn't worth the effort.

* Completely irrelevant to the discussion but we only stayed one month before going elsewhere. Lots of problems with the hotel. Why even a month? New GM was to arrive week 2 (apparently previous one was fired and then a temp GM had been brought in from another property). Wanted to give the new GM a chance to fix things. And while the new GM was making a little progress, for us, it was too little, too late. By the time we made the decision to go elsewhere, it made financial sense to wait until over a month as all taxes get reversed at that point as you move from transient to resident status.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by exodusNH »

lstone19 wrote: Mon Dec 05, 2022 11:16 am
exodusNH wrote: Mon Dec 05, 2022 11:01 am
lstone19 wrote: Mon Dec 05, 2022 10:31 am
sc9182 wrote: Mon Dec 05, 2022 10:26 am Most of the CCs allow paying debt/credit multiple times in a month.
Don’t necessarily wait for statement generation- pay as you go
Of course they do but one reason for running a lot of stuff through credit cards is for the float. Paying it off before the due date has an opportunity cost - the foregone interest you would earn on the interest.
Will an extra 5 days of float really have a meaningful impact on your finances? And if it's a meaningful amount, you likely have so much money that it's irrelevant to your success.
Five days? Not much. Almost two months? More so. Some charges I can time to be just after the statement period closes so it doesn't need to be actually paid for almost two months. Regardless, in the current interest rate environment, I estimate the credit card float is getting us an extra $200 per year in interest. Not make or break but better than worrying about eking out a few extra points on an 800+ credit score.
While $200 > $0, you could probably save more than that by making sure your tires are inflated to the proper amount and switching to a MVNO to save on your cell phone bill. (On the latter, I'm now paying $33/mo vs $130/mo for the same service.)

To each their own, though. If it works for you, that's great! Trying to dance around statement dates requires more attention to detail than I care to engage in. My convoluted payday shenanigans are more than enough!
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Re: 107 point credit ding from large purchase: how long to recover?

Post by greenskeeper »

pay off a mortgage and you’ll really see your score tank !
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Re: 107 point credit ding from large purchase: how long to recover?

Post by MrJedi »

billaster wrote: Mon Dec 05, 2022 11:23 am
muffins14 wrote: Mon Dec 05, 2022 7:48 am Thanks. It’s a bit funny how binary these systems can appear. Had I paid it one day sooner, my score and, if I applied for financing now, my interest rate, would have been so much different.
There is no easy way of knowing exactly what date your bank reports your current credit balance to the credit agencies. It is once a month but it is not necessarily the date of the statement balance. That is a common misunderstanding. Whatever your current balance is on the day the bank runs it balance report, that's the snapshot balance that gets reported. If you are concerned about a high balance, pay it off early and hope you are before the bank runs their reporting program.
Most banks it is statement balance. It should be noted that it can take a few days for the credit report to reflect it, but the actual balance reported is statement balance.

US Bank / Elan are one exception I know that reports the current balance on the last business day of each month.

Chase has a small quirk. They report statement balance but they will also make additional reports off schedule whenever the current balance reaches $0.

Those are the exceptions I know of. Every other bank I've worked with report the statement balance (Amex, Discover, Citi, Synchrony, and a few small CUs).
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Re: 107 point credit ding from large purchase: how long to recover?

Post by billaster »

MrJedi wrote: Mon Dec 05, 2022 12:54 pm
billaster wrote: Mon Dec 05, 2022 11:23 am
muffins14 wrote: Mon Dec 05, 2022 7:48 am Thanks. It’s a bit funny how binary these systems can appear. Had I paid it one day sooner, my score and, if I applied for financing now, my interest rate, would have been so much different.
There is no easy way of knowing exactly what date your bank reports your current credit balance to the credit agencies. It is once a month but it is not necessarily the date of the statement balance. That is a common misunderstanding. Whatever your current balance is on the day the bank runs it balance report, that's the snapshot balance that gets reported. If you are concerned about a high balance, pay it off early and hope you are before the bank runs their reporting program.
Most banks it is statement balance. It should be noted that it can take a few days for the credit report to reflect it, but the actual balance reported is statement balance.

US Bank / Elan are one exception I know that reports the current balance on the last business day of each month.

