Advice on credit score dropping

You’ve made great progress starting with a secured credit card, but there are a few things affecting your credit score that we can address. Here’s a breakdown and action plan:

Why Your Score Is Dropping

  1. High Credit Utilization

    • Using 90-100% of your credit limit (even if you pay it off in full) signals high credit usage to lenders, which can negatively impact your score.
    • Fix: Keep your utilization below 30%, ideally below 10%. For a $300 limit, aim to use no more than $30-90 at any given time.

  2. Delinquency or Serious Indicator

    • This suggests a past late payment, collections account, or other negative mark on your credit report.
    • Fix: Pull your full credit report for free at AnnualCreditReport.com to verify the details. If the delinquency is inaccurate, dispute it with the credit bureau.

  3. Multiple Accounts Listed

    • The 3 accounts reported likely include:
      • 1 Installment Loan: Likely a past car loan, student loan, or personal loan.
      • 2 Revolving Credit Accounts: Your Discover card and your old Apple Card (even closed accounts can stay on your report for up to 10 years).
    • Fix: Closed accounts generally aren’t bad if they were in good standing, but confirm that the old accounts don’t show unpaid balances or errors.

  4. Short Credit History

    • While your oldest account is listed as 5 years (from the closed Apple Card), your current active credit is only 7 months old. Lenders prefer longer credit histories.
    • Fix: Keep your Discover card open and active to grow your history over time.

Action Plan

  1. Monitor Your Credit Reports

    • Check all three bureaus (Experian, TransUnion, Equifax) for accuracy. Look for:
      • Delinquencies you don’t recognize.
      • Closed accounts showing balances owed.
    • Dispute any errors immediately.

  2. Reduce Credit Utilization

    • Keep your balance below $90 at all times. Instead of maxing out the card each month, make smaller, frequent payments to stay under the limit.

  3. Set Up Payment Alerts

    • Ensure you never miss a payment or have one reported late. Payments over 30 days late are a common cause of delinquencies.

  4. Consider a Credit Builder Loan

    • If your secured card isn’t enough to improve your score over time, a credit builder loan from a local credit union could help diversify your credit mix.

  5. Patience and Consistency

    • Building credit takes time. Stick to responsible habits—pay on time, reduce utilization, and monitor your report—and your score will improve gradually.

Key Reminders