Dear Credit Card Adviser,
I noticed my FICO score has dropped from 788 to 728 in the last year. Is this because I am a stay-at-home mom and don’t have an income? If we keep a balance on the cards in my name, it is generally paid off within a couple of months to maintain active credit.
It’s hard to pinpoint exactly what might have caused that 60-point drop in your FICO score, but your gig as a stay-at-home mom certainly wasn’t the culprit.
Income isn’t included on your credit report and, subsequently, won’t be factored into your FICO score — or any other major consumer credit-scoring model for that matter, says Rod Griffin, director of public education at the credit bureau Experian.
You can keep an eye on your credit score for free at mybankrate.com.
(Quick side note: You may, at times, see a list of employers on your credit report, but this personal information is meant to serve as “an additional identifier” and is not an indicator of your ability to repay, Griffin says.)
As for what may have caused the drop, given that you only sometimes carry a balance, there is a chance it may be related to a variation in your credit utilization rate — essentially how much debt you are carrying versus how much credit has been extended to you.
The general rule of thumb regarding credit scores is to keep your utilization below 10 to 30 percent of your overall credit. So, if you ran up a big balance that put you over that threshold after the first time you pulled your score, you’re likely to see a fluctuation.
There’s also a chance that you were looking at two different versions of the FICO score. Remember, there are a lot of scores in the credit-scoring marketplace and a varying range could be behind the discrepancy.
Don’t stress, however, over any uncertainty. There’s a simple way to discover what’s driving down your score. Many credit score providers outline a list of risk factors when they furnish a score.
“The number will give you a sense of where you stand,” Griffin says. “The factors tell you what is driving (it).”
For instance, if your credit utilization is holding your back, you may see “high balances” listed as a potential negative.
Check to see if the scoring company provided a list of risk factors with the scores you received. You should also be able to double-check the range the provider is using to make sure the same score was, in fact, in use.
If you don’t have a full report at your disposal, request one on AnnualCreditReport.com. You can also purchase its accompanying credit score for a small fee. If you don’t want to spring for the score, several websites offer a free version, providing similar guidance.
These risk factors are “very consistent from one score to another,” Griffin says. “Use them to identity what you need to work on in your credit report.”
Once you address the potential problems, your score should start to bounce back.
Ask the adviser