Chase has a small quirk. They report statement balance but they will also make additional reports off schedule whenever the current balance reaches $0.

Those are the exceptions I know of. Every other bank I've worked with report the statement balance (Amex, Discover, Citi, Synchrony, and a few small CUs).
How do you know what they report and when? I've heard that certain credit monitoring services can give you that information but I haven't seen it myself.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by MrJedi »

billaster wrote: Mon Dec 05, 2022 12:58 pm
MrJedi wrote: Mon Dec 05, 2022 12:54 pm
billaster wrote: Mon Dec 05, 2022 11:23 am
muffins14 wrote: Mon Dec 05, 2022 7:48 am Thanks. It’s a bit funny how binary these systems can appear. Had I paid it one day sooner, my score and, if I applied for financing now, my interest rate, would have been so much different.
There is no easy way of knowing exactly what date your bank reports your current credit balance to the credit agencies. It is once a month but it is not necessarily the date of the statement balance. That is a common misunderstanding. Whatever your current balance is on the day the bank runs it balance report, that's the snapshot balance that gets reported. If you are concerned about a high balance, pay it off early and hope you are before the bank runs their reporting program.
Most banks it is statement balance. It should be noted that it can take a few days for the credit report to reflect it, but the actual balance reported is statement balance.

US Bank / Elan are one exception I know that reports the current balance on the last business day of each month.

Chase has a small quirk. They report statement balance but they will also make additional reports off schedule whenever the current balance reaches $0.

Those are the exceptions I know of. Every other bank I've worked with report the statement balance (Amex, Discover, Citi, Synchrony, and a few small CUs).
How do you know what they report and when? I've heard that certain credit monitoring services can give you that information but I haven't seen it myself.
It's on your credit reports. There are a number of free services that put together a summary for you (I.e. Credit Karma, Experian, or many banks offer a free service) or once per year you can request a free copy of the full report from each bureau.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by grabiner »

muffins14 wrote: Mon Dec 05, 2022 7:48 am Thanks. It’s a bit funny how binary these systems can appear. Had I paid it one day sooner, my score and, if I applied for financing now, my interest rate, would have been so much different.
Your credit score is a measure of how likely someone with your credit profile would be to default on a new loan. If you have a huge balance on your credit card as last reported, the credit file alone doesn't give any information about whether you are about to pay it off (so that it isn't relevant to your creditworthiness) or can't pay it off (in which case you are a high-risk borrower because you are already deeply in debt).

Next month, it will be clear for both the scoring model and any human being reading your report that you are capable of handing large amounts of credit. Your report will show that you have a current balance, of, say, $1000, and a high balance of $25,000. That is what your report would have looked like this month if you had paid the balance before the statement date.

So the temporary drop will only hurt you if you apply for credit before next month's balance posts to the bureau.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by exodusNH »

MrJedi wrote: Mon Dec 05, 2022 1:14 pm
billaster wrote: Mon Dec 05, 2022 12:58 pm
MrJedi wrote: Mon Dec 05, 2022 12:54 pm
billaster wrote: Mon Dec 05, 2022 11:23 am
muffins14 wrote: Mon Dec 05, 2022 7:48 am Thanks. It’s a bit funny how binary these systems can appear. Had I paid it one day sooner, my score and, if I applied for financing now, my interest rate, would have been so much different.
There is no easy way of knowing exactly what date your bank reports your current credit balance to the credit agencies. It is once a month but it is not necessarily the date of the statement balance. That is a common misunderstanding. Whatever your current balance is on the day the bank runs it balance report, that's the snapshot balance that gets reported. If you are concerned about a high balance, pay it off early and hope you are before the bank runs their reporting program.
Most banks it is statement balance. It should be noted that it can take a few days for the credit report to reflect it, but the actual balance reported is statement balance.

US Bank / Elan are one exception I know that reports the current balance on the last business day of each month.

Chase has a small quirk. They report statement balance but they will also make additional reports off schedule whenever the current balance reaches $0.

