A Silly Mistake Can Significantly Hurt Your Credit Score – A Mistake Should Be Avoided

As a busy person like many of you, I have always use automatically payment from my Bank of America (BOA) checking account to pay for all my bills from mortgage to credit cards and utilities.   E-Bill, a feature which I love the most, allows billing companies to bill directly to my bank account.  My bank account  then pays the bill on due dates or other options (depending on the setting).  This feature is so convenient that I don’t even pay attention to any billing deadlines because I know that I won’t miss any payments.

 

However, some billing companies don’t have this feature available on BOA. In other words, I have to login to the credit card online to check for the balance, and then go to my BOA account online to pay the bill manually or pay the bill traditionally by sending the check in the mail.  Another payment method which I don’t like to use is to provide bank account information to billing company website, and it will automatically withdraw your money when it’s due.  Kohl’s credit card is one of these billing companies.  The only reason that I Kohl’s credit card because occasionally I can get 30% discount from Kohl’s if I use Kohl’s credit card.  I was very careful when I use the Kohl’s credit card.  So I always pay full balance after each transaction to ensure I don’t miss the bill payment in case I forget.

The mistake that hurt credit score

However, in 2018 I had a business trip to Taiwan, and I forgot to pay for the bill of around $17.  Two months later, the balance went up to ~ $35 by the time I checked for the balance.  Calling to Kohl’s customer service, explained the situation and then paid the balance in full right away.  I was shocked when the monthly credit reports show my credit score down to 729 points from 819 points. This score range has stayed on my record for a long time; it’s now in 2020 but my credit score is not improved much.

I usually don’t care much about credit score impact as I didn’t have any debts and didn’t borrow money.  However, Mid-2019, my husband and I have found our dream home and we decided to purchase the home.  Even with 50% down payment, we couldn’t get a good mortgage rate because brokers told us that we don’t have a perfect credit score.

Lessons learnt from the mistake

As you see, a small mistake which I forgot to pay for a bill of $17 costed my 90 points of my credit score. In addition, it also impacted my mortgage rate which also costed me thousands of dollars.  Here is my lessons learnt:

1. Limit number of credit cards that I use for easy billing management
2. Avoid credit cards that don’t have e-bill feature with BOA.  If I need to use these cards, I put the transaction balance into my task list to remind me for on-time payments
3. Avoid using cash for two reasons

• • Record keeping – credit card companies keep all transactions while I can’t keep track cash purchases
  • Rewards – most credit card companies pay rewards on the total amount of money spent.  My husband and I usually get around $400 to $500 per year in credit card rewards while I won’t get any money back with cash spending