A lot of people struggle with their credit score. They try their best to work towards having good credit. Without a good score, life can be difficult. You might face higher monthly payments, big interest tacked on, and so much more. If you have great credit score, you’re trusted a bit more with the credit you use.
That’s why it can be super frustrating when your credit score suddenly drops and you’re unsure why. You didn’t really do anything, right? One day it was higher, then the next you see it dropped. What could be the cause of this? Well, there are a hundred different factors that impact your credit score. Let’s take a look at 5 of them.
1) Identity Theft Impact Credit Score
Identity theft is one of those things that happens without you knowing about it. There’s never any warning that someone has somehow stolen your information. They might open a credit card account and make a bunch of purchases. You won’t really know about it until it’s time to pay for those purchases. When no payment is made, it will hit your credit score. Signing up for credit monitoring is one of the best ways to prevent this from happening.
2) There’s an Error
If you’ve taken out credit and are making payments on it, usually the person you have the loan with will report those payments. A record of on-time payments is wonderful! It shows you can be trusted. Over time, those on-time payments will improve your credit score. Yet, mistakes happen. Something isn’t reported the right way or there’s a typo. It’s even possible that something shows up on your credit that’s not supposed to be there. That’s why it’s important to routinely check your credit score.
3) You Missed a Payment
Sometimes life gets in the way of having a perfect on-time record. You sent the payment in, but it got lost in the mail. Maybe you got your due dates wrong or mixed up. Anything can happen. When it does, you have to be proactive. Having a perfect record of on-time payments is the best way to improve your credit score. If you’ve missed a due date, contact the creditor immediately. Explain what happened and they may cut you some slack.
4) You Used a Lot of Your Available Credit
Let’s say, for example, you have two credit cards. Both cards have a $500 limit. If you max both of them out, then you have zero available credit. That can send your credit score plummeting. When you pay off those cards and the balances are back to maximum, your score will shift back to the good score it was. The best course of action is to not max out your cards every month. That makes it harder to pay back, especially as interest is added on. Make smaller payments every month.
5) The Average Age of Your Credit Score Has Changed
The age of the credit you have plays a factor in determining your score. The older your credit, the better. It shows you’ve been trustworthy for a long period of time. Yet, if you have a bunch of new credit added on, it shifts the average age of your credit to being younger. That will drop your score.