Those are the exceptions I know of. Every other bank I've worked with report the statement balance (Amex, Discover, Citi, Synchrony, and a few small CUs).
How do you know what they report and when? I've heard that certain credit monitoring services can give you that information but I haven't seen it myself.
It's on your credit reports. There are a number of free services that put together a summary for you (I.e. Credit Karma, Experian, or many banks offer a free service) or once per year you can request a free copy of the full report from each bureau.
They're currently available weekly.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by VictorStarr »

I had a similar experience when I paid $24K of estimated taxes with a credit card with a $25K credit line. Despite that overall credit utilization was under 10%, my VantageScore 3 dropped by 112 points. It took two months for my credit score to recover to the previous level. It worth noting that FICO 8 variations were way less, under 40 points.

Here are values of VantageScore 3 (I paid estimated taxes in August):

Code: Select all

826   August
714   September (-112)
805   October
829   November
In general, I found that credit score calculations are very sensitive to credit unitization of individual cards and overall utilization. Credit score computation gave too much weight to the latest state and underweight years and decades of credit and payment history.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by exodusNH »

VictorStarr wrote: Tue Dec 06, 2022 1:52 am I had a similar experience when I paid $24K of estimated taxes with a credit card with a $25K credit line. Despite that overall credit utilization was under 10%, my VantageScore 3 dropped by 112 points. It took two months for my credit score to recover to the previous level. It worth noting that FICO 8 variations were way less, under 40 points.

Here are values of VantageScore 3 (I paid estimated taxes in August):

Code: Select all

826   August
714   September (-112)
805   October
829   November
In general, I found that credit score calculations are very sensitive to credit unitization of individual cards and overall utilization. Credit score computation gave too much weight to the latest state and underweight years and decades of credit and payment history.
I tend to agree. I had a 0% interest card that I was paying the minimum on. As I was using it for everything (that I wouldn't incur payment fees greater than the cashback fee). The moment it hit 50% use, my credit took a 40ish point hit, despite it being 5% of my available credit and my only other debt being a mortgage with a balance less than a year's salary.

I suspect that their models show that people who start accumulating balances tend to be at the beginning of financial trouble; they're not sophisticated enough to differentiate between that and someone making a rational decision to accumulate debt.

It did, however, make me realize that I had a looming balloon payment coming up and that to pay it off before the 0% rate expired would involve quite a bit of money on top of my regular monthly expenses. I vowed to never do that again unless I was specifically offsetting the future liability.

I do have a 0% card now, but now I purchase offsetting Treasuries each month.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by muffins14 »

So here we are -- the statement closed yesterday 12/8. Now I'll be curious:
a) When does this change get reported to the credit bureaus? (people seem to think today, by the way the card is a Fidelity Visa)
b) When does this reflect in my scores at the credit bureau, giving me a truly updated score? (This seems unknowable, because I cannot check them directly.)
c) When does this reflect in my score that I *can* check on Credit Karma? (We shall see ...)

I also had an old chase account that tracks my VantageScore3.0 as well. Interestingly it was:
795-805 from June-December 2021
-99 points on Nov 7 2022, down to 694
-10 points on Dec 7 2022, down to 684

And it claims to be updating next on Tuesday, Dec 13
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Re: 107 point credit ding from large purchase: how long to recover?

Post by muffins14 »

MrJedi wrote: Mon Dec 05, 2022 12:54 pm
US Bank / Elan are one exception I know that reports the current balance on the last business day of each month.
Interesting -- I'll let you know as I see the updates
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Re: 107 point credit ding from large purchase: how long to recover?

Post by wfrobinette »

muffins14 wrote: Mon Dec 05, 2022 7:39 am So I could have absolutely avoided this, but I didn’t, and I’m surprised at the magnitude of impact.

I “had to” make a large purchase for a relative who passed away (think funeral expenses and a memorial event for a large group people at a nice venue, not unlike what a wedding reception might be). I put the amount on my credit card, about $25k, and the card max was about $40k. Edit: The card is a Fidelity Visa.

I just let it auto-pay the full balance rather than paying it off early, manually, which means the statement amount was sent to credit bureaus. Somewhat to my surprise, my credit score (per credit karma) went from 795 to 688. I assumed it might go down a little, but that feels a little intense.

Any idea what the time for the road to recovery looks like there? The amount was paid off as soon as the monthly payment was auto-paid.

It is relevant because I am considering applying for financing in Q1.

