Since nobody likes to go backward, lowering your credit score is both frustrating and stressful. It can have a serious impact on your life, as you may have more difficulty in getting qualified top credit cards or get the best personal loan rate.
That’s why it’s important to find out what happened to your credit and how to fix the problem. Here are all possible incidents that can cause your credit score to drop, plus how you can fix each issue.
1. Your balance is too high
If you recently charged more than usual on your credit card or you’ve used it for a large deal, that might increase your credit usage. Credit usage is 30% of your® FICO score and your card release organization reports your balance each month, so this is the factor that can change your credit score quickly.
The use of your credit is simply your combined credit card balance against your combined credit limit. Suppose you have 1,000 dollars of available credits and 700 dollars in the balance. That will set your usage level to 70%, which is considered too high and will spoil your credit.
How to fix-Reduce your credit usage by 30% or less (the lower, the better) and you will quickly increase your credit score. Here are three ways to do this:
Pay off your balance.Ask your card-releasing companies to increase your credit limit, since credit is more available than lowering your credit usage.Open a new credit card. When its credit limit is added to your credit record, it will increase your available credit.
2. You have closed the credit card
When you close your credit card, you’ll have fewer available credits, because the credit limit on that card will be removed from your credit file. That means that if you have brought any balance, they will occupy a larger portion of your total credit, which makes your credit usage increase.
Another issue when closing a credit card is that the average age of your credit account may be reduced. This is a smaller part of your FICO® point, but it still accounts for 15%.
How to fix-check your credit usage level and reduce it if it has increased too high, by paying the balance, asking for increased credit limit or opening a new credit card.
Although there is no quick way to increase the average age of your credit account, but at least you can avoid registering any new credit accounts until your score is improved.
3. You have missed a payment
Your payment history is part of your FICO® point, the most important issue, accounting for 35%, so the lack of payment will almost certainly reduce the major credit score.
It is important to note here that missed payments are only counted on you if they are delayed at least 30 days. From 0 to 29 days, creditors may charge you a late fee, but they cannot report your account late to the credit office.
How to fix-get a missed payment right away, as your score will continue to sink for a longer period of waiting.
Set up an automatic payment or reminder payments on all your invoices to make sure you don’t miss a payment again. It may take more than a year for your credit score to recover after the payment is missed, but any additional missed payments will make you come back even more.
4. You have applied for a new credit
Any new credit application, which may be a credit card, credit limit, or loan, leads to a difficult investigation of your credit record. Each difficult question can cause your point to drop a few points, although it’s nothing big.
How to fix-no job is needed for you during this time, as difficult questions only affect your credit for one year. A hard question will not cause much of your score.
However, you will want to avoid any more credit applications so that your score can recover.
5. You already have an account to be reported for the collection
A collection account can wreak havoc on your credit. The creditor will initially report that you do not pay, and then the Debt collection agency will also report to the credit bureau.
If you have a great credit score to get started, your collection account can easily decrease by 100 points or more.
How to fix-first, verify that it’s a legitimate debt. Otherwise, you may dispute with creditors and any credit office that has a debt that is listed in your credit report.
Collection accounts can spoil your credit for many years, but you can negotiate what is called “paid to delete” with the collection agency. Simply stated, you tell the agency that you will only pay off the account if they agree to remove it from your credit record.
Not every collection agency will agree with this and the credit bureau frowned with it, but it’s worth trying.
6. There is an error in your credit record
Lowering your credit score may not necessarily be your fault. If there is an error in your credit record, it may reduce your credit score. The error is more common than most consumers realize, which is why keeping track of your credit is important.
How to fix – Request your credit report from each of the three major credit offices. You are legally entitled to a report from each office every year, free of charge. See which of these three errors, and then report it through the online dispute process that each office launched.
For step-by-step instructions to dispute an item in your credit report, here’s how it’s done with Equachus, Experian, and TransUnion.
To keep your credit file changes up to time, you should withdraw your credit reports at least once a year. You can also sign up for the free credit monitoring service to immediately notify you of any changes.
7. You have paid off a loan
If you have taken two times for this, you are not alone. It seems the opposite, paying off a loan can reduce your credit.
The reason for that is what is called your credit mixture, responsible for your 10%® FICO score. It is considered better to have a more diverse credit mixture. For example, two credit cards and an installment loan, such as a personal loan, will be better for your score than the three credit cards.
If you pay off your unique installment loan and only credit card remaining, it can affect your credit score.
How to fix-maintain low credit usage and make all your payments on time. You can borrow another loan, but that’s just worth doing if you really need a loan. Not worth paying interest to give your credit score a small collision.
Get your credit score back into shape
Taking care of your credit is one of the most intelligent financial decisions you can make. There are many ways that your credit score can decrease, some of which are more serious than others, but they can all be corrected if you know what you’re doing.
If your credit score recently goes down, start by finding out what the cause is. Then follow the steps above to fix the problem.
These savings accounts are insured FDIC and can earn you 20 times your bank
Many people are missing out on the guaranteed profits because their money fades in a big bank savings account earned next to no interest. Our best choice of online savings account can help you earn more than 20 times the national average savings account rate. Click here to discover the best selection in the class that has won a position on our shortlist of the best savings accounts for 202