Why did my friends credit drop like 30 points?

[Anonymous]

I still don’t know in depth why. I know one of the reasons was that he was barely using his credit card which i told him to just use it for gas each month and the other was he didn’t have any installment loans mainly because his car bought and he basically went to college for free because of his dad being in the army. but what’s the other reason?

[Lynx122]

We don't have this system so I'm not 100% sure but I think not having any debts is not enough to have the highest credit score you constantly have to use your credit cards and get into debt but then pay it off on time to have the highest score. This system conditions people to take on debt, it's insane to me. To me someone who is constantly taking on debt even if they're managing it well and paying it off is closer to having debt problems than someone who just stays out of debt. But this system is probably set up by credit card companies in the first place, it's easy money. Now more people have to use their cards to pay which raises the chance of people paying expensive interest on their bills it's a great system for them but for the average person it sucks.

[HighValue]

If someone pays off their debt their credit rating drops. It also drops from not using credit cards for a long time. The system is backwards. Carrying lots of debt and making timely payments gives someone a higher credit rating than someone that has all their debt paid off, even if they have the same income. It is an illogical system.

[Anonymous]

It’s most likely the inactivity. When a credit account is idle, the card issuer makes no money from transaction fees paid by merchants or from interest if you carry a balance. Even if you don't use your card often (or at all), an open credit card account still affects two key credit scoring factors: the length of your credit history and your credit utilization rate. Using the card for small purchases each month, like gas or buying coffee, and then paying them off is a good way for your friend to build back their credit.

[Danny_dan92]

Everytime you take out a loan, fail to make payments, get a credit check, etc.


Your score is affected

[Redstang88]

Yeah it’s probably just the inactivity