Does Returning A Purchase Affect Your Credit Score?

There could be any number of reasons why you’d want to return an item you purchased. Maybe you ordered an item and the seller accidentally shipped the wrong one. Or, maybe you just changed your mind.

Luckily, returning a purchase you made with cash won’t affect your credit score whatsoever. Unfortunately, returning a purchase you made using a credit card may raise your credit utilization and can lower your credit score.

What Is Credit Utilization?

Whenever you make a purchase using a credit card, your credit utilization ratio changes. However, these changes don’t always immediately reflect on your credit. The reason? Credit card companies often have specific dates when to report.

Data furnishers like credit card companies report consumer credit information to the credit reporting bureaus. It’s this information that the bureaus use to populate credit reports and what credit-scoring companies like FICO use to calculate credit scores.

If you complete a return before your credit card issuer reports the transaction to the credit bureaus, you’ll avoid hurting your credit. But, if you return a purchase after your issuer has already sent a report, your credit will have been affected already.

Fortunately, once your returns have been processed and your credit card issuer reports your new(now lower) credit utilization ratio to the credit bureaus, you may see your credit improve.

How Returning A Purchase Can Impact Your Credit Utilization Ratio?

Fortunately, once your returns have been processed and your credit card issuer reports your new(now lower) credit utilization ratio to the credit bureaus, you may see your credit improve.

Your Credit Can Stay The Same Even After Returning A Purchase

As mentioned, returning a purchase before your card company reports the transaction will allow you to avoid any changes to your credit utilization. And, by extension, avoid any changes to your credit score.

That being said, your credit can remain unchanged or damaged even if you return an item after your credit card issuer reports to the bureaus. This generally occurs when the transaction continues to appear on your credit report.

Your credit score is calculated based on the information available on your credit report. A credit card purchase, even if you’ve returned the item, will continue to reflect on your credit as long as it stays on your credit report.

Luckily, you can dispute inaccurate, incomplete, or fraudulent information to have them corrected or removed. You also have the option of seeking credit professionals to file a dispute on your behalf through the process of credit restoration.

Your Payment History Is More Important Than Your Credit Utilization Ratio

While your credit utilization does play a big role in determining your credit standing, your payment history is arguably even more important. So much so that your history of making payments makes up 35% of your credit score.

Whether you return a purchase or not, you need to get into the habit of paying your credit card bills on time, each month. This is because a single late payment can knock off as much as a hundred points from your credit score.

That being said, however, you shouldn’t forget to keep your credit utilization ratio low either. In order to avoid hurting your credit, you need to keep your utilization below 30%. If you want the best scores, keep this number in the single digits.

The Bottom Line

Returning a purchase you made with cash won’t hurt your credit. Returning a purchase you made with a credit card, however, can affect your credit. Whether that effect is good or bad depends on the timing of when the return was processed.

Luckily, you can undo the negative impact of returning a purchase by removing negative information from your credit report. This is where credit experts and credit restoration come in. Call us at 888-799-7267 to schedule a Free Credit Consultation.