Credit Score Drops after getting Credit Card

Pegasus_1981

Hi,

Quick bit of background detail, trying to boost my credit rating, have a 4.8k limit on my Barclays credit card and a balance of 3k, I'm paying this off £500 a month so will be down to zero soon.

I read a lot around utilization % as i'm currently around 60% on my sole credit card (no other credit apart from mobile phone), you get a big jump once you get below 30%, my logic was to take out another credit card and use that for small purchases but paying the balance off each month to exaggerate the amount of credit i wasn't using vs what was available.

It worked in that sense but it saw my Equifax score drop by 26 points, anyone else noticed a drop in score when they get a new card or product as its showing 100% available balance and on time payment for the first month?

I thought it anything my score would go up not down, should I just cancel this card and have it show as settled, just shopping around for a better APR for car finance?

[Deleted User]

Your score has no meaning, is not seen by anyone apart from you and can be safely ignored.

Pegasus_1981

I'm confused by the purpose of the score then, i thought lenders would get my report from the big three and make a decision based on their records.

do they ignore the score and just make their own assumption of the file?

Pablosammy

Ignore those who say it has no meaning - it does, as long as you understand its limitations. No lender is going to use your arbitrary credit score from Experian or Equifax etc - they have their own selection criteria - but it IS a very rough measure of credit worthiness.

If you take out new credit, that's a flag to other lenders that you're looking to get into more debt. A number of applications or new accounts in a short period will harm your chances of getting other credit, as it's a sign you're living beyond your means.

[Deleted User]

All lenders see is your file and judge you on that and any other information you give them.

Many bankrupts appear to get 999 scores, as do people on their 18th birthday. If you use if to micro manage your account, you wil lend up making the wrong decisions.

Pegasus_1981

Hi Pablo,

Many thanks, do you think i should get rid of this card, the only point of it was to make little payments on like petrol then paying off via the direct debit so i'd get zero interest to boost my score.

I don't need the card but was looking to cheat my score up a little. The balance is at zero having only mad purchase of petrol which I have cleared right away.

Do you think it'll do more harm than good long term keeping it?

[Deleted User]

This is a good example of where you can start going wrong - you took out a new card, and your score dropped. That encourages you to think you should close the card. Which will make your score drop further.

Credit scores hate change. The fact is, having two cards is fine and indeed sensible. Keep them and simply use them well - clear the debts, then use and pay in full each month.

Pegasus_1981

Ok thanks, makes perfect sense, when i did all the reading I was certain I was doing the right thing to boost my score, to see it drop was a surprise!

i'll carry on with my strategy and see how it plays out.

glentoran99

Pablosammy wrote: »

Ignore those who say it has no meaning - it does, as long as you understand its limitations. No lender is going to use your arbitrary credit score from Experian or Equifax etc - they have their own selection criteria - but it IS a very rough measure of credit worthiness.

If you take out new credit, that's a flag to other lenders that you're looking to get into more debt. A number of applications or new accounts in a short period will harm your chances of getting other credit, as it's a sign you're living beyond your means.

No lender even sees your score

MallyGirl

but as you now know - no one sees the score. All they will see is 2 well managed (hopefully) accounts.

Pablosammy

Deleted_User wrote: »

This is a good example of where you can start going wrong - you took out a new card, and your score dropped. That encourages you to think you should close the card. Which will make your score drop further.

Credit scores hate change. The fact is, having two cards is fine and indeed sensible. Keep them and simply use them well - clear the debts, then use and pay in full each month.

Never a truer word said.

Keep things steady, maintain a credit history, and don't overindulge. Keep the card you've got, as any damage was done when you hit 'apply', and keep the balance low.