Finding out your credit score has dropped during the process of a credit check can be upsetting. It’s especially confusing, if you don’t recall making any significant changes to your credit use. But the truth is your score is constantly evolving, and a number of factors influence your standing.
The detailed information contained in your credit report is used to calculate your credit score. Keep in mind that your credit report is a living document, with new information being reported each and every month. Not only that, your score varies as well. Each time your score is checked, whether it’s by a business entity or yourself, it is calculated fresh on the spot. It does not remain static. Knowing which personal behaviors negatively impact your score is the best way to reach your credit goals.
Delinquent Payments
Paying a bill late or missing it entirely may cost you dearly. This information is reported to the credit bureaus and you could lose several points depending on the severity of the delinquency. Most lenders measure late payments in 30-day increments; a payment that is 180 days late is worse for your credit score than one that is 60 days late.
Maxing Out Credit Cards
Did you charge too much on your credit cards recently? Lenders look for a specific usage rate in order to earn optimal points towards your credit score. Utilizing any more than 30 percent of your available credit may cause your credit score to drop significantly. Try reducing yours using even less and you may gain some points.
Closing Accounts
Your credit score is positively affected by a lengthy credit history, so closing a longstanding account could cause a slight drop in your score. Keep in mind that under the Credit Card Accountability, Responsibility and Disclosure (Credit CARD) Act, lenders may no longer impose inactivity fees, so consider reaping the benefit of keeping your oldest credit accounts open without using them.
Applying For A New Line of Credit
Each time you apply for a new credit account, you authorize lenders to look into your credit history. When lenders pull your credit information, a hard inquiry is placed on your credit report and your credit score may drop. However, the same rule does not apply when you check your own credit, requesting your own credit check will not have a negative impact.
Understanding which types of behaviors cause your score to fall may make you more aware of your credit use in the future. Keep these habits in mind the next time you pull out your plastic and make sure your acting in a way to help meet your credit goals.