Why Did My Credit Score Drop?
You might feel frustrated or angry thinking about “Why did my credit score drop for no reason?” While a few points down or up isn’t a big deal. However, a constant bad credit score is concerning. Your credit scores change all the time. This is because the data that is used to calculate your scores comes from your credit reports, and that information keeps fluctuating all the time. Even when it seems that your score randomly dropped for no apparent reason, there is always an underlying reason.
Formulas generally determine credit score ranges, and a lot of factors can result in lower ranges. If you are interested in learning more about these factors, then we suggest you read on! Here are some of the reasons why your credit is on a downward trend and some tips to fix the issues. So, let us get on with it!
Major Reasons Why Did My Credit Score Drop?
You Missed A Payment
It happens; maybe you have online statements and deleted a notice email, misinterpreting that it was just another advertisement. Or, maybe you set the bill aside and did not get back to it in time. If you pay a few weeks or even days late, expect a late fee or maybe a penalty interest rate increase. However, if your account goes more than a month past the due date, then the creditor might report you to the credit bureaus, and even your 820 credit score can drop to poor. Because the better you score, the worse the score damage possible.
The Fix
Right after the creditor receives the money, you can contact them and ask if they can forgive you just this one. There is no guarantee that this will work or not, but it won’t hurt anyone to ask simply. If the creditor agrees to not report your late payment, then my credit score will not carry the negative mark for seven years or so.
Your Credit Card Balance Is Higher
If you have unanticipated expenses and you put them on your cards, then your 810 credit score can drop. This is because a significant factor in credit scoring is credit utilization, or how much of your limits you are using. Generally, use no more than 30 percent of the limit on any of your cards because the lower it is, the better it will be for your score. If you use credit more, even staying below 30 percent, you might end up dropping your score.
The Fix
Pay the high balances as soon as possible and return to utilizing a smaller portion of the credit available. Moreover, by asking for a higher limit, you can not only improve your credit score but also maintain it. Ask your issuer if there is anything that can be done without “hard inquiry” because that will also cost a bunch of points.
You’re A Victim Of Identity Theft
A major, unexplained reason for “Why is my credit score going down?” can be a crucial sign of identity theft. You can ask reputed credit score monitoring services to check your reports. You can review them yourself for warning signs, such as the accounts that seem unfamiliar or the addresses where you have never lived. Those can determine if someone is operating fraudulent credit accounts in your name. The good thing is that you clean up the mess. The sooner you indicate there is any issue, the simpler it will be for you to get things right.
The Fix
You can report identity theft to trustworthy credit score services, such as Gifted Financial Services. By doing so, you can easily dispute the information present on your credit reports. Follow up by reviewing your credit reports again in a month or so – to be exactly sure that corrections have been made. You can also freeze your credit or at least add a fraudulent alert to safeguard yourself in the future.
You Co-Signed Credit Card Application Or A Loan
If you are wondering, “why my credit score going down when I pay on time?” then you might have co-signed a credit card application or a loan. In this case, there is a high chance that the person who co-signed the application might have spoiled your good 748 credit score. It can happen if they have an overdue payment or even a huge balance on their credit card.
The Fix
Make sure that you have access to the online account or you have statements sent to your home. By doing so, you can easily watch for any issues and address them early. You’re on the hook for the entire amount. So, it might be worth taking the hassle of making the payment all on your own in order to ruin your 746 credit score. If it is a credit card, you can pay it off and close it to preserve your scores. However, we suggest you talk to your relative or friend first to make sure if a less severe method would be more suitable.
You Paid Off A Loan
It might feel no less than an achievement to pay off a loan. However, it can also leave you with a lower score. So, if you are worried about this issue, then it is probably because when you pay off a loan, you have one less credit account.
The Fix
You have to steer clear of this entire situation by keeping your other accounts active, paying on time, and keeping your credit utilization low. Your credit will continue to benefit as your records with credit expand longer and are filled with positive information.
Summing It All Up!
Keeping an eye on where your credit lands is significant because it can make a huge difference in your financial status. Generally, lower credit score ranges mean lesser access to credit cards and loans, and if you get access, the interest rates and various other terms will likely be less promising. Once you pinpoint a reason why your score dropped, you can work on bringing it back up by incorporating a lot of fruitful strategies. These strategies might include keeping your credit use below 30 percent and paying your bills on time every month. Progress might seem slow. Nevertheless, adopting healthier financial habits is the best way to climb your way back up the credit ladder. If you need any help with your credit score, try contacting reputed experts from Gifted Financial Services. By doing so, you can get all the answers that you require without a hitch.