Edit: Super cool credit tracker below:
11/7: Credit Karma score ~795
11/8: Statement closes for the period 10/12-11/8 that had the $25k balance
12/1: Auto payment executes, back to 0 balance
12/4: I check credit karma - score is now 687
12/8: Statement closes for the period 11/9 - 12/8
12/9: No CreditKarma update yet, also checked Chase, no update
I’m going through a divorce my credit is dropped almost 105 points from north of 800 to right around 700. All I’ve done is dropped the 400k mortgage and took on about 50k of non CC debt. Plus had to cancel some joint accounts. I have much less debt to income ratio than before too. The whole thing is a racket. I’ve never had a bad mark on anything. Declined opening a new card to replace the joint. Chase will never have my business again.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by JackoC »

billaster wrote: Mon Dec 05, 2022 12:58 pm
MrJedi wrote: Mon Dec 05, 2022 12:54 pm
billaster wrote: Mon Dec 05, 2022 11:23 am
muffins14 wrote: Mon Dec 05, 2022 7:48 am Thanks. It’s a bit funny how binary these systems can appear. Had I paid it one day sooner, my score and, if I applied for financing now, my interest rate, would have been so much different.
There is no easy way of knowing exactly what date your bank reports your current credit balance to the credit agencies. It is once a month but it is not necessarily the date of the statement balance. That is a common misunderstanding. Whatever your current balance is on the day the bank runs it balance report, that's the snapshot balance that gets reported. If you are concerned about a high balance, pay it off early and hope you are before the bank runs their reporting program.
Most banks it is statement balance. It should be noted that it can take a few days for the credit report to reflect it, but the actual balance reported is statement balance.

US Bank / Elan are one exception I know that reports the current balance on the last business day of each month.

Chase has a small quirk. They report statement balance but they will also make additional reports off schedule whenever the current balance reaches $0.

Those are the exceptions I know of. Every other bank I've worked with report the statement balance (Amex, Discover, Citi, Synchrony, and a few small CUs).
How do you know what they report and when? I've heard that certain credit monitoring services can give you that information but I haven't seen it myself.
As mentioned, can see on eg. Credit Karma. Which shows that Bank of America, as additional data point, reports the latest statement balance not an intramonth snapshot, far as I can tell. One of my BOA cards is the only one on which I deliberately allow a positive statement balance, which is now worth something in terms of carry, say if I pay $12k in estimated tax and let it run the extra 3+ weeks that's $20 in after tax interest now in VMFXX and no extra work to click a mouse later rather than sooner. I try to zero out all my other cards for statement closing, though sometimes I miss. I haven't seen credit score hits near as big as OP but along with ordinary spending on that card max closing balance is only maybe $18k v $30k limit and since I have a number of actually used CC's plus ones I got just for bonuses which now sit in a drawer my total CC limit is $245k.

I've heard that a different variation on the score can enter into insurance pricing. It's conceivable that could impact me but I don't know the details enough to say. Use of credit score for background check for renting or getting hired doesn't affect me. Borrowing-wise I'm the 'warm body' on non-recourse commercial loans to my real estate LLC but they also collect personal info including assets and actual humans review it for a thumbs up/down on rate already quoted, squiggles in the canned credit score haven't caused a thumbs down. There's little prospect I'd apply to borrow money directly personally. Which is a presumed reason my score isn't all that high (just below 800 on Credit Karma without particularly big statement balance on that card): no personal borrowing in a long time.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by grabiner »

wfrobinette wrote: Fri Dec 09, 2022 9:21 am I’m going through a divorce my credit is dropped almost 105 points from north of 800 to right around 700. All I’ve done is dropped the 400k mortgage and took on about 50k of non CC debt. Plus had to cancel some joint accounts. I have much less debt to income ratio than before too. The whole thing is a racket. I’ve never had a bad mark on anything. Declined opening a new card to replace the joint. Chase will never have my business again.
I'm not sure why you blame Chase for this; every bank uses the same credit scoring models. It would make more sense to blame FICO, which is the source of the score.

But FICO is doing the best it can here. Your FICO score is an estimate of how likely someone with your credit profile would be to default on a loan. Even if you don't make any late payments, your score has other information that indicates your creditworthiness. No longer having a mortgage, and having fewer open accounts, should reduce your score. Taking on lots of new debt may reduce the score, depending on the type of debt (personal installment loan? auto loan?). If you pay down this debt over time, your score will improve, both because the amount of debt decreases and because it will no longer be new.

