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Dear Asking for a Friend,
I'm frustrated about credit scores and I'm hoping you can help. Here's the situation: My husband and I have two credit cards and we pay them off in full every month via autopay. We've never carried a balance or been late on a payment. We don't spend too much on them, either: probably less than 30% of what we could. In fact, both credit cards have asked us this summer if we wanted to raise our credit limit. We said yes to one and ignored the other.
All the same, I've gotten two notices this summer that my score has gone down. I haven't even checked to see how much, because I'm too mad. One I could understand – maybe it was because they had to do a check to raise our limit, and that dinged us. But twice? What on earth is happening? I did check my credit report through one of the bureaus to make sure there wasn't, like, some fraudulent activity or identity theft, but all seemed fine there.
I don't have a long credit history, because I waited until my 30s to get my first credit card – I was just a user on my husband's card for a long time instead – so I acknowledge I didn't do that right. (No one told me I was supposed to get my first card in college!) Still, I've done what I thought were all the right things since then. So why is my score going down? Why isn't there, like, a Butterball hotline people like me can call to get answers or advice?
Dear Credit Self-Conscious,
Thanks for your question. Please think of me as your Butterball Turkey Talk lady for all things credit.
I agree that your credit conundrum is frustrating. It seems strange that your credit score would fall more than once for a single hard inquiry placed on your credit file.
You say that you received two notices that your score has gone down. Who sent the notices? Was each notice from the same credit scoring company? Or possibly different companies?
There are two main credit scoring models: FICO and Vantage. And each of these models can take on different forms and result in many different scores per person.
It's possible that, while your recent credit check or "hard inquiry," as it's called, was most likely recorded as a one-time event on your credit report, that one piece of data may be used to update more than one score. Hence the numerous notices.
It's just my first thought, which hopefully doesn't confuse things further.
The bottom line is this: I doubt your score may be in an actual freefall. These may be references to two separate scores, which are most likely in the same ballpark.
I strongly recommend that you check your score to find out what actually happened. These notices can freak us out, when in reality they may not be as scary as they sound.
Just to provide some background on credit scores: The most important factors that determine your credit score are:
- Your payment history (how well you pay your bills on time)
- Your debt-to-credit ratio (the totality of all your debt balances versus your total credit limit)
Keeping your debt-to-credit ratio to below 30% is good. Be aware, though, that the top credit scores belong to those with debt-to-credit ratios of 10% or less. Paying down your balances faster can go a long way in improving your score.
If the decrease you heard about was just a matter of a hard credit inquiry placed on your credit file when you applied for more credit, it shouldn't make a huge dent. According to FICO, "In general, credit inquiries have a small impact on your FICO scores. For most people, one additional credit inquiry will take less than five points off their FICO scores."
You did mention that your credit history started only in your 30s. Inquiries can have a bigger impact if you have few accounts or a short credit history, per FICO. Even so, the hard inquiry won't impact your score for more than a year.
I'd be curious to know what you discover!