I moved countries a few years ago and am building up my credit score from scratch. I’m cognizant of good practices to build up my credit score like paying my credit card on time. My credit score dropped 10 points in the last month but I don’t know why. I’ve increased my spending on my card because of Christmas and travelling but make the payments right away (typically same day) so that there is not a large balance on my card at the end of the month. The total spending for the month is less than 30% of my credit card limit.
I don’t have any other form of credit like loans. Any suggestions why there was a drop?
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You should wait for the statement to pay your spending instead of covering it same day. Otherwise it’s not reported to the credit agencies and it looks like you have no activity on your card.
Also, generally speaking some fluctuation from month to month is to be expected. I wouldn’t worry too much about 10 points in either direction.
Exactly. 10 points is nothing and you’re better off building longer term credit (on-time payments) instead of short term credit (reducing credit usage) unless you’re looking to use your credit in the next month or two (get a mortgage, auto loan, or credit card).
I’m going to assume we’re talking about US credit evaluations here. I’m not familiar with others.
First, paying your credit card balance the same day doesn’t net you any benefit. Paying off the total every month is a very good idea, but doing it early isn’t necessary. It’s not going to harm you or your score, but the balance is like an interest free loan as long as you pay it off when due.
Your spend as a percentage of your credit limit shouldn’t be a factor either, as long as you pay it off. Your credit utilization is - how much you owe versus your total credit amount. If you have a $10k limit and you spend $3k per month, no one’s going to bar an eye if you keep it paid off. If you carry it month to month, that’s going to count against your utilization.
Second, you shouldn’t worry about a 10 point fluctuation, especially with a newer credit record. You have fewer data points, so you’ll have more fluctuations in general. I would ignore it.
Finally, once your credit score hits somewhere in the neighborhood of 730-750 or so (depending on the agency), you’re placed in the highest tier. Things like interest rates and loan approvals go off of the tier, so someone with a 750 will get the same loan as someone with an 825. It’s not that big of a deal.
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10 points is just noise. My score fluctuates more than that when I sneeze. It’s nothing to worry about.
I wouldn’t worry too much about credit btw, if this is utilization based which seems likely because you have nothing else, it won’t affect you for more than the cycle it’s based on. Unlike other things, utilization has no memory. Also common advice is it’s only worth worrying about credit in the months before you need it.
I’ve commented here like three times cause every time I open Lemmy again I relive this thread haha. Worry not for I am to sleep soon
You should also never spend more than 10% of your limit. If you do that will drop your credit score
I have used a credit card for almost every single purchase for 15+ years. If the balance gets paid monthly, you can spend 200% of your limit and it will not affect your credit score.
I assume you mean paying it off mid statement cycle to spend more than the limit? This is called cycling and can get you shut down by some banks, rare but worth noting.
Anyway the other comment still works with what you’re saying, you could spend 5x your limit by cycling but leave it at 9% when statement posts and it would be good for your credit score. I fully recommend doing this if the bank isn’t sensitive to cycling, could even get a credit limit increase
I’m sure it depends a lot on the original application and your current credit and income at the time. I thought the person I was replying to said if you put more than 10% of your limit on the card you would take a credit hit. That is clearly false. Cycling and spending more than your limit might get questioned, but credit card companies do not want you to pay your balance off. They want you to be just a bit behind all the time but likely to be able to pay off eventually vs. bankruptcy.
I make a shit ton of money and my credit score is absolutely awful. There is a reason that my credit score is terrible. It’s because I refuse to participate in the fleecing of my wealth by paying interest to usurers. I don’t have any debt. I don’t have a credit card. I make about 40% more than I can reasonably spend in a year. I am not a target for credit card companies because they cannot make any money from me. They can make money from you, so they make you think about your credit score.
Respectfully this is not good advice. Responsible usage of a credit card comes with only benefits, such as improved fraud protection, extended warranties, free travel or rental insurance, rewards, or cash back.
A zero annual fee Chase Freedom Unlimited gets you 1.5% back per year on all purchases. If you’re not carrying a balance (thereby not paying interest) that’s straight up free money. The bank still makes money off you from transaction fees from your purchases, so it’s not correct to say they don’t target you because you won’t pay interest.
