“How $6 Dropped My Credit Score 100 Points”

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Daraius:   Team member Harlan told me a story about how his credit score dropped unexpectedly.  So I asked him to share his experience with Million Mile Secrets readers.  So they can avoid it happening to them!

Harlan:   Thanks, Daraius!  I clearly remember the day I got an email from Credit Sesame with a “Delinquent Account” alert.

Cancel Recurring Payment

One Small Recurring Payment Ruined My 800+ Credit Score

After I clicked through, I saw my credit score had dropped 100+ points because of a recurring charge on a canceled AMEX card!

I knew how important good credit is for earning lots of miles & points with sign-up bonuses.  So I immediately called to find out what happened.

Here’s what I learned.  I’ll also give some tips so this never happens to you!

How One Small Error Dropped My Credit Score

Until a few months ago, I had an AMEX EveryDay® Preferred Credit Card.  When you use your card 30+ times on purchases in a billing period, you get 50% more points on those purchases, less returns & credits.

That’s a lot of transactions!  So I put many small recurring payments on the card, including my monthly subscription to Dollar Shave Club.

I’m on a plan that costs a flat $6 per month.

Cancel Recurring Payment

$6 for a 4-Pack of Razors Is a Good Deal! But Watch Out for Subscription Services

I put the plan on pause because I don’t shave enough to use all those razors!  While my account was dormant, I closed the AMEX card, and moved to a new city.

Between the move and the time that passed, I forgot to change that card as my payment method.  But when I got the email alert from Credit Sesame, I realized what had happened.

Cancel Recurring Payment

The $6 Charge AMEX Cleared on a Closed Card

AMEX let the charge go through on a card I thought had been closed for months.  Even worse, I didn’t get notice from AMEX that I owed anything on the card.  So by the time I got the alert, my account was 30 days past due – for $6.

My Call With AMEX

I immediately called American Express to figure out how to fix it.  The representative I spoke with said they would “re-age” my account so it would appear closed for a date beyond when the charge was due.  So that way, it wouldn’t appear late on my credit report.

And of course, I paid the $6 charge over the phone once and for all.

The representative said it would be clear on my credit report in ~ 4 weeks.  So I waited.

Cancel Recurring Payment

Now AMEX Says I Owed $0 for Over 30 Days

Over a month later, the error was still on my credit report.  So I called again.

A different representative said the account was not properly “re-aged,” but not to worry – she would do it again.  I waited another month.

That was a few months ago by now.  Now, my credit report says I owe $0, literally nothing.  But that my $0 payment was over 30 days late.  WHAT?!

I’m extremely disappointed AMEX did not help me resolve this error.  Especially because they admitted to me several times the charge should have never gone through in the first place!

Why My Score Fell So Much

Before this situation, my credit score was around 803.  But now, It’s 702 – ~100 points lower!

Cancel Recurring Payment

Payment History Is 35% of Your Credit Score

I have hundreds of on-time payments in my credit file.  But it only took one error to mess it all up.

That’s because payment history makes up 35% of your overall score – more than any other single factor.  Any late payments are weighted heavily.

Even though this error wasn’t my fault, I still took a huge hit.  And AMEX didn’t do anything to help me.

Now I Have to File Claims With the Credit Bureaus

Unfortunately, to fix this I have to contact each of the 3 major credit bureaus directly.  And file 3 individual claims to dispute the error.

It’s a lot of hassle and time to clear up such a small charge.  Only $6!

They each have their own system of handling disputes.  But I have:

  • Proof I paid the account
  • The date I closed the card
  • The date of the charge

So it should be obvious what happened.  Of course, I’ll let them know I tried to clear it up directly with American Express.  And that I have no choice but to file a claim directly.  I won’t know the outcome until after a few more months of waiting.  This is a long process I don’t want to ever repeat.

Remember to Cancel Recurring Payments

Typically, most issuers won’t charge a closed account.  And you can clear up the payment with the merchant.

The best way to avoid dealing with this situation is to always switch recurring payments when you close a card.

Another way is to set up automatic monthly payments from your bank account.  Because even if you overdraft, it may be easier to pay the overdraft fee than to ruin your credit score.  Plus, most banks are lenient when they realize a charge isn’t your fault, and may reverse the charge for you.

I recommend keeping a spreadsheet or file so you can remember.  Or to carefully check your recent account statements and look for recurring charges before you cancel.

Bottom Line

Having a good credit score is the best way to unlock sign-up bonuses on credit cards.  So I was devastated when my credit score fell ~100 points because of a $6 charge.  Payment history is 35% of your over credit score.  So one late payment ruined my 800+ credit score!

Don’t let my story happen to you.  Be sure to keep good records.  And to cancel any recurring charges you have.  There are lots of subscription services out there, so check your account statements.  And switch your payment when you cancel the card on file.

Does anyone have a similar story, or tips to share?  Let us know in the comments!

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Editorial Disclaimer: Neither the responses below nor the editorial content on this page are provided or commissioned by the bank advertisers, and have not been reviewed, approved or otherwise endorsed by the bank advertisers. Opinions expressed here are the author’s alone, not those of the bank advertisers. It is not the bank advertisers’ responsibility to ensure all posts and/or questions are answered.

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9 responses to ““How $6 Dropped My Credit Score 100 Points”

  1. Bottom line is Amex shouldn’t have let the charge go through on a closed account.

  2. How can Amex approve payment on a cancelled card, doesn’t seem right!

  3. No definitely not right but that is in fact the case with a fair few credit files, plenty of accounts have errors and as shown they can be hard to fix.

  4. Being brutally honest (from a retired financial guy), you authorized a transaction on a cancelled card. This is akin to writing a check on a closed checking account. I would call Amex and fall on your sword. Tell them the impact of the transaction and ask to have it removed from your credit record. If they won’t do it, contest the transaction to the credit bureaus. There is a good chance that Amex will not respond to the query and it will be dropped and your score will be restored. Finally, create online access to all your credit accounts and check them once or twice a week for “rogue” transactions. I have found errors while they are still pending transactions or within a day or two of them being posted to my account. Online access will also facilitate you reviewing your account for recurring transactions.

  5. I try to put all recurring payments on the same credit card (Chase Freedom).

  6. Amex will put recurring charges through on a closed account – that is their policy. I think they they are doing you a favor by not having a delinquent account with the vendor. I have asked them not to do this in the past and they say they can’t stop it unless you report the card stolen. I just remember to always check the amex balances for about a year later.

  7. Hi, this is the Dollar Shave Club team. Just read your post. What an unfortunate situation. From our end, would love to send you some DSC products on us.

  8. Good advice from John F. And I’ll take it one step further and say that, for security purposes, you should refrain from ever setting-up recurring or automatic payments.

    Entering your credit card information or your bank account number, for automatic payments, is an open invitation for hackers to steal your credit card numbers or the details of your bank account information.

    As inconvenient as it may be, take the time to pay your bills individually, even the $6 dollar ones.

    Many thanks to Harlan and Daraius for sharing the story.

  9. My personal SPG AmEx was cancelled. When I stayed at a SPG hotel I’d been to before, they swiped my business SPG AmEx card when I checked in. Apparently when I checked out, the charge went to my old personal card in their system. Didn’t even know it could happen. Took a year to fix!!!