Friday, April 19, 2024

Top 5 Reasons Why Your Credit Score Went Down

If you have a habit of regularly checking your credit scores then you know that credit scores change every time. While it might excite you that there is an upsurge in your score, you’ll be equally worried if there is a sudden decrease in your score. The calculation of a credit score is highly complicated and it will be difficult to identify the specific reason why your score dropped.

Credit scores are a reflection of your credit report so if there is an unexpected drop in your score, then it is usually because of a drastic change of information in your report. Here are a few reasons why your scores dropped:

Missed And Late Payments

Missing a payment or paying your debts late is obviously one of the top reasons why there will be a sudden drop in your score. One late payment might just have a little impact in your score but accumulating missed payments will have a significant effect in your score. This is why you should always see to it that you are paying your debts even if it is way past the deadline. The longer you allow the payment to be missed, the larger the decrease will be on your score. Debts that are more than 30 days late are immediately reported to the credit bureaus. As soon as this reflects on your credit report, your credit score might have already dropped.

Had A Massive Purchase

One important factor that affects your credit score is how you utilize your credit. Some people might still be surprised but making an expensive purchase such as starting a business or buying a house will decrease your credit score even if you fully pay your balance on time. This occurs because credit card companies usually report the balance of your credit card at the last day of your billing cycle. The good news is it’s simple to fix this kind of drop in your credit score. You only have to settle the balance in full and avoid making other credit purchases. After doing this, you will need to wait until your credit report shows the balance.

Frequently Changing Address

Lending institutions may regard frequent changes in your address as a sign that you are financially unstable and is unable to pay rent. Lenders would like to see stability as it shows that you will be able to pay back your debts. So, seeing something that indicates the opposite can decrease your score.

Your Account Is In Collections

To be able to secure your credit score, it is crucial that you pay all accounts under your name and not just your cards or mortgages. If you fail to pay your non-credit accounts such as your monthly electric bill, the defaulted balance will be forwarded to a collection agency and will be reflected on your credit report. Once this collection shows on your credit report, it will cause a drop in your credit score.

Error In Your Report

Sometimes, but not often, a borrower sees a mistake in listed on his reports. But most of these mistakes are not sufficient enough to cause a decrease in a person’s credit score. So, if you are sure that you did not do anything to lower your score, check your credit score because an error might be the cause. You will need to assess every part of your credit reports to check if a mistake has been making your score to drop. If you ever you see one, make sure to dispute the error so that it can be rectified immediately. Act fast so that your score will be able to recover again.

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