Credit score getting lower – but I'm doing everything right?
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.
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:
revolving credit limit, then check your score
request a credit line increase but don’t increase the amount you
charge to the card
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.