Top 7 Reasons Your Credit Score Could Drop

JUL 31, 2013

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From carrying large balances to having your credit limit cut, discover 7 reasons your credit score could drop.

Reason #1: Large Balances

The closer you are to reaching your credit limit and maxing out your credit cards, the higher your credit utilization ratio will be. Ideally, you would pay the balance on credit cards in full every month, but that’s not always doable. Your goal should be to keep your balance at around a third of your credit limit to avoid risking a dip in your credit score.

Reason #2: New Credit Applications

Inquiries may not make a big splash with your credit score, but multiple inquiries, like applying for credit cards or even signing a cell phone contract can impact your score. If the credit line application was declined for any reason, checking your credit score wont hurt you and may be a good idea if you plan to apply for additional lines of credit.

Reason #3: A Public Record was added to Your Credit Report

From judgments to bankruptcies, public records can curtail your credit score. Depending on the notation, these negative entries can stay on your credit report from 7 to 10 years, causing your credit score to drop. Past due on child support or havent paid your taxes? Even these types of financial responsibilities might become public records if they aren’t addressed timely and appropriately.

Reason #4: Inaccurate Information on Your Credit Report

Because lenders report information to the national credit bureaus, its good to check the data is correct across reports from all the bureaus. Lending companies do not have to report their information to each bureau. Sometimes this causes credit reports to differ from bureau to bureau.

Be sure lenders have accurately reported timely payments, closed accounts and other information. If you find inaccurate information on your credit report, there are steps you can take to have the data corrected.

Reason #5: Late Payment

Missed payments are a no-no, especially when it comes to your credit report. Past due marks in your credit history can lower your credit score, especially as the length of time theyre late increases.

Reason #6: Past due account sent to collections

When your bills go unpaid, your lender may send your past due account to a collections agency to help collect whats owed to them. This means double-trouble for your credit score, as the missed payments and collections notation both make it extremely likely that your credit score will drop.

Reason #7: Closed Credit Card Account

Your oldest accounts are more valuable than you may think! If you’ve paid off a balance on a credit card, wait before closing your account. Once you close an account with a long solid history, you are ditching the positive aspect of length of time you’ve held credit, thus potentially lowering your score when it cycles off of your credit report.

Once you’ve checked your credit report and pinpoint the cause of your lowered credit score, dont be afraid to contact your lenders to work out an agreement that may help get your credit score in better shape.

But, despite these things that can make your credit score drop, the good news is that consistent, positive money management habits can often eclipse the credit score-sinking factors over time, so dont give up!

 

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc.   © 2013 ConsumerInfo.com, Inc.   All rights reserved.