Why Is My Credit Score Dropping?
You’ll have it for your entire life. The greater it is, the better.
Your credit score will always be important. It’s the main indicator of your creditworthiness that lenders and other financial institutions rely on to dictate everything from an interest rate to even if you can rent a house or rent an apartment.
Credit scores can change for an unfortunate reason or for what appears to be no reason at all. If you’ve recently experienced a credit score drop, here are some of the likely culprits.
The Reasons Why Your Credit Score Is Dropping
You’re Missing Payments
The first rule of credit is that regular, on-time payments are a priority. That said, everyone makes mistakes, especially if like most you have many forms of credit or just got a new credit card.
Unfortunately, one late payment may cause a credit score to drop since on-time payments are one of the top factors in formulating a credit score.
If you’ve overlooked a payment, take care of it right away and find a way to remind yourself of the due dates. Creditors may even be lenient about granting forgiveness and not report the payment to credit bureaus.
You Just Got A New Card
If you’ve consistently used different forms of credit and paid on time throughout your life, you’re likely in good credit score shape. But beware: Applying for a new credit card could make your credit score drop since typically credit card issuers look at your credit score, known as a “hard inquiry.”
Such inquiries can stay on a credit report for a few years. A way to avoid this is to not apply to so many credit cards all at once and see if you qualify for pre-approval offers from a credit card issuer.
You Have Too Many Derogatory Marks On Your Credit Reports
Derogatory marks are any type of negative credit or loan issues — and they tend to impact a credit score for up to (and sometimes more than) 10 years.
Common derogatory marks include having a credit account in collections, filing for bankruptcy, losing a civil lawsuit, and having to pay damages, home foreclosures, and tax liens.
The Balance On Your Credit Card Is Abnormally High
Unanticipated expenses or making several high-cost purchases around the same time almost always make your credit score drop. Another major factor in determining your credit score is your credit utilization, the percentage of your credit limit being used at any given time.
Financial advisers often recommend using 30% of your limit or less and, relatedly, working to eliminate your debt with the highest balances.
You’re Experiencing Identity Theft
If there’s a sudden huge drop in your score, identity theft may be responsible. Another clue is if there’s incorrect personal information in your credit report, such as accounts you are unaware of or if there are addresses where you never lived.
To combat further damage, consider using a fraud alert or temporarily freezing your credit until the matter is resolved.
You’ve Closed A Longtime Account
Another big factor in your score is how long you’ve been using credit responsibly. It’s a strong indicator that you can be trusted to pay a loan back on time.
So, if you’ve recently closed an older account, one you’ve managed successfully for some time, it could lower the overall average age of all of your accounts, leading to a credit score drop and often lower credit limits.
There’s An Error On Your Credit Report
There’s a reason why it’s recommended to check your credit report regularly. Incorrect information on your file could lead to a credit score drop. That could come in the form of inaccurate payment history and wrong credit balances.
Continue Being Financially Responsible With An Installment Loan
Emergencies can severely damage your credit score. An unexpected hospital bill, last-minute travel, or an expensive car and home repair can lead to significant financial setbacks.
If you’re struggling to overcome a financial emergency, an installment loan can help those who qualify. Installment loans in Missouri are designed to help with such emergencies and are paid back in regular installments over time. At Missouri Title Loans, Inc., you may qualify for a loan of up to $1,500 easily and quickly.
Just start on our homepage and fill out the installment loan form. One of our friendly loan representatives will then give you a call to discuss the loan process and answer any questions.
Once you qualify — it can often take as little as 30 minutes — and agree to the terms, you’ll get the cash you need that same day or the following business day.
Get Started Today!
Credit score drops can happen for a variety of reasons. One may be a failure to cover a financial emergency in a timely manner. An installment loan may help. Either start the qualification process on our homepage, give us a call, or visit one of our locations today.
Want to know more? Increase your knowledge of credit and debt here!
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.