Learn how an innocent credit card can reduce your scores by 150 points – overnight. It does not matter if you made all of your payments on time, or even early! The folks at FICO may applaud your timely payment efforts, but there is something they care about even more.
It’s all about your balances. As soon as your balance exceeds 60 percent of the card limit your score will start to fall. Go over 80 percent, bad news. Hit the limit on your card, look out; you may see a 150 point drop.
But wait, there is good news. Reduce your balance, and your score will go right back up. The minute the credit bureaus have the updated balance information your score will be recalculated without any lasting damage.
A Note on Small Cards
Small secured credit cards often take people by surprise. A card with a 300 dollar limit is easily maxed out. Small cards are one of the best ways to rebuild and to boost your scores, but watch those balances.
If you plan to make application for a loan in the near future, start reducing your card balances right now. It can take the credit bureaus 60 days to reflect the updated balances, so you need to plan ahead.
Credit card balance changes are the most common cause of big credit score swings. If you check your scores and see an unexpected change, don’t panic. Check your balances.