Credit Score Down

By | June 26, 2018

Predictably, my credit score has declined.  Recently, I wrote about the fact that I’m broke.  Part of the consequence of not having any money is the fact that I rely on my credit card for everyday expenses.  That’s a problem.  Usually, I pay off my credit card balance every month.  However, in June, I was unable to pay off my balance before the credit card companies reported my balance to the credit bureaus.  For the first time in a long time, I carried a balance from one month to the next.  As a result, my credit score suffered.  Let’s take a look at how.

Credit Score Decline

I use Credit Karma to check my scores on a weekly basis.  You heard that right.  I check my credit score every week. I know, it’s overkill.  But because I have good credit, I watch it like a hawk so that if any problems arise, I can take care of it as soon as possible.  I don’t think I need to remind you of all the data breaches that have occurred just in the past two years.

With that said, in looking at my credit scores, I see that Equifax went down by 16 points to 800!  But, TransUnion takes the cake.  My credit score went down 28 points to 783!  Are you kidding me?  That’s a lot of points just for carrying a small balance!  It’s unclear what my Experian score is. The last time my credit score went down was June 2017.

Well, thankfully I was able to get my credit card balance back to $0.  The reimbursement from my work came through and I just put all of that to paying off the credit card.  There was no extra and so I just have to go back to being disciplined in July so I don’t have a repeat of the same situation that led me to get broke.

The key question I’m wondering is, “how long it’s going to take to restore my credit?”  It seems like the last time, it took about three months to get the credit score back up.

Why Does My Credit Score Matter?

So, why does it matter what my credit score is?  Well, we know that having a high credit score is important for many reasons.  But for me, it’s very important for two things.  The first is that I need to buy a car around July or August.  The second is that I want to buy a house.



Ideally, I would buy the house before I purchase the car.  The problem is that it’s going to take me too long to find a house.  I’m going to need a car, pretty much as soon as I move to California.  I am hoping that I will be able to pay cash for a car and not have to borrow funds, but I’m not holding my breath.  I won’t have that much money at that time, but even if I take out a loan, I could pay it off very quickly – probably by the end of the year depending on how expensive the car is.  So, my plan might be to purchase used and pay it off really quickly.  Specifically, I’d take the $2000 I was paying towards my student loans and pay off the car.

I could then spend the next six months in 2019 to try to save for a down payment for a house.  I’m looking at the Sacramento area, but haven’t decided yet.  I also want to buy the house sooner rather than later, and ideally before year’s end.

In either case, having a high credit score matters in terms of getting the best rate for those loans.

Around October, I will have access to about 10k and that can be used to put towards paying off a car or pay for a downpayment on a house.  Think of this money like a bond that will mature at that time.  So, the money is guaranteed.  I just have to figure out what to do with it.  Ideally, I would put it in my Dividend Portfolio, but given my other investment concerns (ie, house and car), this is unlikely.  You can expect a future post on this topic.

Conclusion

I hate seeing my credit score drop.  This is especially true when I’ve worked so hard to keep them high.  I’m really hoping that it will go up as quickly as it dropped, but I guess only time will tell.

Do you know what your credit score is?  Do you have a good handle on your credit situation?  Let me know your thoughts by commenting below.

6 thoughts on “Credit Score Down

  1. Mr. Robot

    I have no clue what my creditscore is and would also definitely not check it that much IF I knew what is was. 🙂

    Reply
    1. Dividend Portfolio Post author

      I don’t blame you Mr. Robot. I freely admit that weekly is way too much. It’s just a habit or part of my weekly routine. It takes me less than 5 minutes to look to make sure that everything is ok. I think I just do it because I like staring at the number to see how good it is – not because of some necessary reason why I need to check my score every week.

      Reply
  2. Tom @ Dividends Diversify

    DP, With two big purchases coming up, I can see why you would want to keep your credit score as high as possible. Hopefully you can pay cash for the car, but I know that’s a lot of funds to come up with even if you buy used. Tom
    Tom @ Dividends Diversify recently posted…Clean Up With CloroxMy Profile

    Reply
    1. Dividend Portfolio Post author

      Coming up with the cash, even for a used car, is going to be both tough and unrealistic. Since I do have a motorcycle, one school of thought is to rely on the motorcycle until I buy the house, and then buy the car right after. I’ll be weighing all my options, but I suspect that I will likely buy a used car, and drive for Uber in my free time to help me generate some additional income. If I can’t make money with Uber in San Francisco (maybe even Sacramento), I’m not sure where else I can make money with Uber. Haha.

      Reply
  3. Dividend Diplomats

    DP –

    You could improve your credit score by improving the “moat” between the $0 balance and the credit limit. I would call your credit card company and see if they can raise your limit, that should help in the short and long run.

    -Lanny

    Reply
    1. Dividend Portfolio Post author

      Interesting point Lanny. I am quite sure that if I asked my credit card companies to raise my limit, they would gladly do it. However, much like how I have a problem using spare money that’s in my checking account, to a lesser extent, I have the same problem utilizing credit that I have available. I don’t want to give myself that temptation. I’d rather suffer through the lower score than risk getting myself into more debt because of poor discipline. Good point though.

      Reply

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