Dear Liz: I know different factors are involved, but I find a recent increase in my FICO score inexplicable. My score went from around 740 to 815, according to a note on my last credit card statement. Yet I have done next to nothing in terms of major credit activity – no purchases, no changes in my already low credit card usage. I transferred about $ 800 from one card to another, and that’s it. If such small things can affect the FICO score, it makes that score look ridiculous. Can you suggest possible explanations?
Reply: Credit scoring formulas are a bit of a black box, but they are sensitive to the amount of available credit you are using.
If you moved the balance from a card with a very low credit limit to a card with a higher limit, your scores would generally improve, although perhaps not as drastically as the increase you describe.
Your scores might also improve if your balances go down on other accounts or if something that negatively impacts your credit “drops” or stops being reported. The simple passage of time can also improve your scores, increase the age of your credit accounts and the time since your last credit application.
It’s impossible to say exactly what combination of factors may have affected the score you saw, but at least it has moved in the right direction.
Dear Liz: I had a problem last year and had no income so I couldn’t pay my bills for three months. I explained the situation to my creditors, but they still recorded the late payments on my credit reports. I called and sent letters, but it was not good: my credit rating fell to the middle of 500. How do I recover from late payments?
Reply: Over the past year, many lenders have offered various types of hardship programs due to the pandemic. If your forbearance was approved, the payments you missed should not have been flagged as late. You can dispute the errors with the three credit bureaus (start at www.annualcreditreport.com) and ask the lenders to correct the record.
Unfortunately, lenders don’t always tell clients that forbearance or other hardship programs are available. If you weren’t given a chance to sign up when you called to explain your problem, contact your lenders again, in writing, to report it and request that the late payments be removed from your credit reports.
If a lender refuses to cooperate, consider filing a complaint with the Consumer Financial Protection Bureau.
Liz Weston, Certified Financial Planner, is a personal finance columnist for NerdWallet. Questions can be directed to him at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.