Why Did My Credit Score Drop?
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If you’re wondering why your credit score dropped, you’re not alone. Many people experience a dip in their credit score at some point, and it can be frustrating to try to figure out why.
Luckily, there are a few steps you can take to figure out the reason for your credit score drop, and we’re here to help. Read on to learn more.
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Check for New Credit Inquiries
If you see a new credit inquiry on your report, that could be the reason your score dropped. When you apply for a new credit card, loan, or other type of credit, the lender will do a hard inquiry on your report. This type of inquiry can temporarily lower your score by a few points.
If you don’t recognize a particular inquiry, it could be that someone else applied for credit in your name (a form of identity theft). In this case, you should dispute the inquiry with the credit bureau.
Check for New Accounts
When you check your credit report, look to see if there are any new accounts that you don’t recognize. If so, it’s possible that someone has stolen your identity and is using your information to open new lines of credit. This can obviously have a big impact on your credit score.
If you do find new accounts that you didn’t open, contact the credit bureau and the lender right away to let them know about the situation. You should also file a police report so that you have documentation of the crime. Then, take steps to protect your credit going forward by monitoring your credit report regularly and placing a fraud alert or freeze on your credit file.
Check for Missed or Late Payments
One of the most common reasons for a drop in your credit score is missing a payment or making a late payment on one of your accounts. If you have a history of missing payments, your score will likely be lower than someone with a similar credit history who has never missed a payment.
If you recently missed a payment, don’t panic. As long as you bring your account current and don’t miss any more payments, your score will eventually recover. To help offset the negative impact of a late payment, make sure you pay all your bills on time going forward.
Check Your Credit Utilization
One of the most common reasons people see their credit score drop is because they have used too much of their available credit. This is also known as credit utilization, and it’s something you should always keep an eye on.
Your credit utilization is the amount of debt you have compared to your credit limits. For example, let’s say you have two credit cards with limits of $5,000 each. One has a balance of $2,500 and the other has a balance of $500. Your credit utilization would be 50%.
Ideally, you want to keep your credit utilization under 30%. The lower it is, the better it is for your score. If you see your score start to drop, one of the first things you should do is check your credit utilization and see if it’s getting too high.
Check for Negative Items on Your Credit Report
One of the most common reasons why your credit score may drop is because you have negative items on your credit report. Whether it’s an overdue bill or a collections account, any type of negative item can bring down your credit score. You can check your credit report for free once a year at AnnualCreditReport.com.
If you see any negative items on your report, you should reach out to the Credit Reporting Agency (CRA) that is reporting the information to dispute the item. You can also try contacting the company that is reporting the negative information to see if they will remove it from your report if you pay off the debt.
If you don’t have any luck with either of these methods, you can also try using a credit repair service to help get rid of negative items on your report. Just be sure to do your research before signing up for any services, as some companies are not legitimate and may end up doing more harm than good.
Check Your Public Records
Public records are one of the most common reasons why your credit score may have dropped. A public record is defined as any type of information that has been filed and recorded by a government agency. This can include things like bankruptcies, foreclosures, tax liens, and judgments. While these items will eventually fall off your credit report, they can stay on for up to seven years and have a major negative impact on your credit score.
If you see a public record on your credit report, it’s important to check the details to make sure it’s accurate. Sometimes, public records are incorrectly reported or placed on the wrong person’s credit report. If you find an error, you can dispute it with the credit bureau and have it removed from your report.
Check for a Change in Your Personal Information
If you see a sudden drop in your credit score, the first thing you should do is check for any changes in your personal information. If you’ve recently moved, changed your name, or gotten married, that could be the reason why your credit score has dropped.
If you haven’t made any changes to your personal information, the next step is to check for any errors on your credit report. If you find any errors, dispute them with the credit bureau right away.
If there are no errors on your credit report, the next step is to check for any negative items that have been added to your report. These items can include late payments, collections accounts, and charge-offs. If you see any negative items, try to get them removed from your report by negotiating with the creditors.
If you can’t get the negative items removed from your report, then you’ll need to focus on rebuilding your credit. You can do this by making all of your payments on time, keeping balances low on your credit cards, and using a mix of different types of credit products.
