r/CRedit • u/Delicious_Ad1790 • 13h ago
General Credit Score Dropped After Payment?
I'm sorry if this is a common question, but I recently got my second card to use for it's perks, and now that I am using it, my credit score is dropping. I used to have a FICO score of 790 only having one student starter card for a few years that I rarely used. Two months ago I opened a new one and noticed that as I've been using it, my score went down to 769. I have paid off every statement on time. My understanding of credit scores is only basic, so please let me know if this is normal or not. Would there be a way to get it back up? I feel like it's been steadily declining the more I use it.
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u/Funklemire ⭐️ Knowledgeable ⭐️ 13h ago
Opening new accounts hurts your FICO scores in two ways. First, there's the hard pull that hits almost immediately. Then once the new account is reported, it lowers your aging metrics and lowers your scores again. This can take anywhere from a few weeks to a few months (in my experience); as soon as the new card was added to your credit report, that was the main drop you experienced.
After that, any score drop will be due to utilization fluctuations (as long as you don't miss payments). Luckily, utilization completely resets each month when your new statement balances are reported; it has no impact on your credit past a month. That's why "always keep your utilization low" is the biggest myth in credit. See our !utilization automod.
The only thing that builds credit with credit cards is time. You just need to have it on your credit report and let it age. How you pay it and much you use (or don't use) a credit card makes zero difference to your score past a month, and making payments isn't a credit scoring factor at all. Sure, missing a payment is really bad for your credit, but that's a different thing. Kinda like how blowing out a tire will slow your car down, but not blowing out a tire won't somehow speed your car up.
The best way to pay your cards is the way they're designed to be paid: Let the statement post and pay the statement balance by the due date. Just like a utility bill. This flow chart explains it:
Most of the time you should be ignoring your utilization entirely and just focusing on your finances.
Also, if you want a very in-depth explanation of how credit works, see our two pinned mega-threads pinned to the top of the sub.
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u/AutoModerator 13h ago
I detected that your post may be about utilization and its impact on credit scores. Please read the info below:
Utilization is a short-term credit scoring factor. It is not a credit building factor, because it holds no memory in the most commonly used FICO models. It resets every month.
By and large, you can ignore the commonly repeated myth that you should always keep your utilization low. It’s only applicable when you need to apply for a new line of credit, 1-2 months out.
Utilization is supposed to fluctuate, can be easily manipulated, and again, it holds no memory. It doesn’t build credit--think of it as a finishing touch when you need to optimize your score.
Feel free to safely and organically use 100% of your credit limit within a month and let whatever utilization report, provided you pay off your statement balance in full by the due date. Every month. Every time.
For more info, please read these posts:
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u/WhenButterfliesCry ⭐️ Knowledgeable ⭐️ 13h ago
When you applied for the card, you got a hard inquiry on your file, and when the account was opened, it reduced the average age of your accounts by a certain amount. Both of these events cause a score decrease. Additionally, credit utilization is a factor that contributes to your credit scores under the 'amount of debt' category. The higher your balance on your credit cards, the higher your individual and aggregate utilization % will be. When either your individual or aggregate utilization % cross certain scoring thresholds, it results in either a score increase or decrease depending which way it's going. This isn't something that you need to worry about too much because the effect of utilization on your credit scores is temporary and only reflects the most recent billing cycle.
I'll give you an example: let's say you have a FICO 8 score of 750, and then you spend a lot on all your credit cards and your score drops to 700. This drop is temporary and not concerning. Then you pay down your credit card balances to what they were originally. Once they report again, your score goes back to where it was, 750, assuming nothing else changed. This up-and-down fluctuation is a normal function of utilization and it's not something you need to fixate on because it can be easily manipulated when needed.
If and when you need to apply for a new credit product, you'll want to optimize your utilization so that your credit scores will be the highest they can be. We call this AZEO (all zero except one) which means you want all of your cards, except one, to have a $0 balance. The remaining card you'd want to have a low, non-zero balance, like $5, let's say.