Credit Score Went Down Dramatically

Money Management
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I’ve had credit challenges all my life due to the combination of student loans and public interest jobs that didn’t pay well or sometimes not even on time. About five years ago, I started my own business, and it’s thriving. As a result, I’ve been able to pay off all my credit card debt, pay off one of my car loans, and haven’t had a late payment in many years.

For the past 18 months, I’ve routed most financial transactions through cards whenever possible to get points or miles, and then pay them off without carrying a balance. I paid one vehicle off early and am on track with the other one to pay it off in three years or less instead of five. So my credit score over that time period moved from mid 600s to mid 700s.

Early on, I only had a couple of credit cards, with low credit limits, high interest, and little or no perks, but over time, I got more offers and so wanted to get better cards with better terms. Some of my credit card companies increased my limits without me even asking.

My single-owner business is separately incorporated and has been in existence for 5 1/2 years. I needed to get a computer and line of credit for my business. Long story short, even though I thought the inquiries would only show up on my business credit record, the credit card company and lender checked my personal credit, and so now I have multiple inquiries within a short period of time.

I read some information where a dip for multiple inquiries could make a difference, but that difference would be offset by bigger credit limits and lower credit utilization. In a couple of months, I increased my business credit limit by $50K, and my personal credit by $12.5K. I’m still not carrying a balance, but my score has gone down 75 points!

Is there anything I can do? I don’t need more credit right now, but it’s just very frustrating when I’ve worked so hard to improve my score, that it reflects so poorly on me, especially when my creditworthiness and ability to pay has never been higher. I don’t know how long it will take to return to what it was before, but am curious whether there’s anything I can do to accelerate that happening.

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Have you pulled your credit report for each of the three credit bureaus (you can do it for free) to make sure that the information is accurate? If information on the credit report is not accurate, send a letter to that credit bureau getting the information corrected or removed. Keep paying your credit cards/loans on time and early as you indicated and it will improve. 35% of your report is your credit history so if that is clean then your score will improve.

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I have been watching the credit score updates I get through my cards, but went to pull my credit reports just in case there was something else there. The negative info on there was the same as before when my score was higher, and hasn’t changed in the meantime (miscommunication about student loan deferment and a 30 day late payment from 2015, which will drop off later this year.)

So it’s still really curious, but the only significant change is the two inquiries in Dec and Jan, and the increase in available credit. It is gradually improving in small increments, but it will take a long time to get back to where I was before at this rate, so it’s just annoying.

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@peebee - what’s the age of your personal cards? Your business credit increase shouldn’t affect your personal credit score. So it’s just the $12.5K credit increase that’ll help you.

Also, you mentioned you don’t carry a balance - this is great as that’s the thing that’ll most destroy your credit score.

But what’s your current utilization rate? And how often do you pay off your card? I’ve found that paying off my card 2x a month (once autopay, once manually) makes my credit utilization go to 0, which skyrockets my credit score.

I take dips of like 20-30 points when I get inquiries, and they go back up in a couple months. I take further dips temporarily when I increase my credit limit. So if your utilization rate is 0, or close to 0, then just wait.

Lastly: How come you want your credit score to skyrocket so quickly? Are you purchasing a home soon or need to use the credit score for something?

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Oldest account is nearly 30 years – the analysis is “excellent” on that front.

While I don’t think the business credit increase should have affected my score, two queries that are business related (a business credit card and a business line of credit) are now showing up on my personal credit.

In checking my credit report, I found some late payments in 2015 that will drop off later this year. I don’t think 30 day lates in 2015 are probably having a big impact, but maybe a little. At any rate, they were there when I previously had scores well over 700.

Utilization is typically 10% or less, max 30%, but if it goes up before the bill would be due (like when I travel or make a big purchase) I make an extra payment to bring it down.

I don’t care if it skyrockets so quickly – it’s just that I worked very hard over the last five years to get it over 700, so seeing it go back to the mid 600s is demoralizing. My score really jumped when I started paying off balances every month, so now I don’t know what I can do to see that kind of jump again.

We were considering a vehicle trade that would require new financing, so having it be lower will affect the interest rate and lender options. Also, I have purchased a new business, and am watching to ensure cash flow fluctuations don’t impact my personal income until I have the client business from that business secured.

Basically, I want my score to reflect my financial situation and give me the credit flexibility I didn’t have before in terms of choice of lenders and terms. I thought I was on my way to doing that, and this has been a setback.

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It sounds like you might be getting personal report hits on your small business but without getting any of the personal advantages (like aggregating your available credit) from those hits. You say you’ve incorporated - but as an LLC? LP? S Corp? C Corp? Even with incorporation - depending on the type - you might be signing personally as a guarantor (i.e., for any of your small business lines - is there an individual signature guarantee?). If so - my bet would be that your individual score/report is suffering as a guarantor of your business accounts - but you’re not reaping any personal score advantages… though, keep in mind, your business accounts might need your individual help.

Much as everyone hates to pay - this might well be a situation where it would be wise talk to a professional (CPA and/or attorney). Won’t come free, of course - but might be worth the cost (and, of course - any such costs would be perfectly legitimate business expenses for tax time).

Another option (perhaps the first option, actually!) might be looking into small business resources – https://www.sba.gov/ is a good place to start. Beyond that, your state and local governments may have resources – and we’re not just talking grants, loans, and such - but you might have some free resources/advice available before you spend on a pro.

After 5 1/2 years - assuming your business has solid financials (i.e., provable cash flows, etc), my guess - and it’s only a guess based on what you say - is that it might be time to more clearly delineate/separate your personal finances from the business. This can be as simple as changing the nature of business incorporation (which won’t be free - but generally, means a few hundred dollars in filing fees).

Avail yourself of SBA/state/local resources for small business - they’re under-utilized and they’re funded for a reason. You might ultimately benefit from a pro - but start with what’s available for free.

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@zonk1984, now that some time has passed, I think that’s definitely what happened, but I don’t know what I can do about it. I have an LLC/S Corp, and when I requested a business credit card (Amex) and a business line of credit, both appeared to have checked my personal credit even though I only gave them my EIN.

I guess because S Corp is a pass-thru corp they’re entitled to do that, but I did think there was a way to separate the two for credit score purposes. Or, if it counts double for inquiries, the fact that I have a significant amount of additional credit on the business side should also count double, so that it would be helpful, not harmful.

Incidentally, Dun and Bradstreet gave me a subpar score for my business, even though I have no business debt and pay off my business credit cards monthly, because I either haven’t filled out certain fields on my questionnaire (which as a professional services business are not applicable to me) or can only provide additional info on some fields if I pay them for a higher level of service (and is not cheap!) That seems to be a real racket and is really frustrating that I would have to in essence buy my D&B score.

Very helpful to look at some of the various resources out there – I’m the dreaded L word so I always think I can figure it out myself, but I’ll ask my accountant or check into the SBA resources.