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?
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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