Why My Credit Score Drop?
Consumers who are confident about their credit score get shocked when they face a sudden credit score drop. Where it could be a sign of embezzlement, there may be several other reasons behind the credit score drop. Here we are listing some of the major factors which can be the reason for your credit score drop.
While applying for a deed, credit card or home loan, business loan, personal loan, or any loan, the granter tries to pull your credit, resulting in hard inquiries appearing to your credit report. A forsaken hard inquiry can lead to dropping your credit score with a few points. One more reason for the drop could be if you apply for several loans or credit cards.
Closed Credit Card
Wonderful!! You have accounted for and finally paid your credit card score balances fully. But if you are thinking of dropping your credit card and have not earned more credit card debts. This could be the reason for the drop in your credit score. Closing your credit card will cause your credit score to drop in two ways.
Firstly, your credit card looks for the age of your credit card and the older values. the average age of your account drops adds if you drop one of your oldest credit cards, causing you a drop in credit score.
Secondly, your credit score is also affected by credit utilization i.e, how much debt you have concerning your credit card. Generally, it should not be more than 30%. If your utilization is too high, your credit score will automatically have a negative impact.
Delay or Mis Payment
Your payment history affects your credit score as it comprises of around 35% score. A single mispayment will decrease your credit score much. These mispayments can affect your credit report for as much as 7 years which lasts very long. And if you forget to make payments in a group, it goes on collecting. The next point goes in the same way-
Accounts in Collection
If you have not paid your credit card bills on time, your service provider will add it to the collection archives. This collection account appearing on your credit report will decrease your credit score. This shows a serious misdemeanor and the servicer might take you as a risky task.
You can get incorrect or inaccurate information from anywhere. The accounts of which you do not know, payments are done on time can all be represented on your credit report, and lowering your credit scores. It could be a result of a variety of clerical errors. If you want your credit score to be up, it becomes important to immediately dispute this information.
If your credit score is decreased suddenly, it could be a case of fraud. To stay protected from this, regularly review your credit report. If you feel that you are a victim of fraud than immediately contact your service provider.
Discrepancies Between Bureaus
Every insurer or loan broker does not report to each bureau, that is why your credit score may be different every time. Make sure you are comparing your credit score from a single place.
Related Topic: Impact of Student Loan on Credit Score