It’s a topic we all wished we learned more about in school. It’s our credit score. Without good credit, it can become difficult to make large purchases with the use of loans.
This could have an effect on car and home purchases and even apartment rentals. Realizing your credit score dropped is the last thing anyone wants to learn. When you do see a credit score drop, it’s important to understand what caused it so you can then correct the problem.
In the guide below, there’s a list of several reasons why your score might have dropped. Continue reading below to learn more!
You Used More Than 30%
When you have credit cards, it’s essential you keep your use at 30% or less. Take the amount your credit card is for and then figure out what’s 30% of that limit. This is the number you don’t want to spend past.
Although the money has been approved and is there for you to use, keeping your credit cards maxed out or at the use of more than 30% can cause your credit score to go down. Check your credit cards and put enough money on them to bring their utilization to less than 30%. You should see a rise in your score within a month.
There’s a Missed or Late Payment
A credit score shows financial institutions, loan providers, landlords, and others how reliable you are. A high credit score proves you’re likely to pay back the money you borrow or make payments as promised. When you miss a payment or are late on a payment, your credit score will drop.
If there are any missed or late payments, then be sure to correct these as soon as possible to raise your score.
You Applied for Several Lines of Credit
The more lines of credit you apply for and open around the same time, the lower your credit score will drop. When loan providers run a credit score check, it takes a hit on your credit. How much it affects your credit will determine if it’s a soft pull or a hard pull on your credit.
This is something you can ask before having someone run your credit score. However, if you must open multiple lines of credit at once, then keep in mind you can bring your credit score back up by being on time with each payment. Be sure to do some additional reading on how to increase your credit score to ensure it’s always where you want it.
There’s Been a Foreclosure or Bankruptcy
As stated before, missing payments can have a negative effect on your credit. If you miss enough payments to find yourself in foreclosure, then this will take an even bigger hit on your credit. The same is true if you file for bankruptcy.
Aside from negatively affecting credit, finding yourself in either of these situations can also have a negative impact on your ability to borrow from lenders in the future.
Know What Affects Your Credit Score to Keep It High
When you know what affects your credit score, you can correct any errors and keep it high. Don’t forget, credit score errors aren’t impossible. Always be sure to conduct free credit score checks to search for any possible errors that you can then correct.
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