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Question By
Shanefpt

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2 People Helped
Should I use, or not use my credit cards?
I am 33yrs old and new to credit. I started with a 320 score, and some nasty claims, most of which weren't legit. In the past year I have cleared it and jumped up to 690. A few months ago I took my first credit card. I use it often and then also pay my balance often. I noticed recently my score dropped to 660 then to 635 in two months! However, I have carried no balances and promptly paid my card after each use! I only have a $200 limit, but I have about $1500/month in expendable income. I use my card for all my purchases (except when it is over 80% limit and it doesn't clear my payment from my checking account in 2-3days, then I use my debit card until the balance is cleared) and I keep it payed up. I typically pay it off 3 times a month since it seems I have a limit on how often I can pay it off, so I use it for about $480-540/month spending. I just don't understand why my score is dropping... Is this normal? Will it eventually fix itself? I've always hated the idea of credit and sort of fear it. I just don't understand why it is going down when I have nothing negative in my history or spending habits. Is it best to NOT use your card at all?

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No, it is best to use your card every month. Although your use is pretty responsible and it will reflect as such when viewed throughout time, I would recommend lightening its use. The thing about credit utilization and how you are using it now is that you are charging it up to a high percentage then paying it off, high utilization percentage on a single card can hurt your credit score. However do know that most creditors take into account the fact that it is a low limit card and they actually won't take that high utilization rate into consideration when considering your credit worthiness in light of your responsible usage (paying it off in full each month). The best way to utilize your card is to just charge gas for your vehicle or a small grocery tab (say around $50 out of your $200 limit). Leave that balance on your card until your bill statement posts and then pay it off in full by the due date. Rinse and repeat (you won't be charged any interest). The thing is although you are paying it off in full 2-3 times a month, you only get a benefit for paying off your Statement Balance each month. By doing this you will keep your utilization rate around 25% which is good, your continuous use and paying off of the statement balance will cause your credit card company to eventually increase your limit due to your responsible use, and you will be getting a monthly on-time payment history; all 3 of which will boost your credit.  Don't worry about the credit anamolies too much, they happen all the time. Just keep you credit moving in the right direction as you are and it will stop dropping and start going up. Just pay attention to each category that has an effect on your score and make sure you are doing what needs to be done in each area...and keep using that card.

Reply by
Shanefpt

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Helpful to 2 out of 2 people

Thank you so much for your time and thorough response. I will be sure to use your advice, it makes sense. Thanks again!

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