Meanwhile, you mention debt-to-income ratio. This ratio is not in your credit score, because your income is not in your credit report. However, it will be important to the bank in deciding whether to offer you a loan, or how much. When you had the old mortgage, you might have had a good score but still be denied loans because your debt-to-income ratio was too high. Now that you no longer have a mortgage, your debt-to-income ratio with an added payment will determine how large a mortgage you can get.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by muffins14 »

Updating in case anyone is interested in this saga

12/12: Better.com did a soft credit check for me - FICO 3 score was 724. Much better than Credit Karma's score of 687 on this date. They pre-approved me for a jumbo mortgage, but not a great rate.
12/13: A big-bank lender pre-approved me for a jumbo mortgage on a 7/6 ARM for 5.75% before any points or relationship discounts. Seems like an OK starting point.

I'm still going to try to push other applications until after I see credit karma update my score after Elan reports the zeroed-out balance to the bureaus. Hopefully Dec 30-31.

I'm hoping I could end up around <= 5% after negotiations, buying some points, and moving money in for a relationship discount
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Re: 107 point credit ding from large purchase: how long to recover?

Post by grabiner »

muffins14 wrote: Tue Dec 13, 2022 8:46 pm Updating in case anyone is interested in this saga

12/12: Better.com did a soft credit check for me - FICO 3 score was 724. Much better than Credit Karma's score of 687 on this date. They pre-approved me for a jumbo mortgage, but not a great rate.
Note that scores from different models are not comparable, so you can't tell whether this is better. The 300-850 range is traditional, but within that range, the median score may be 650 on one model and 700 on another. The information which would be useful to you is the percentile rank of your score.

It is also possible for models to give different scores based on different data. Since Credit Karma offers scores from both Equifax and Trans Union, you can see this difference; my own score is consistently higher with Trans Union because one old account is reported only there, and can also change with one bureau before the other if only one bureau has received an update.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by wfrobinette »

grabiner wrote: Fri Dec 09, 2022 9:16 pm
wfrobinette wrote: Fri Dec 09, 2022 9:21 am I’m going through a divorce my credit is dropped almost 105 points from north of 800 to right around 700. All I’ve done is dropped the 400k mortgage and took on about 50k of non CC debt. Plus had to cancel some joint accounts. I have much less debt to income ratio than before too. The whole thing is a racket. I’ve never had a bad mark on anything. Declined opening a new card to replace the joint. Chase will never have my business again.
I'm not sure why you blame Chase for this; every bank uses the same credit scoring models. It would make more sense to blame FICO, which is the source of the score.

But FICO is doing the best it can here. Your FICO score is an estimate of how likely someone with your credit profile would be to default on a loan. Even if you don't make any late payments, your score has other information that indicates your creditworthiness. No longer having a mortgage, and having fewer open accounts, should reduce your score. Taking on lots of new debt may reduce the score, depending on the type of debt (personal installment loan? auto loan?). If you pay down this debt over time, your score will improve, both because the amount of debt decreases and because it will no longer be new.

Meanwhile, you mention debt-to-income ratio. This ratio is not in your credit score, because your income is not in your credit report. However, it will be important to the bank in deciding whether to offer you a loan, or how much. When you had the old mortgage, you might have had a good score but still be denied loans because your debt-to-income ratio was too high. Now that you no longer have a mortgage, your debt-to-income ratio with an added payment will determine how large a mortgage you can get.
I blame chase because as a long time customer for more than 20 years they declined to open a new card for me. It’s all right there in the last sentence I wrote. All of the other info you provided is valid but wasn’t related one bit to my rant. And chase asked for my income as part of the credit card application so that should have been part of their underwriting process.

So yeah Chase will never get another dime from me.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by goingup »

muffins14 wrote: Tue Dec 13, 2022 8:46 pm Updating in case anyone is interested in this saga

12/12: Better.com did a soft credit check for me - FICO 3 score was 724. Much better than Credit Karma's score of 687 on this date. They pre-approved me for a jumbo mortgage, but not a great rate.
12/13: A big-bank lender pre-approved me for a jumbo mortgage on a 7/6 ARM for 5.75% before any points or relationship discounts. Seems like an OK starting point.

