Why My Credit Scored Dropped 16 Points: What NOT To Do

My Early Retirement Journey - credit score droppedSo I received a notice from Credit Karma that my credit score dropped 16 points. I scoured the site but found no explanation. They state that some fluctuations are normal. I doubt 16 points is a normal fluctuation. I called one of the credit reporting agencies and they stated they were unable to provide me any information over the phone. They would send me a free credit report, and I could then file a dispute if  anything on the report was inaccurate.  Fighting with organizations is my least favorite thing to do. How do you prove "nothing." As in, I did nothing to warrant this drop. The struggle is just ongoing.


 
Sometime in April 2018, I received the free credit report (with no score). It showed me everything I could already see on Credit Karma so that was a bit anti-climactic. I didn't see anything new on the report. The report showed 3 late payments from a federal student loan in 2015 that should have been under a grace period. I thought it was a mistake that would correct itself once my loans were consolidated or have minimum impact on my score in the end. It didn't correct itself and it did impact my score in the end.  I suspect these alleged late payments dropped my credit score dramatically in 2015 from being Very Good/ Excellent to Good/Fair.  But for them to drop again out of the blue down to Fair, I have no explanation and the credit report yielded nothing further.

By way of consumer education, Credit Karma provided some details into what impacts credit score.

My credit score was much higher in the mid 700s just 4 years ago when I was swimming in debt with 2 credit cards at a high balance of $15,000 (total) and a private student loan which at its highest was about $20,000. Both debts have been paid off as of Summer 2017, and their payoff honestly had no significant impact on my credit score conceivably because the student loan account closed, and I closed 2 of the 3 credit card accounts.  My score had already fallen to the mid-low 600s by then.

Although I've had some form of credit, either credit cards, car loan, or student loan since age 18 (so 16 years), CreditKarma shows my average credit age is about 4.5 years because all but 2 accounts are paid off and or closed. It doesn't explain the sudden drop, but according to this report the "young" credit age may be why my score is still so low.

Next steps. At first I did nothing about the credit score. I don't need it for anything. The hard inquiry was from March 2017 when I was getting serious about buying a house. That is on the back burner for the foreseeable future. I wanted the credit report, namely to make sure I hadn't been hacked as that was the primary reason for closing my credit card accounts. I thought keeping them open was supposed to be good for your score, and I wasn't wrong it seems, but it had a negative impact because I was a victim of identity theft.

A recent blogger shared her credit score journey and how she uses credit cards responsibly to keep her score really high. It started to motivate me a little to check this little blip off my list. I took another look at the report that was mailed to me. I considered funding my summer adventure musings with responsible credit card use but decided against it. I want to maintain my position and avoid credit card use at all costs for the foreseeable future. What I did do was file a dispute with the reporting agency explaining that my account should have been under a grace period. It costs nothing and at the very least I'll be exactly where I started. I wanted to feel like I did something while also pushing down the urge to use credit cards again. In the end, I've made up my mind not to be discouraged by the outcome of the dispute and not to get lost in the FIRE comparison game for something that didn't matter just yesterday.

Lessons learned:
  • Monitor your score, if needed to catch fraudulent activities.
  • Mistakes don't correct themselves. Act if you must.
  • Credit card age matters. Keep your oldest one active, if you can do so responsibly. If not, don't. 
  • Run your own race to credit score perfection. No one's watching!
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