Large credit score drop

Question

I use Mogo to review my credit score every month.

I just moved to Canada so it took a while to even kickstart my rating, however, Mogos history shows.

Dec (2 months after I got my credit card) - 648 .
Jan - 662 (+14) .
Feb - 668 (+6) .
Mar - 647 (-21) .

What on earth happened here. I can confirm every bill has been paid on time. I only have one credit card, and I pay a phone bill, rent, and hydro.

So what would cause a substantial drop like this? I've never maxed my card (although I did utilise maybe 70% of it during Feb, but paid it off already.

Is this something to worry about, will it just keep going down by huge jumps like this every month, even if I spend it and pay it all back?

Thanks

Answer 1

While credit scores are somewhat of a black box, most credit reporting agencies will penalize your score if you have a high utilization (credit used compared to credit limit) at the time your credit card company reports the balance to them. In my experience (USA) these reports happen roughly once monthly, shortly before your statement comes due.

This drop is likely due to your high utilization during February. I wouldn't worry about it (or your credit score in general) unless you plan on using credit for something new very soon (mortgage, car note, etc. not just using a CC)

@OP raised concerns of their score permanently lowering every time they had a high utilization on their CC or other revolving credit accounts. To make it clear for everyone, credit drops due to high utilization are temporary, and reflect a snapshot in time recalculation of your score, not a permanent loss that must then be recouped over several months. Most reporting agencies recommend you not exceed 30% utilization, with 7% or less being ideal. What this means is, ONLY when you anticipate needing to take a large loan or line of credit (think mortgage or car note), you should pay off your cards earlier so the statement reporting shows less than 7% utilization BEFORE you apply for the loan. Credit score is just a way to verify your identity hasn't been compromised, even 50 point swings are not a concern when you don't need a large loan.

I spent 2 months without putting more than 30USD on credit before applying for a mortgage (December'17/January'18) and my score jumped nearly 30 points. Still not worth sweating it when you're not buying something large.

Answer 2

My concern is that if I put through one large transaction on my CC once every 3 months.

I'd like to provide an answer to just this concern. The accepted answer covers the real issue, the larger issue, that small swings are meaningless over time and you should just be aware before applying for credit.

As someone who likes to know the smallest of financial details, I began to monitor my score and found that if I wished to game the system, maximize my score, the real issue wasn't spending, it was payment timing.

In other words, I would make a large payment to credit the account the day before the bill was cut. I managed to pin our scores to 850 via this method, and when applying for a renewal of my HELOC, after retirement, was pleasantly surprised to hear the agent mumble "holy crap". Huh? She then said,"Oh, sorry, I'd just never seen a couple who both had 850 scores before."

That said, one of my cards changed banks, and while the billing cycle never changed, the reporting cycle did. The bill gets issued on the 15th, but the balance on the last day of the month is what started getting reported. One month of a huge drop in score, a lesson learned, and now I pay the card twice each month, on the date the payment is due, but again on the 30th to zero out the balance reported.

All this effort is not needed for anyone who doesn't really care about those last few points. It's easy enough to get the reported balance to near zero ahead of an important event, again, as noted.

Note - there are free services that offer a simulated credit score, Credit Karma among them. It offers an easy way to see when your accounts last reported your activity. I get my FICO score from other sources, but while the score is more accurate, the supporting details are lacking. For those who are a bit obsessed, it takes a few sources of data to provide the whole picture.

Answer 3

It's not a large change, and it will bounce back next month right away (assuming you pay your bills, etc.)

Often, a simple shift of a day back or forth in a month because of weekends moves the reporting day, and with that, the amount owed / pntage of credit used.

[I am seeing 20+ points up and downs every month, since years, swinging around between 805 and 845, without me doing anything different]