Common Reasons Why Your Credit Score Can Suddenly Drop

Credit Score

Many business dealings and day to day transactions are accomplished through the use of credit. Credit score monitoring is, therefore, very crucial to protecting your credit score. People are usually happy and content when their credit scores improve because it creates a sense of security. However, when a credit score drops, we are alarmed and would do anything to raise it. The following are some of the reasons why your credit score may be dropping.

Late or Missed Loan Payment

Your credit rating will drop if you do not pay your debts on time. Many lending institutions report defaulters to credit bureaus. This results in a drop in the credit scores of people who do not pay back debts when they are due. Lenders always check with the credit bureaus for the credit ratings of potential borrowers before issuing a loan to an individual or business. If you have many loans to repay, you can consolidate or refinance them for better repayment terms with the lenders through the help of experts.

Other Unpaid Bills

It may come as a surprise to many people that your other non-credit bills may affect your credit rating. You need to ensure you pay all your bills, not just loans, on time. Defaults on such bills can be sent to a collection agency, who will include the information on your credit report. Once this information appears on your report, it will obviously affect your score negatively. Since you do not know which bill collection agency will report you, it is important to clear all bills through automatic payments when possible.

High Initial Purchase

You might wonder why your credit score drops despite making payments on time. Making a one-off expensive purchase during the first month after acquiring your line of credit can affect your score by increasing your utilization ratio. Therefore, how you spend using your acquired credit can also affect your score. This is because your credit card issuer reports your credit card balance in the last day of the billing cycle. If you used a large proportion of the available credit, then your balance will be higher. Luckily, the Boostcredit101 website has better solutions for how to can go about this. Visit their website today to speak to an agent about solutions. To correct this, pay your balance and take time before making other purchases to ensure the zero balance is reflected in your report.

Too Many Credit Inquiries

Lenders need to research your credit history to determine your creditworthiness before issuing a loan to you. These hard inquiries by lenders will take some points off your score. While a few inquiries would not affect the score that much, too many attempts will adversely affect your score. To avoid this, research and apply for only a few credit cards that have favorable repayment terms. This will reduce the number of lenders inquiring about your credit report.

A Negative Remark Was Added to Your Report

If you recently declared bankruptcy, this information will appear on your credit report and negatively affect your credit rating. Lenders take such information into consideration when deciding your creditworthiness despite the fact that you might pay your bills on time now. Follow up with a credit repair professional to help you amend the unfavorable information. Otherwise, you will suffer a major blow from which it can be hard to recover for a long time in the future. However, reversing your financial situation through more income and better financial management could be the best idea.

Incorrect Credit History Report

There is one more challenge that can happen to your credit report. Whether by mistake or not, incorrect information can cause harm to you. The most common issue is when lenders submit your name to the credit bureaus for blacklisting by mistake. Although it can be reversed once detected, the majority of people, who do not monitor their credit history, can be disappointed when applying for a loan. It is good to dispute this as soon as you detect a mistake.

Conclusion

With the above highlights, it is now clear what the main reasons for a credit rating decline could be. Luckily, all have solutions that you can easily follow to bring your score up again.