Credit Score Dropping For No Reason? It Might Be THIS

Understanding Drops in Credit Score

( – It can be very alarming to discover that your credit score has suddenly dropped.

Having a good credit score is key, as it affects your ability to own or rent a home, get a car loan, and even get utilities without a large deposit. If your credit score dips too low, you may not even be able to open a bank account. If you’re applying for a mortgage, a credit score dip will likely mean a higher interest rate on your loan. That is why it is important to remain vigilant about your finances and how they impact your credit score – and avoid any nasty surprises!

Figuring Out Credit Score Drops

There are many legitimate credit score monitoring services, of which Credit Karma is the most popular.

Sites like Credit Karma are useful because they provide excellent information on how to recover from debt, but they also make money on affiliate sales. For example, links on the website could advertise credit card services to you that you may not actually need.

Be sure to keep this in mind if you read information that urges you to consolidate your debt with a loan, refinance your car, or sign up for a new credit card, as some of these actions might hurt your credit score. If you can, you may want to talk to a financial adviser to find the best plan for your specific needs.

Repair The Damage

It is vital to find the source of your financial woes if you’re looking at a credit score drop. You could be facing more than one problem!

Check for the following issues:

  • Suspicious activity and fraud: Someone might use your personal information to apply for credit cards, loans, and more —  which results in a score drop when the scammer does not pay. This could be a criminal who received your information on the dark web following a data breach, but it could also be a family member or friend. If this happens, you need to report the fraudulent activity immediately and freeze your credit to avoid further problems. You should also notify your bank, even if the fraud pertained to a different bank or a card not associated with your bank account, so you can ensure your money remains secure and available to you. Credit reporting websites like Experian have step-by-step guides for reporting fraud and freezing your credit.
  • Purchases you actually made: Sometimes, you need to make a big purchase, like taking out a car loan or getting new furniture. This isn’t unusual or bad, but if you have a big purchase on your credit card, it will negatively impact your score.
  • Other credit inquiries: Any credit inquiries can damage your score, and they’re usually unavoidable when applying for a loan. These are minor and usually pretty temporary.
  • Credit age: When you apply for and open a new credit account, it lowers your credit age. Generally, you want to keep your accounts to a minimum and keep them open as long as possible to keep your credit age high. Lowering your credit age with new accounts affects your credit score negatively.
  • Loan payoffs: Paying off loans is important, but when your loan is done and over with, your credit score drops. This applies to closing credit card accounts, student loans, or even mortgages.
  • Collections accounts: Collections are a frequent source of bad credit. Collection occurs when you have failed to pay off loans and other debts on time, and once your debt goes into collection, your score tanks. You can fix this issue by calling your creditors and working out a payment plan. Once you are paid up, your score will likely recover soon.
  • Eviction or default: If you’ve been evicted or if you’ve defaulted on a loan, it can stay on your credit report for at least seven years. There’s not much you can do about these bad marks once they’re on your record, but steadily improving will help your score recover over time. Unfortunately, credit scores do not take into account hard times like recessions, job loss, or housing market collapse.

It’s important to regularly monitor your credit score. Once you have a nasty surprise, it’s too late!

While some big purchases are unavoidable, they can negatively impact your score. Make sure you do your life planning carefully so you anticipate this and can plan for it. If you need financial counseling, there are employee assistance programs and other local services. Get a plan to get your finances on track – and avoid any nasty credit score surprises!

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