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My credit score has dropped considerably in the past year from ~700 - ~600. This is my first credit card so far, and have only used mainly debit in the past.

Thing is, I'm not sure why it's dropping. I've tried looking up the issue online, which suggested not paying bills on time or not abiding the rules. I have paid all my bills on time, and in fact, paid them in full (not minimum payment, but the payment requested).

The only two things I can think of that might have contributed, but have little proof/correlation to harm would be two things. Sometimes, I reached near the credit line in between payment months, so I would make a payment to make room for credit line (I have not gone over my credit line). Second, I spent more each month the bill came in, with about a $50 increase each month.

Any help here? I've tried looking online and those "problems" others have don't apply to me.

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  • Can you add a country tag, you can edit the question. Also which service you have used to see the Credit Score
    – Dheer
    May 13, 2014 at 5:31
  • @Dheer Added in the appropriate tags, and I have been receiving these "monthly" FICO scores which show it has been going lower and lower, despite having had a job and having paid my bills on time
    – yuritsuki
    May 13, 2014 at 5:32
  • What's the meaning of your username?
    – littleadv
    May 13, 2014 at 7:12
  • @littleadv: DISREGARD X ACQUIRE Y meme
    – nneonneo
    May 13, 2014 at 7:22
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    You can get your credit report for free annually, there are no laws about providing free credit scores. I keep wanting to ramble longer than what fits in a comment. Your credit score is based on the information in your credit report. Most places where you apply for credit will use a version of your FICO score. There are many other "credit scores" that are easy to get for free, but aren't actually used by any lenders. You're getting a true FICO on your statement because of an agreement between FICO and your credit card company
    – VBCPP
    May 14, 2014 at 3:58

1 Answer 1

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It could be due to your "Credit Utilization" rate. If you have one credit card with a limit of $5,000 and charge $4,500 each month and pay it off in full you'll get dinged. If you look at your credit report, per links in others' comments, they'll typically have a value that shows the maximum balance you had at any time.

If this max balance exceeds 50% (maybe as low as 33% now) of your total revolving credit line it is viewed as a negative. The assumption is that you are living beyond your means and are at a high risk for late payments, default or bankruptcy.

Suggestions:

  1. for 6 months don't have a balance that exceeds 25% of your total revolving credit limit, then check your score

  2. request a credit line increase but don't increase the amount you charge to the card

  3. open additional credit card accounts but don't use them. This will increase your total revolving credit limit, thereby reducing the utilization rate for your first card. Note you will need to use the other cards 'occasionally' to prevent a non-use closure

1 is the best option as #2 & 3 will immediately lower your credit score.

Assuming you don't change your spending patterns then the impact to your score from #2 & 3 should be shortlived.

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  • interesting you mentioned #2. Last week, my credit card company actually increased my credit line; despite me not actually asking them, an email just came by saying they had increased it. Is this a bad sign? Or are they just taking preventative measures?
    – yuritsuki
    May 13, 2014 at 14:17
  • I fully agree it's credit utilization. However, what I've seen with the admittedly fake credit ratings is that the effect does not persist--when the next cycle reports a lower utilization the rating springs back. I do have a long and clean history, though.
    – Loren Pechtel
    May 13, 2014 at 15:06
  • My question though is, why is credit utilization so detrimental to my score? If I pay it off in full, isn't there no damage to anyone? I understand if I fail to pay in full, there's a huge underlying problem, but I've paid all my bills on time (even earlier) and in full constantly
    – yuritsuki
    May 13, 2014 at 16:33
  • @DISREGARDMODSACQUIREREP The system doesn't know you pay your bills in full. All that's reported is if you paid at least the minimum payment on time. The bank that issued the card can see that you're paying in full and are happy to have you using the card (hence the credit increase), other banks don't get this bit of information.
    – Loren Pechtel
    May 13, 2014 at 22:41
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    Note that for #1 6 months is not necessary, utilization has no memory month to month, it only uses the most recent balance posted. #2 will not always lower your score. Many companies offer CLI without a HP & its the HP, not the CLI that would lower your score.
    – VBCPP
    May 13, 2014 at 23:53

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