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New Member
sollid
Posts: 3
Registered: ‎05-18-2011
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Why does a small purchase send my score down 20+ points????

This is maddening to me.......A few months ago, I had a score of 685. My auto loan is paid off in full, I have a 10 year old mortage with 10 years of perfect history, and a credit card with a credit limit of $300 that I use here and there and pay it off in full every month. Well, last month I took the family on a long weekend and used it a couple of times. The spends that weekend totalled around $265 and I had a credit score alert that my number had gone down to 265. Whoah, didn't expect that to happen! A 20 point drop for using a small balance credit card???? I immediatley paid off the card balance in full, and again have used it a couple of times in the past week for a total of $111. I just received another score alert that my score has dropped to 255. Is using a couple hundred dollars on my card REALLY having that kind of wild swings on my score? My alerts did tell me the reason for the score declines were for having balance changes on that card. Any insight is greatly appreciated.........
Valued Contributor
Gunnar419
Posts: 1,275
Registered: ‎01-23-2013
0

Re: Why does a small purchase send my score down 20+ points????

It's not the absolute size of the purchase. It's the percentage of your available credit that you're using -- which is a huge factor in scoring. The solution is either having a larger credit line or more credit cards, if you're comfortable with doing so.

 

The good news, of course, is that once you pay down those high percentage utilizations, your score should recover quickly.

Valued Contributor
dodfire
Posts: 1,453
Registered: ‎04-14-2012
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Re: Why does a small purchase send my score down 20+ points????

Correct....it is your utilization %. If this is your only card and your card has a limit of $300 and you have a balance on there of more than $30 you are going to see a drop in your score. However, do not worry about it too much. Your score will go back up when you pay it off.

 

If you are going to apply for any type of credit make sure you have a very very low balance on that card (less than $30) when you apply. You want your score to be as high as possible when you request new credit.

*8/10/13
New Member
sollid
Posts: 3
Registered: ‎05-18-2011
0

Re: Why does a small purchase send my score down 20+ points????

Thanks so much for the quick reply and explanation.

New Member
sollid
Posts: 3
Registered: ‎05-18-2011
0

Re: Why does a small purchase send my score down 20+ points????

Okay, so here is another mystery to me.  As I mentioned above, my car loan has been paid off for awhile.  I am also the co-signor for my wife's car loan.  It has 9 months left on it, and I am really trying to pump up my credit score for an upcoming construction-to-permanent loan that I am going to seek.  So, I pay off my wife's car loan about a week or so ago, and I get a score alert that the account has been paid off in full.  BUT, no uptick in my credit score?  What gives with that?  My thought process was that if I eliminated a debt altogether, then it should increase my score.  What am I missing?  Also, from my previous posts, I was given the advice that my score would go back up when the balance on this little credit card goes down.  I have had it paid off for over 2 weeks now and it still stays put.  Why?  Any other tips for raising my score?

Moderator Emeritus
llecs
Posts: 32,869
Registered: ‎08-04-2007
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Re: Why does a small purchase send my score down 20+ points????


sollid wrote:

Okay, so here is another mystery to me.  As I mentioned above, my car loan has been paid off for awhile.  I am also the co-signor for my wife's car loan.  It has 9 months left on it, and I am really trying to pump up my credit score for an upcoming construction-to-permanent loan that I am going to seek.  So, I pay off my wife's car loan about a week or so ago, and I get a score alert that the account has been paid off in full.  BUT, no uptick in my credit score?  What gives with that?  My thought process was that if I eliminated a debt altogether, then it should increase my score.  What am I missing?  Also, from my previous posts, I was given the advice that my score would go back up when the balance on this little credit card goes down.  I have had it paid off for over 2 weeks now and it still stays put.  Why?  Any other tips for raising my score?


Installment utilization is a teeny tiny part of FICO scoring. You really don't gain points by paying off loans. Conversely, you aren't going to lose a lot of points when adding a car or mortgage (new account ding and impact to AAoA aside). There's always a chance for a very small gain once you pay off a loan, but that's because you're adding another zero balance which can help if you are carrying balances on most accounts.

 

CCs typically only report once per month and will report the balance you had on your statement date and will report that up to a few days following that statement date. Are you sure your Equifax report already updated the new statement balance?


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