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How One Pair of Leggings Decimated My Near-Perfect Credit Score

Even personal finance writers make stupid money mistakes. Here’s my most recent blunder.

Just a month ago, I was riding high on a credit score that was six points from perfect. There’s no real good reason to try to get an 850 score, by the way—the best interest rates usually require no more than a 760 score. But as someone who doles out credit advice, I felt an obligation to walk the walk. (Plus, my husband’s score was besting mine.)

Little did I know that I had already set the course for a debilitating drop in my score.

A year ago, I signed up for a monthly subscription at an online retailer to get a deep discount on some leggings (that, itself, is embarrassing enough). I just needed to supply my credit card number, and every month, the retailer would charge $49.95 for future purchases on bargain clothes if—and this is key—I didn’t actively decline the charge.

Like a good finance guru, I dutifully declined, using calendar reminders. (I could have canceled the entire subscription, but I wanted to keep my options open—you know, just in case.) But my system failed during my summer vacation and I forgot to decline.

Normally, I would have cursed myself, paid the charge and moved on without a credit hit. This time, though, I didn't know about the charge because I'd otherwise stopped using the card. And so there it sat, unpaid for more than a month until an email from my issuer a week ago informed me that my credit line had been decreased because I was behind on my bill.

The sad FICO impact

I nearly fainted. Surely, there was some mistake. That card wasn’t even in my wallet. I briefly blamed the Equifax breach. But then I signed onto my account and saw that it was all true. Defeated, I paid off the card, canceled the subscription, and waited to see the damage to my credit score.

A few days later, my credit report updated to reflect my humiliation and there was my new score. This hurts to write: My score dropped by 107 points. Seven years of perfect payment history wiped away, just like that. One. Missed. Payment. And adding insult to injury, FICO told me it could take “years to fully recover”—yes, years, as in plural.

This is what it means in dollars and cents. If I wanted a 30-year fixed mortgage—and thank goodness, I don’t—I now would qualify for a 3.776% mortgage rate (which, for all intents and purposes, is not bad—just ask someone who took out a mortgage in 1981 when rates hit 18%). For a $200,000 home loan, that’s a $929 per-month payment. But! If I hadn’t bungled my score, that same loan would come with a 3.554% rate, or a $904 monthly payment.

So, I'd pay an extra $25 a month, or more than $16,000 over the life of the loan, in interest. Those figures don’t even consider how much money I would have made if I invested that extra $25 a month for those 30 years, like a good little personal finance writer (although, the jury is out on that one now).

Your Lessons From My LeggingsGate

Looking back, there were missteps and misconceptions that led to this one big dent in my credit score. I don’t want it to be in vain, so let me highlight a few cautionary lessons so you can avoid my experience.

Be wary of subscription services. First, I should have avoided a subscription service, especially for the lame reason of getting cheap clothes. Companies count on recurring charges falling under the radar, and often force you to call to cancel these services, a major time-waster and disincentive. If you do sign up, review your subscriptions once a quarter and set time aside to cancel the ones you don’t want anymore. Put any automatic charges on a card you use regularly, so you will definitely see them each month.

Check unused credit card accounts regularly. This helps to gird against potential fraud as well as money mishaps. In my case, I should have checked every dormant card account each month, along with those I use everyday. To make these tasks easier, install your credit card’s mobile app for on-the-go monitoring or link all your accounts to a personal finance tracker like Mint.

Don’t assume a good score allows you wiggle room to mess up. You’d think years of a stellar credit record might mean that FICO would let a once-in-a-decade mistake slide. That’s not the case, as score developer FICO sadly confirmed to me.

More is expected from those of us who have high scores, so missteps are especially costly. “Lower FICO scores already reflect riskier past behavior,” says Tommy Lee, principal scientist at FICO. “So the addition of one more indicator of increased risk typically does not impact a lower-scoring consumer as much as a higher-scoring consumer.” That means high scorers must do constant credit vigilance.

Fortunately, I don’t need any new credit soon, so I have time to repair my credit score. (I’ll let you know how long that takes.) I also got new leggings out of the whole mess—I had to cash in that $49.95 credit—which would be a silver lining, if the darn things actually fit.

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