Why does my credit score keep dropping?

Question

I just moved to the U.S. and started with a 700 credit score. I use my credit card instead of cash and always always pay off the balance on time.

One credit card is a secure card with a limit of $500 and I use about 100-200 per month. The other account is an american express card and has a limit of about $5000 of which I use between 1000-2000 per month and also pay that off every month on time. My credit score just dropped by about 20 points. How can I build it up my goal is to get it to atleast 720, but 800 would be great.

Answer 1

I can't explain your score dropping, unless there is some other activity you haven't mentioned.

I can tell you, however, that Chris and Nathaniel are both wrong.  Your score does NOT drop because you pay it off, and in fact, that way of dealing with finances works very well to raise your score over time.  

Neither does checking your own score lower it.  Credit enquiries from potential creditors does lower the score, but you can check your won all you want.

Answer 2

that is odd that it keeps dropping.. are you sure you have made your payments on time?  Run your credit report to make sure you don't have things on there you don't know about

Answer 3

Your score is based 1/3 on your ratio of balance used to available balance.

You appear to be using roughly 40% of your total available credit.  That's not super high, but it could be better (try for under 25%).

I would call your card companies and see if they can raise your limits, that should change your ratios and help a bit.

Other than that, I don't have enough details to give you any other advice.  Make sure you're not applying for lots of different types of credit, inquiries can decrease your score as well.

Answer 4

It could be because you are checking your credit often.  Inquires on your credit show up and bring your credit down.   I saw a few answers here that are based on belief and not fact, so let me clear things up for you.

There are many things that determine your score.  Credit card usage is just one of them.  Your score is based on history, inquires, major purchases and ratios.

Credit cards:

You should not have more then 3 credit cards.  Credit cards are unsecured revolving credit.  Your score on these are based on what you can owe vs. what you do owe. The more you owe the lower the score. if you owe 0-10% of your limit, then the score goes up. 11-25% your score still goes up, but not as much. When you go passed 75% your score goes down. If you exceed your limit, then your score tanks.  When you pay your bill, make sure you pay it 10 days before the due date, so that it has time to post and report.

Each repository (Trans Union, Experian, and Equifax) reports on different dates, but if it is checked after the 15th you should have the updated score.

Major purchases:

A term loan or major purchase would be like a student loan, car loan or mortgage.  These are set interest rates that are divided up into months (36,60,150,240,360 and so on) Your score is based on how you pay these.  If you over pay, every month, then your credit accelerates.  If you make slow payments (you pay it off everymonth but exceed the 15 day grace) you will have to pay fees, but your credit won't be effected.

Inquires:

This is how many times your credit pets pulled. The more times you apply for credit or hav eyour credit checked, once you exceed 3 per month, your score goes down.  The exception to the rule is on mortgages.  You have the right to shop for the best rate, so banks and mortgage brokerage firms can pull credit within the same peoriod of time. (30 days)

New Credit

If you open a new credit line, your score will drop for 6 months until you have established a good standing.

Collections:

These are unpaid bills.  The older the line, the less effect it has on your score.

Judgements

These are what the courts says that you owe and have to pay off.

Bankruptcies and Tax leins

These can ruin your credit, it will stay on your report for 7-10 years even if it is paid off.

Answer 5

Believe it or not your score is dropping because you pay it off completely every month.

Assuming you can pay the bills off in full each month, why not just use cash to make your purchases? It will save the interest and the hassle of worrying about your credit score falling.

You are also entitled to a free credit report once per year from all 3 agencies. You may want to check with one of them to make sure nothing false is being put on your credit report.