I finally caught my biggest credit card mistake after 3 years of thinking I was being smart

I always thought paying my credit card balance the day after I made a purchase was being super responsible. Like I'd buy something for $50 on Tuesday and pay it off Wednesday morning, thinking I was avoiding any interest. Then last month my credit score dropped 40 points for no reason I could figure out. I went to a free financial counseling thing at my local library in Portland and the guy asked me how I pay my cards. When I told him he just shook his head and explained that I was reporting zero utilization every month, and that actually hurts my score because it looks like I'm not using credit at all. He said I should wait until the statement posts and then pay the full balance before the due date. I had no idea after 3 years of doing it wrong. Has anyone else had a similar wake up call about something you thought you were doing right?

2 comments

2 Comments

jessew8312d ago

40 points from that? Seems kind of extreme for just paying early. I've done the same thing for years and my score hovers around 780 with no issues. Maybe it was something else like a credit limit change or a late payment you missed somehow. But yeah, waiting for the statement to post is the standard move, I just don't think one habit alone wrecks your score that hard.

caleb_gibson12d ago

Jessew83 saying 40 points is extreme... yeah that part's actually pretty normal. I've seen tons of people in credit groups freak out over the same thing. The zero utilization penalty is real for some credit scoring models, especially if you have thin credit history and all your cards report zero at the same time. It's not like a guaranteed thing for everyone, but for someone who's only had credit for 3 years with maybe one or two cards, a 40 point drop from that is totally plausible. Your score is probably higher because you've got thicker files or multiple cards averaging out differently.

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