credit & debt

Why Is My Credit Score Dropping?

This reader is paying off debt, but it's not improving his credit score.

Q: I have been paying down debt and I haven't charged any new items, except on my American Express business account, which I pay off every two months. Yet my score has declined about ten points every month for the past five months. Shouldn't my score be going up?

Your American Express card may say it's a "business account," but if it appears on your credit report, the credit bureau considers it a personal card -- and transactions on it are factored into your credit score. So paying off your balance every two months is hurting you. Paying a revolving debt more than 30 days late is one of the red flags that can hurt your score, explains Steven Katz, a spokesman for credit bureau TransUnion.

"The computer model that generates your credit score is looking for a long record of credit accounts that you have paid on a timely basis." Katz recommends that if you cannot afford to pay off the balance each month, you should at least make the minimum payment.

Andy Jolls, of credit-education Web site VideoCreditScore.com, goes even further. He recommends making two payments each month so that your balance will be low when data is sent to the credit-reporting agencies. (The date of transmission may not be the closing date for your account.) That will improve your credit-utilization ratio -- that is, your current balance in relation to your credit limit.

Most Popular

The 25 Cheapest U.S. Cities to Live In
places to live

The 25 Cheapest U.S. Cities to Live In

Take a look at our list of American cities with the lowest costs of living. Is one of the cheapest cities in the U.S. right for you?
August 7, 2022
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Kiplinger's Weekly Earnings Calendar
stocks

Kiplinger's Weekly Earnings Calendar

Check out our earnings calendar for the upcoming week, as well as our previews of the more noteworthy reports.
August 12, 2022

Recommended

When Will Student Loans Be Forgiven?
Paying for College

When Will Student Loans Be Forgiven?

Millions of Americans are waiting for the Biden Administration’s next hint, which could come later this summer, at how he’ll address the student loan …
July 7, 2022
Financial Advice from America’s Founding Fathers
credit & debt

Financial Advice from America’s Founding Fathers

What money-management guidance can we glean from the words — and experience — of Benjamin Franklin, Thomas Jefferson, Alexander Hamilton and others?
June 30, 2022
Two Updates to Credit Reports
credit & debt

Two Updates to Credit Reports

The major credit bureaus are changing how they report information about medical debt and buy now, pay later.
April 26, 2022
Free Credit Monitoring for Equifax Breach Victims
credit reports

Free Credit Monitoring for Equifax Breach Victims

Millions of consumers whose data may have been exposed have been notified to sign up for the monitoring service.
March 17, 2022