I put a large amount through my cards every year (>99k for personal cards alone) and have never paid a cent of interest. Every year I get thousands of dollars back, plus a number of other little wins. Full disclosure I pay 1945/yr in annual fees (on the low end for enthusiasts) but make far, far more back. I use CardPointers to keep track and axe any card I’m not easily profiting from. Which has been none but yeah.
Credit cards are bad for those who will not pay off the statement in full every single month (and for privacy). Anyone with self control issues should stay far away. If you use it well it’s only upsides. I’d plug the credit card community but it’s dead as hell and I have no idea how to link those.
Also, how do you have a bad score? If you have no debt and have never had a card, I believe you wouldn’t have a score at all. By just having one credit card and zero debt, you start out with >700 which is solid.
I totally get the philosophy though. I loathe interest and have probably lost money by making the vast majority of my purchases without loans, including cars and most property, save for housing here in the bay because with the cost of even mediocre houses at the price they are, it’s not as trivial to avoid interest. So I concur completely, with this one point of disagreement— luckily, with good credit card usage you’re not paying any of that anyway.
Edit: fixed my AFs, hadn’t actually looked at that number on the app in some time apparently. Also this whole comment obviously doesn’t matter if you’re extremely wealthy and don’t care about making any extra money. If that’s the case, congrats!
You are doing what I refused to do, which is to game the credit system. You’re right, if I didn’t incur any debt I wouldn’t have a bad credit score. When I was young with four kids and a dead wife I incurred a massive medical debt by having cancer. Outside of that I didn’t do anything.
I applaud you, and congratulate you. I wish I could have done what you have.
You’re right, I have bad advice. Who can just not carry a debt in this economic climate?
Edit: This is far snarkier and negative than I intended. My apologies.
It’s wildly bullshit that medical debt affects credit score, yeah. My condolences by the way, though I know it means little from internet strangers. I think medical debt gets removed after seven years though so the score could rise. Not sure if you have to dispute it manually, but it shouldn’t affect you for too long (in the span of your life).
If you’re not planning to also game the system the score obv doesn’t matter either way though. I don’t actually know my score, which is probably weird in a thread specifically about credit scores. It’s its own bullshit system, largely in part because stuff like medical debt counts there. And really the concept of three companies keeping track of everyone’s financial data, mismanaging the information, and profiting from it is just kind of garbage.
That said, if you do ever actually want to start, having a low score isn’t a huge hurdle. There are plenty of cards for low scores like Discover which is 1% back. By keeping the same life habits but using a credit card instead, you do come out on top very easily. If you set an autopay you never carry debt, and you also save just the teensiest amount through delayed paying and can generate interest on the money you use to pay it. Of course there’s no need to ever start, especially if you don’t have use for the extra money.
No worries about any snark! I try to read things in the most positive way these days. Hope you’re doing well out there!
AFAIK, medical debt has changed quite a bit recently, and my read of this is that paid medical collections will drop from your report. So unlike non-medical debt, you should consider letting large medical debts go to collections and settle for a fraction of the price. This doesn’t work as well for non-medical debt because collections otherwise stay on your report for 7 years.
I’m far from an expert and haven’t dealt with this at all, so definitely double and triple check this if you’re in a situation where defaulting and settling may be preferable.
I think settling for a fraction of the price is rarer than it seems, and even a tiny fraction of cancer bills would be extremely difficult for most. This is good advice if you need your credit though. I hear it’s easiest to negotiate with the hospital itself but with American healthcare you might well get one that simply does not care.
Your suggestion also works for people who already have the medical debt though. At that point it doesn’t hurt to try to negotiate. They should avoid making any payments until completely ready to pay it off though (and having made a deal), wouldn’t wanna restart the clock and whatnot.
In the other commenter’s case I would probably just ignore it until it went away. I never need credit though so it’s not realistic for everyone. Medical debt is such a fucking terrible thing honestly. Hopefully they succeed in removing it from credit entirely
Yup, try your luck with the provider, and consider the collection company as a backup plan. Usually you can get a pretty good deal from one of them, but you need to be ready to pay in cash.
But yeah, if you can handle waiting 7 years, letting it fall off is the cheapest, but you’ll have crappy credit and are open to lawsuits until that time.
Man medical debt lawsuits are among the worst things in this country. Pure maliciousness. I imagine it’ll be one of the most reviled “past things” in the future.
This won’t help you, I know. I only hope to awaken you to the hegemony that lies over your head.
