My credit score has been erased. What happened?

Question

In 2006, I bought my first car with a loan. In 2008, facing a number of emergencies, I took out a credit card and maxed it out. I worked hard not to miss a single payment on either and to pay off the car early. I settled both debts in full in 2010, and closed the credit card account, not wanting any temptation to go back into debt. I have had no other borrowing activity. I married in 2014, but have taken care to keep my wife's finances separate from mine.

Since 2010, my credit score had been excellent whenever I checked it once or twice each year, and I was proud of myself for doing what I thought was the right thing. But last week, I was turned down for a rental car on my debit card. I checked my credit score, and was shocked to find that it was 0 with all three agencies! Specifically, I am "unrated."

According to the company that provided me with my credit score, one factor in my score suddenly disappearing might be:

No open installment accounts are reported. Having no experience with a specific type of account is considered negative. Having too few accounts overall is also negative. This is because it does not provide enough information about how you typically use credit and repay your debts.

I live in the United States if it matters. A few questions please:

1. I thought that bad events in your credit history disappear after seven years, and good events stay forever. Is that not correct? Why would all of my events disappear after only five years?
2. Can I get back my healthy credit score quickly? If I open a new credit card this week and purchase something and pay the bill, will my score then be near zero or near its previous height? I intend to move early next year and was looking forward to having the high credit score.

3. Can I even get a decent credit card now? If I apply, will I be judged based on my dormant history or be treated as if I have no history at all?

4. I have heard many times of people keeping a single credit account open, buying one inexpensive item on it per month, and then paying each bill on time. I always thought this tactic was for people trying to repair a damaged credit rating, not to preserve a good one, but apparently I was wrong. Is this what I should have done, and what I should do now?

Thank you for the help!

Answer 1

First step: go to https://www.annualcreditreport.com/ and pull your credit reports from all three credit bureaus. It's free; that's the legally mandated site where they have to let you have the details of your credit report once a year. You won't get your credit score that way, but each company makes it easy for you to get that if you really want it (and pay for it).

Check each one and make sure they're accurate.

You didn't help yourself by closing the credit card account. Doing that disappears it, so the benefit of that "history" leaves your report. Next time, just leave it open and don't use it. As for the car loan -- mine stayed on my credit report after I paid it off, but maybe its different between lenders?

If you want to re/build, getting a card with good terms and using it, but paying it off quickly is a good way to do that. Interesting point on how your credit score gets calculated -- one factor (weighing about a third of it), is your "credit utilization rate". That's how much credit card capacity you have available to you, vs how much you use. E.g., if you have a CC with $3000 limit and have $1000 balance, your utilization rate is 33%. Lower utilization helps you -- one of the thresholds is about 30%, if I remember right. The weirdness:

1. Not using your card at all, though, is like not having it. Thus your credit score can be lower than if you carried a small balance. It makes sense when you think about it -- credit score is a measure of your ability to use credit safely, not a measure of your ability to not use credit.
2. If you had a high-utilization balance, say, $1000 on a card with a $1200 limit, that high of a utilization it would hurt your credit score... but you can improve your credit utilization rate and thus your credit score by calling the credit card company and getting your limit raised. Weird, huh?