7 reasons for a drop in your credit score

Find out what may have caused a drop in your credit score

Drop in your credit score

Are you surprised that your credit score has dropped since you last checked it? If yes, don’t worry because the credit score calculation is rather complex. It is not easy pinpointing the exact reason for a drop in your credit score. However, here are the common reasons for a drop in your credit score:

1. A 30 day late credit card or loan payment

Remember that your payment history has an important impact on your credit score. Payments made more than 30 days late are reported to the credit bureau. Once it shows up in your credit report, it is reflected in your credit score.

2. Unpaid account sent to collections

It’s important you not only pay your credit cards and loans to protect your credit score, but you also have to make non-credit payments in case they are sent to a collection agency and included in your credit report.

3. Expensive credit card purchases

The amount of available credit is also an important factor in your credit score. If you make a large purchase using your credit card in one month, your credit score drops even if you pay the full balance by the end of the month. This is because your balance is reported to the credit bureau before your payment.

4. Lowered credit limits

Your credit score is affected the same way by a lowered credit limit by charging an expensive item. If you have a balance on your credit card, and you use up you credit, it only leads to your credit score going down.

5. New credit application

10% of your credit score is affected by new credit report inquiries. Each time you apply for new credit, your credit score is at risk. However, as inquiries affect your credit score only for a year, if you had made only one inquiry, your credit score rebounds in 12 months.

6. Closing or cancelling a credit card

Your credit score will get greatly affected if you or your credit card issuer closes a credit card, especially if it has a balance.

7. Bankruptcy falling off your credit report

If bankruptcy falls off your credit report after a decade, you are most likely to move to a new credit scorecard. You find a drop in your credit score if your credit performance is compared with other people who have not filed for bankruptcy.

Need Help?

If you still need help with controlling your debt and/or improving your credit, fill out the form below and get a free credit consultation from a credit expert at Better Qualified.

5 Tips for preventing a bad credit score

5 Tips for preventing a bad credit score

5 Tips for preventing a bad credit score

No one plans a bad credit score, it’s just that life sometimes throws a curveball to you where  your credit history ends up badly damaged. Usually, it’s repeated mistakes that lead to low credit  scores. And protecting your credit score does not seem to be a big deal till you find it’s time to  borrow some money.  So here are some tips which should help protect your credit score and prevent a bad credit score.

1. Keep ‘Good’ credit accounts open

You generally think it’s better to close credit accounts which you don’t use often. However  before you do this, it’s better to first take a look at the account. If you have an account with a  history of payments made in full and on time, it’s better to keep such accounts open as it  provides a history that proves you can pay your debts responsibly. In fact, it will help your credit  score for as long as you keep it without operating it.

2. Close all small loans, credit cards and credit lines

Cleaning up your credit report by paying off and closing small balances on open credit products  helps prevent a bad credit score. Pay emphasis to the accounts with a history of late payments  and other problems as these accounts can damage your credit score as they show your  irresponsibility at making payments. Moreover, it’s difficult keeping track of so many small  accounts when life gets busy, and can lead to more missed payments.

3. Apply for credit after your credit score improves

New borrowers with credit for a short time of less than 2 years will have a low credit score as  you don’t have sufficient history to prove you are a responsible borrower. If you think opening  additional credit products even if you don’t need them will help improve your credit score, you  are wrong. Only apply for credit required and do not look for additional credit till your score  improves as open credit balances affects your credit score. If you are in need of secured cards please visit our Building Personal Credit page

4. Be punctual with full payments

Falling behind on monthly payments to lenders, landlords and utility providers can tarnish your  credit score as they regularly report to the credit bureau. Their word affects your score, and if  you are late with payments, your score will start dropping.

5. Close revolving balances

The proximity of your revolving balances like credit cards and credit lines to your credit limit  can prevent your score from slipping. Do whatever possible to keep your credit balances below  your limits preferably using just 30-35% of your available credit. Payment delays leads to  interest charges and missed payment fees which not only has a negative effect on your credit  score, you may have to pay an additional fee to your creditor.

So just take responsibility of your finances with the help of these 5 tips to avoid getting a bad  credit score. It’s good not only for your conscious, but also for getting a future mortgage or car  loan.

Need Help?

If you still need help with controlling your debt and/or improving your credit, fill out the form below and get a free credit consultation from a credit expert at Better Qualified.

Multiple Credit Card Applications Can Affect Your Credit

Multiple Credit Card Applications

It is true that you need to get credit to build a good credit score and this can be done by getting a credit card and using it responsibly. However, making various credit card applications in a short  span of time can also damage your credit score. The reason multiple credit card applications affect your credit score is because 10% of your FICO credit score is determined by new credit inquiries you make. Each time you make an application,  your credit is checked by the creditor to decide if your credit card should be approved. This  leaves an injury to your credit report which is included in your credit score.

Various Applications Hint Desperation

Multiple Credit Card Applications Hint Desperation

Consequently, the more credit card applications you make, the more your credit score drops. So as 10% of your credit score is affected by a new credit application, your credit score can fall as  much as 70 points if your credit score is 700. Then again, it also depends on the other information in your credit report. If your credit score  isn’t affected by the various inquiries, there is a chance of creditors denying your application  only because you had recently made various applications. This is because multiple applications are considered to be a sign of desperation for credit, where  desperation is always a turn off. While most people can regain these points within six months of applying for a loan or credit card application, the points may really count for those who had a poor credit score to begin with.

Makes You Look Like A Financial Risk

Opening numerous credit cards in a short time span is a negative indicator of a person’s financial  responsibility. This leads to a negative impact to your FICO score as it indicates you are a  financial risk. As your FICO score predicts how dependable you are with borrowed money, showing any  behavior which is correlated to mismanaging of credit is reflected with a drop in your credit  score. However, if you have already made the mistake of applying for many credit cards at once,  responsibly managing these multiple accounts leads to a quick re-bounce of your FICO score. This is done by paying bills on time and keeping balances below 30% of available credit. Unfortunately, data collected over the past few decades prove that this is not the case most of the  time, and those consumers who open various accounts in a short span of time end up running up  balances and missing payments.

Need Help?

If you still need help with controlling your debt and/or improving your credit, fill out the form below and get a free credit consultation from a credit expert at Better Qualified.