OMG, Why Did My Credit Score Drop Again?
Why Did My Credit Score Drop Again?
Credit can be like a box of chocolates if you don’t know how to maintain it and you really don’t know what you are getting until the results hit. Here are some common reasons that your scores may have dropped:
Your Payment Was More Than 30 Days Late– Just because you made the payment late it does not mean that it is helping your scores
You Made A Tasteful and Expensive Purchase
Was the purchase a need, want, desire and was it worth it? Your credit utilization matters and even though you made the purchase this month it will catch up with you next month and you will see the decrease. The great news it that as you start paying down the balance you will see the increase again. Lenders report to the bureaus at the end of the month, why, because in my opinion, they get you to think that you are doing well and then they drop the bomb on you. However, they are holding you responsible for your actions. So, my word of advice is to ALWAYS BE READY in your credit.
The Unpaid Account Was Sent to Collections
In my collection days, I witnessed my scores go down 70 points all within one week and it was not a great feeling. Its is important to pay all of your accounts and not get in over your head. Get what pleases your financial situation and not you. Lenders don’t want to send you to collections but they don’t mind because they will get paid either way. So be mindful and keep a paper and name trail.
A Collection Dropped Off of Your Report
Collections are never a good thing and I am an advocate of removing them but, when calculating your scores, they are included in your debt to income ratio. I love to hear when people tell me that they have paid off a collection account or that it was removed and I tell them that they are on the right track but that the collection (s) is included with their good debt as well. The main factor is the age of the collection however, because collections are not good in any since don’t let that detour you and keep going with your already good credit actions.
Inquires can hurt but rest easy knowing that it will come off after a year or two. However, the positive will offset the negative and you will see a balance.
A Credit Limit Was Lowered
Lenders do random credit checks and if you are not being “credit worthy” they will lower your balances in a heartbeat. This goes back to your credit utilization and please make sure that you keep it under 30% of the loan amount.
You Closed an Account or It Was Cancelled
Don’t close an account especially if it’s in good standing with a 0 balance because it shows that you have credit stability, good credit habits, and it aids in keeping you ahead. If you no longer want to use the card keep it because it will add to your debt to income ratio. By closing the card, it will allow for your points to drop because it is still a part of your credit history.
A Bankruptcy Fell Off
Bankruptcy has given you a new slate to get your credit and finances right. However, once removed it can bring your scores down but with you exercising good credit habits they will be back up in no time.
Don’t get discouraged with what you see on your credit but be encouraged by what you can’t see because the scores are going to increase if you put in the work.