I really liked the app at first, I’ve been a user since August and my credit score was 749. Since then, I’ve paid off all my credit card debt ($30k) and have consolidated to a single credit card (leaving the others still open) with the balance paid each month and car loans in great standing. According to Credit Karma, my score has now dropped 100 points since joining. WTF!? Looks like this has happened to others as well. Advice?
Not a scam, don't care about the score a lot unless your planning to apply for credit soon (in which case the credit karma score is not a FICO score any way). I use CK to monitor my credit for fraud/theft for the most part.
No. This is common with people that don’t understand credit scoring rules. Paying off cards and closing those accounts actually lower your scores. Why? Less available credit. Lots of movement in your credit also impact your score. It should stabilize in a month or two. That said, if you’re getting paid big tech bucks you should have a paid credit monitoring service and just use CK as a backup. It only costs $10 (ish ) a month.
Sorry, should have clarified that the cards I paid off are still open. Only closed one account but the others are open.
It’s not just the number of accounts it’s available credit and also credit age. * Closing older accounts drops your credit age * Closing credit accounts with high cash availability drops you availability balance. CK is good because it allows you to do scenario modeling before you pull the trigger
Read a little bit about how credit score works. If you close a bunch of credit cards, your score goes down. The standard advice is to cut the credit cards so you don't use them. But not close the accounts.
Yeah learn more about credit. You want to keep credit cards open so that your ratio of use:limit is low. The only time you should close them is if there's an annual fee that you don't want to pay.
And now don't apply for a bunch of credit cards or open many new ones... Your score will go down again. Lol. No sudden moves.. That is the mantra
Credit karma does not have real credit scores. It's a good place to check your report to see what is in it, but ignore the scores.
No you're literally a higher credit risk now 😂 Each card or loan you pay off each month is another piece of evidence of your ability to pay and ability to manage multiple accounts recently. When you stop doing this there is less recent evidence. Consider your actual risk and an estimate of your risk. The less recent evidence we have the worse the estimate will be (higher standard deviation) even if the expected risk (mean of estimate) is better. As not losing money is critical, you are penalized for the uncertainty in your risk. Also closing other credit accounts shows that you have less credit available to you, ie less people are trusting you with money and you have less temptation (available credit) that you aren't using/spending.
Never close a credit card unless it has fees. Go immediately request that your one active card gets its limit raised, by as much as you can. Then you will have a lower debt:limit ratio. Consolidating and closing your cards meant you only have that one credit limit and so your reported monthly debt is high compared to your credit. The credit companies report the debt as billed, not whether or not you pay it by the due date.
There's a simple solution. Have two or three good credit cards and pay your balance in full every month. Pay all your bills on time. Save for a rainy day so you don't go uncontrollably into debt if you lose your job. Ignore your score. It will take care of itself.
Thanks Yes Huh - that’s precisely the model I adopted. I didn’t have a ton of cards to start but the ones I paid off I kept open. I have a low interest card that I put everything on and pay off each month. I guess that’s why I was surprised when I kept getting notices that my score has continued to drop even though everything is in good standing.
If you pay it off every month you don't care what interest rate it charges!
You do know that credit karma does not set your credit score, right?
Correct. But I find it suspect that since signing up my score has dropped dramatically. And based on a quick google search, this is a common problem with the app. Along with absent tech support. I thought Blind might get me a more precise answer.
The relationship noted is likely real but I suspect its more resultative than causal. How so? People open a CK account when they have interest in monitoring their credit. The first action is likely to make moves that impact the scores being monitored. Don’t expect any tech support besides email. They’re not providing a direct service/product. They’re just relaying data from your credit score and applying their scoring model.