If you regularly monitor your credit score, you may be surprised to see something unexpected credit loss on your credit report.
When you have the financial knowledge to understand what affects your credit score, you can improve your credit score and gain peace of mind at the same time.
Here are five reasons your credit score might have dropped recently and how you can fix or prevent them.
You have late or missed payments
Your payment history is the most important element of your credit history.
It is important for your creditworthiness to pay your bills on time. Your credit report logs late payments, which can negatively impact your score.
To avoid late payments, make sure you set up reminders to pay bills or set up automatic withdrawals to ensure your bills are always paid on time.
Your credit limit has decreased
A sudden drop in your credit limit can increase your credit utilization ratio — how much debt you have available. Using up most of your available balance can negatively impact your score.
Either pay off debts or ask your bank for a credit limit.
You recently closed a credit card
As above, closing a credit card can decrease the amount of credit available and increase your credit utilization rate.
You recently applied for more credit
Credit checks, in which financial institutions carry out a credit check, can have a negative impact on your creditworthiness.
To avoid multiple credit checks, do not apply for multiple credit products at the same time.
You have been a victim of identity theft
A key reason for regularly monitoring your credit report is to be on the lookout for suspicious activity.
A significant unexpected drop could indicate that someone else has entered into loan products on your behalf and taken on a large amount of debt.
Curious what to do if you have a decline in your credit rating?
There are several steps you can take to improve your credit score, such as: B. by making sure you pay your bills on time and using your credit cards sparingly.
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