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Signs of looming credit problems

Your FICO® score helps lenders determine if you might be a future credit risk; this presentation discusses ways to use your FICO score as an early indicator of potential credit problems. Not every drop in your FICO score can be attributed to an obvious cause, so understanding the less obvious causes can help you prevent possible credit problems from arising, and prevent a FICO score plunge.

Conducted on:

April 11, 2008

Duration:

44 minutes

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Questions answered in this webinar:

Can you define what "revolving debt" means?: There are three types of debt: installment (where there is a fixed monthly payment over a fixed term, such as a mortgage or auto loan), revolving (where there is a line of credit available, such as a credit card), and open (where there is no limit and you pay it off on a timely basis, such as an American Express card).
Do closed credit cards count towards utilization?: It depends if the closed credit card has a balance. If a credit card is closed and has no balance, it is not calculated in your FICO score. If that same card has a balance, it will be calculated into your FICO score. However, if that same card is open, it will be calculated into your FICO score whether or not there is a balance. This is why we never recommend closing a credit card to raise your FICO score – doing so wipes away a percentage of your available credit and therefore can increase your credit utilization.
Which utilization matters more; overall utilization across all your revolving accounts or utilization for each revolving account?: Their importance is about the same.
If you ask for a limit increase on an existing credit card, does this generate an inquiry?: Only if the credit card company reviews your credit report or credit score as part of the evaluation process. If they look at an old credit report then it will not generate an inquiry, but usually credit card companies DO check your credit when granting a credit line increase.
What's a CFL and what does it mean to your FICO score.: This stands for Consumer Finance Loan (CFL) and is typically an installment loan given to consumers that cannot use traditional means of credit. The presence of a CFL can have a small negative impact on your FICO score, so if you can, you're better off financing through traditional means of credit.