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Why Has My Credit Score Gone Down? Eight Possible Reasons

Filed in Articles, Banking, Banking Guide, Insurance by on April 9, 2021

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Why Has My Credit Score Gone Down? Are you in the habit of monitoring your score often? Or, did you signed up for the alerts? If yes, then you’ve seen how your score changes over time. However, while you’re excited about an increase, note. You’d be equally alarmed about a drop. The score calculation is very complex and it can be difficult to pinpoint the exact reason for a score drop.

Why Has My Credit Score Gone Down?: Eight Possible Reasons

However, since it is based on information in your credit report. Thus, an unexpected decrease in your score can typically be traced to a change to the information in your credit report. However, in this article, you shall learn about a few possible reasons your score could drop.

Some Answers to the Question: Why Has My Credit Score Gone Down?

Below are some possible reason your score has gone down:

1. Your Payment was More than 30 Days Late

If you are asking the question: why has my credit score gone down, please listen. Payment history has the most significant impact on your score.

Also, credit card and loan payments more than 30 days past due are reported to the credit bureaus. Also, they are reflected in your score.

Thus, once the late payment hits your credit report, your score will most likely drop. However, for more information on this CLICK HERE

2. You Made an Expensive Purchase

Another important answer to the question goes thus. This score is the amount of available credit you’re using or your credit utilization ratio. And it comes as a surprise to many people.

However, if you make a big purchase on your credit card one month, you could see a score drop. And this can happen even if you pay the balance in full on your due date.

Also, this happens because credit card issuers typically report the credit card balance as of the last day of the billing cycle. However, for more information on this CLICK HERE

3. Your Unpaid Account was Sent to Collection

To protect your score, it’s important for you to pay all of your accounts. And this is not just your credit cards and loans.

If you fall behind on the payments on your non-credit accounts (such as your monthly phone bill), the defaulted balance could be sent to a collection agency and included on your credit report.

Once a collection shows up on your credit report, it will almost certainly cause a drop in your score.

4. Your Last Collection Dropped Off Your Credit Report

When calculating C scores, credit scoring models place people in different buckets, known as scorecards. Your credit profile is compared to other people in your scorecard to come up with your score.

While you may have been at the top of one scorecard with the collection on your credit report, you may fall to the bottom of a different scorecard if any negative information falls off your credit report.

This type of score drop is outside of your control. Fortunately, as long as you keep paying your bills on time and keep your debt low, your score will improve.

5. You Made a New Application for Credit

Any time you put in a new application for credit, an inquiry is added to your credit report. Because inquiries make up 10 percent of your score, applying for new credit can affect your score.

Though inquiries stay on your credit report for two years, they’re only factored into your score for one year. After just a single inquiry, your score should steadily increase and recover in 12 months, provided you make no other credit mistakes.

6. One of Your Credit Limits was Lowered

A lower credit limit has the same impact as charging an expensive item. If you have a balance on a credit card with a low credit limit, your credit utilization goes up, and your score goes down.

You may not have control over whether your credit card issuer reduces your credit limit, but if this happens, paying down your balance can improve your credit utilization and your credit score.

7. You Closed a Credit Card, or One Was Cancelled

Closing a credit card can hurt your credit score, especially if the card has a balance or more available credit than your other credit cards.

Credit card issuers can also cancel your credit card, which will impact your credit—not necessarily because it was the creditor who closed the account, but because the account was closed at all.

Closing your only credit card or your oldest credit card can also impact your score.

8. Your Bankruptcy Fell off Your Credit Report

When bankruptcy falls off your credit report after seven years (ten years for Chapter 7 bankruptcy), you’ll likely move to a new credit scorecard, similar to what happens when a collection drops off your credit score.

You could see a drop in your score because now your credit performance is being compared to other people who haven’t filed for bankruptcy

With the above reasons, I guess you now know why your score is going down. However, follow the steps given to avert it. Furthermore, feel free to share this information whosoever is facing a similar challenge. Be your brother’s keepers.

In summary, What’s your take on this? Please share it with friends and relations using the share button below.

CSN Team.

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