Having a Baby Lowers Credit Score

This might sound a little crazy.  But, I can tell you that becoming a parent certainly lowered my credit score.  Sure, we’ve heard of all kinds of things that can lower your credit score.  In fact, this may be the most myth filled topic in the last 10 years [acai berry is pretty close though].  I feel I tell at least one person each week not to close down open credit cards as it hurts your score, but many people feel its counter intuitive and they do it anyway.

Here’s the story on becoming a parent.  When you have a baby, even if you have great insurance, you are likely to incur some costs.  In our case, our boy was delivered via c-section [although I'm not sure how that even impacted the cost].  All I know is that we got a bill for about $2500 [the total cost was probably similar to a year of college at Harvard].  We — the lovers of reward points — put that charge on our American Express card.  Great right?

Well, my credit score went down by 8 points.  Why?  The stated reason is an increase in my balance to over $3000.  So, could I have done anything to avoid this point drop?  Yes. Here’s a list

• Paid with a check.  That way there’s no sudden bump in credit card expenses
• Recognize that the time after you have a baby is really busy and you will likely be late on bills or not be paying quite as quickly.
• Pay your credit card bill the same day you pay the medical bill.

What I wish I had done is this final bullet point.  Many of you know that I like to pay my credit card bills off every 2 weeks for the purpose of keeping my rolling balance lower.  This keeps my credit card utilization ratio higher and thus my credit score in great shape – over 760.

Why pay your credit card every two weeks?  You get paid every two weeks.  It’s a good habit that rewards your credit score.

Now, I’ll probably get these 8 points back by getting back to my every 2 weeks strategy.  I would expect to see my score head back up in the next two months.  But, I’ll be more careful, the next time we have a baby, and yes, I hope and expect there will be a next time.

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