Has your credit score dropped recently and you’re not sure why? Check out this blog post to find out some of the most common reasons why your credit score may have dropped, and what you can do to fix it.
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Check for Errors
Your credit score is important. It factors into whether you’re approved for loans and credit cards, and can influence the interest rates you’re offered. A low credit score could even prevent you from renting an apartment or getting a job. So, what can you do if your credit score suddenly drops?
Request your credit report from all three credit bureaus
If your score has abruptly dropped, one of the first things you should do is order copies of your credit reports from all three credit bureaus — Experian, TransUnion and Equifax. You’re entitled to one free report from each bureau every 12 months, and you can request them through AnnualCreditReport.com.
Carefully review your reports for any errors or red flags that could be dragging down your score, such as:
-Incorrect personal information (e.g., wrong birthdate or Social Security number)
-Inaccurate account details (e.g., wrong balance or payment history)
-Signs of fraud or identity theft (e.g., accounts you didn’t open)
If you spot any mistakes, file a dispute with the relevant credit bureau(s). The bureau will then investigate and remove any inaccuracies from your report if it finds them to be errors.
Look for errors and dispute them
If you see something that looks like an error, dispute it with the credit reporting company (Experian, TransUnion or Equifax). Each company has an online form you can use to file a dispute.
If theerror is confirmed, the credit reporting company will remove it from your report. If theerror is not confirmed, it will remain on your report. Either way, you’ll be notified in writing of the results of the investigation.
If you filed a dispute and it wasn’t resolved to your satisfaction, you can add a statement to your report explaining why you disagree with the information. This statement will appear on your report anytime someone requests it.
Understand What’s Causing the Drop
Your credit score is important. It impacts your ability to get loans, credit cards, and even a job. So, what can you do if your credit score drops? First, you need to find out what’s causing the drop.
Check your credit utilization
If you see a significant drop in your credit score, the first thing you should do is check your credit utilization. This is the amount of debt you have compared to the amount of credit you have available, and it accounts for 30% of your overall score. So, if you suddenly have a lot more debt and less available credit, your score will drop.
To fix this, you can either pay down your debt or ask for a credit limit increase from your issuer. If you do the latter, make sure to keep your balances in check so you don’t wind up in the same situation again.
Check for late or missed payments
The first thing you should do if you see a drop in your credit score is to check for late or missed payments. If you have any delinquent accounts, bring them current as soon as possible. Late payments can stay on your credit report for up to seven years, and they can have a major negative impact on your score.
You should also check your credit report for any errors. If you find an error, dispute it with the credit bureau right away. You can do this online or by mail.
If you don’t see any late payments or errors on your credit report, the drop in your score may be due to other factors, such as:
-You closed an account: Closing an account can hurt your score, especially if it’s a credit card with a long history.
-You applied for new credit: Applying for new credit can ding your score, especially if you have several applications in a short period of time.
-You had a change in your credit utilization: This is the amount of debt you have compared to the amount of available credit you have. A high credit utilization ratio can hurt your score.
Check for negative items
If you see a drop in your credit score, the first thing you should do is check for negative items. These are items that are listed on your credit report that are negative for your credit score. Negative items can include late payments, collections, charge offs, and bankruptcies. If you find any negative items on your credit report, you should contact the credit reporting agency to dispute the item.
Take Action to Improve Your Score
Your credit score is important. A good credit score can help you qualify for loans, get lower interest rates, and make it easier to rent or buy a home. A bad credit score can mean you pay higher interest rates and may have difficulty qualifying for loans. If your credit score drops, there are steps you can take to improve it.
Make all payments on time
One of the most important things you can do to improve your credit score is to make all payments on time. This includes both credit card and loan payments. Late or missed payments can damage your score, often quite significantly.
If you have trouble making timely payments, consider setting up automatic payments or reminders. You can also talk to your creditors about payment options. Some may be willing to work with you if they know you’re trying to improve your credit score.
Making on-time payments is one of the biggest factors in determining your credit score, so this is an important step in improving your credit.
Pay down your debt
Your credit score is determined in large part by your credit utilization ratio, which is the amount of debt you have relative to your credit limit. So, if you have a lot of debt and a low credit limit, your credit utilization ratio will be high, and that will hurt your score.
One of the best ways to improve your credit score is to pay down your debt, which will lower your credit utilization ratio. If you can’t pay down all of your debt at once, you can try to get a higher credit limit, which will also lower your credit utilization ratio. Another option is to transfer some of your debt to a 0% APR balance transfer credit card. This will allow you to pay off your debt interest-free for a period of time, which will help you save money and pay down your debt more quickly.
If you’re not sure why your credit score dropped, you can order a free copy of your credit report from each of the three major credit reporting agencies (Equifax, Experian and TransUnion). This will give you an opportunity to see what’s being reported about you and to correct any errors that may be hurting your score.
Use a credit monitoring service
If you’re not already doing so, sign up for a credit monitoring service. This way, you can keep an eye on your credit score and get alerted if there are any changes. If you see your score drop, you can take steps to find out why and fix it.