I'm still going to try to push other applications until after I see credit karma update my score after Elan reports the zeroed-out balance to the bureaus. Hopefully Dec 30-31.

I'm hoping I could end up around <= 5% after negotiations, buying some points, and moving money in for a relationship discount
Gee, I'd let your credit score rebound for a month before beginning the mortgage shopping. A 100 point recovery should make a big difference. I wouldn't want the banks to begin the hard pulls yet.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by muffins14 »

I agree. I needed one for a pre-approval, but will wait for any shopping until after I see the score recover
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Re: 107 point credit ding from large purchase: how long to recover?

Post by muffins14 »

Still living the dream at 686 on VantageScore 3.0. Interestingly I did look into how the VantageScore weights credit elements differently from most FICO scores, so it helps explain why I see 686 on VantageScore 3.0 vs 739 on some FICO models.

I'm really hoping I finally see the December 30 update reflected in the scores this week.

It's pretty wild to me that a charge on October 25 that was fully paid off when due is still lowering my credit score by 100 points on Jan 4. So it goes
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Re: 107 point credit ding from large purchase: how long to recover?

Post by afan »

sc9182 wrote: Mon Dec 05, 2022 10:26 am Most of the CCs allow paying debt/credit multiple times in a month.
Don’t necessarily wait for statement generation- pay as you go

We have auto pay of some low three digit amount twice a month ; in-addition will also check-transactions periodically, ensure no mysterious ones appear, then proceed to pay-off then-current full balance.

It’s a bit extra work - but prevents mystery/incorrect/fraudulent transactions charged on CC - can take care of odd-ball charges lot easier.

Good luck ..
What credit card is that? None of mine will do auto pay more often than once per month. I have to make any other payments manually.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by sc9182 »

afan wrote: Wed Jan 04, 2023 6:23 pm
sc9182 wrote: Mon Dec 05, 2022 10:26 am Most of the CCs allow paying debt/credit multiple times in a month.
Don’t necessarily wait for statement generation- pay as you go

We have auto pay of some low three digit amount twice a month ; in-addition will also check-transactions periodically, ensure no mysterious ones appear, then proceed to pay-off then-current full balance.

It’s a bit extra work - but prevents mystery/incorrect/fraudulent transactions charged on CC - can take care of odd-ball charges lot easier.

Good luck ..
What credit card is that? None of mine will do auto pay more often than once per month. I have to make any other payments manually.
I think BoA does let you autopay more than once a month.
You may be able to use/push some of the Bill-pay options to do similar frequent payment option too .. (haven't tried)

Some of our cards - we put up with different nuisance -- those won't allow us paying any-more than 110% of current balance. In case if we are doing say, a $425.66 purchase that evening, we would rather pay it upfront on Credit-card -- but couple of our cards won't allow us to pre-pay (ie., won't allow us to carry positive balance to absorb soon-to-be coming-in charge ..)
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Re: 107 point credit ding from large purchase: how long to recover?

Post by muffins14 »

Update today: on credit karma, the Equifax score for VantageScore 3.0 has gone up 107 points to 795, and TransUnion updated 2 hours later with +105 to 788

So it seems to confirm that Elan (who manages the Fidelity Visa) reports on the last day of the month, and that there is a 5-7 day lag before credit karma confirms your new info.

Case closed: 72 days between the original purchase and credit score recovery after a swing of -107 points and +107 points. All this for an instance where every bill was paid in full when due.
Last edited by muffins14 on Thu Jan 05, 2023 8:59 am, edited 1 time in total.
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Re: 107 point credit ding from large purchase: how long to recover?

Post by IowaFarmWife »

muffins14 wrote: Thu Jan 05, 2023 7:53 am Update today: on credit karma, the Equifax score for VantageScore 3.0 has gone up 107 points to 795, while Transunion has not updated with the latest info yet

So it seems to confirm that Elan (who manages the Fidelity Visa) reports on the last day of the month, and that there is a 5-7 day lag before credit karma confirms your new info.

Case closed: 72 days between the original purchase and credit score recovery after a swing of -107 points and +107 points. All this for an instance where every bill was paid in full when due.
I'm glad it ended well for you!
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