Notice a Credit Score Drop? Here Are 6 Reasons Why

By November 19, 2018Credit Scores
monitoring your credit score

When you’re working on fixing your credit, or simply paying attention to your score as part of your monitoring efforts, you may be surprised when you see your credit score drop. Whether it’s a significant drop or a minor one, it’s good to stay aware of what’s happening.

Here are six potential reasons why your credit score may have dropped recently.

1. You Have Credit Errors Due to Identity Theft

Identity theft is constantly on the rise. In fact, in 2017 there was a 44% increase in security breaches that exposed personally sensitive consumer information. Because of this, it’s vital to make sure any new activity on your credit report is actually from your own actions. Order a free credit report and scour each account to make sure that you actually opened it yourself. Also, check all of the balances to ensure no one has compromised your existing accounts and charged them up without you noticing.

2. Your Debt Has Increased

You’ll likely see a credit score drop if you’ve increased your debt load, especially if it’s revolving credit rather than an installment loan. You may see a slight dip after you take out large loans, like an auto loan or a mortgage, but those aren’t weighted as negatively as credit card debt. If you’ve upset the balance of your card balances, especially if you’ve maxed out one or more credit accounts, your score is bound to drop. The good news is that you can improve your credit pretty easily by paying down those balances. Typically having just a 30% credit utilization rate is ideal for your score.

3. You Were Over 30 Days Late on a Payment

Being late on your mortgage payment or credit card bill by a few days won’t be reported to the credit bureaus. Once you hit 30 days late, however, the creditor will most likely report it as a late payment. Since your payment history accounts for 35% of your credit score, you’ll probably notice a decrease in your score. Don’t sit on that bill. You’ll receive additional negative entries at 45, 60, 90, and 120 days late. Make that payment as soon as possible to protect your score from being damaged even further.

4. You Closed a Credit Card Account

The age of your credit history influences your score. Consequently, if you close an old account, the cumulative average age of all your accounts will drop. Your score, too, might drop a bit. If you’re paying an annual fee for a credit card and you’re not really taking advantage of the benefits, by all means cancel the account. But if it’s not costing you anything, it might be a good idea to keep that old card in your wallet, especially if you’ve had that account open for several years.

5. You Paid Off a Loan

Paying off a loan isn’t a bad thing, especially if it gets you out of debt or reduces your interest payments. When you do this, however, your credit mix will change, which can impact your credit score. This is especially true for installment loans since they’re viewed as more favorable than credit card debt. Keep paying down those credit cards to help offset the drop in your score. You could also consider consolidating credit card debt into a low-interest debt consolidation loan. It could save you money on your interest payments and also get your credit mix back to a better place.

6. You Had a Derogatory Item Added to Your Report

If you had a collections account added to your credit report or a public record, this can do significant damage to your credit score. A collections statement is added when an account is severely late. To get it removed, you could initiate a credit dispute or make a settlement payment and negotiate to have the listing removed from your credit report.

Alternatively, your score will also suffer if you’ve had anything added like a foreclosure, tax lien, bankruptcy, or civil judgment. These are serious items and typically take between seven and 10 years to be removed from your credit report.

Luckily, these types of public records and any other negative item on your credit report can be removed early. Use a credit repair service like Ovation Credit to help initiate credit disputes with an experienced legal team. You do have rights when it comes to credit repair and you shouldn’t be afraid to exercise them.

Sign up for a free consultation today with Ovation Credit and find out how you can get your credit score back on track.

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