Q&A: Investigate a credit score drop

Dear Liz: I had an 836 credit score as of last week. I’m a business owner and have been using my company credit card to pay bills on a large project to get 2% cash back. I charged $52,000 of the $70,000 I have available on that one card. (I have about $175,000 available across the three business cards I have) and my credit score went down to 699! I pay my cards off within days of receiving my statements. Is this a bad use of my cards? How long do you think it will take to get my score back up? Side note: I don’t need any more credit, but my business line of credit is coming up for renewal and I am buying a new truck in two months. Do you think this will be an issue?

Answer: Lower scores could cause you to pay more for credit, so it’s worth fixing this issue promptly.

There’s nothing wrong with using your cards to get rewards, as long as you’re paying your balances in full and not using too much of your available credit. Ideally, you’d use less than 10% of the limit on any card at any given time. (Credit scoring formulas pay close attention to the amount of credit you’re using on each revolving account as well as how much of your available credit you’re using overall.)

If you need to use a lot more of your credit limit, consider making more than one payment a month. Some people make bi-weekly or even weekly payments to keep their balances low.

(The balances that factor into your scores are typically the amounts that you owe on your statement closing date.)

Credit card issuers typically report to the credit bureaus every month, so it shouldn’t take more than 30 days for lower balances to improve your scores.

It’s a little unusual, however, for a business credit card to affect your personal credit scores. Typically, business accounts don’t show up on your credit reports, even if you used your personal credit history to apply for the cards. You may want to pull your three credit reports from AnnualCreditReport.com to see if other problems may have contributed to your score drop.

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