Have you ever wondered why your credit score might suddenly drop? Even after securing financing from net 30 office supply companies and doing timely payments. Several things can affect the sudden drop in your credit score whether you realize it or not. Although there is a lot of information on how you can build your credit score. Most people tend to assume various actions they take that drop their score, even when what your doing was positive. Fortunately, you can recover easily when a credit score drops. Below are 4 ways you can cause your credit score to drop that you should know about.
- 1.Missing a payment
How your payment history looks is vital as it determines your credit score? Therefore, when you miss a credit card payment it will harm your score. Plus, issuers and lenders have an interest in whether you pay your past credit accounts timely or not. Thus when you miss a payment especially when you have a high credit score, it will have a great negative effect according to how the credit score is calculated. How fast your credit score will bounce back after you miss the payment is dependent on your payment behavior after you miss a payment and your credit history. The faster you get back on track; your score will start to improve together with your good payment history.
- 2.Applying for a new credit card
When you apply for new credit, the card issuers will check your credit report to see how much of a risk you pose before they offer you a line of credit. When they do this credit check, it is also known as a hard inquiry and it lowers your credit score by few points temporarily. These hard inquiries remain on your credit report for up to 24 months. However, when hard inquiries happen in moderation they are not necessarily bad on your credit report. Also, to ensure that you reduce the hard pulls that are not necessary on your credit report. Check the prequalification offers to see if you qualify for a new card to get a good idea if you will be approved or not. So, spread out your credit card applications overtime when it comes to applying for new credit products.
3.Closing your credit card
As you consider closing your credit card account, more so the oldest one, it will hurt your credit score. This is because it lowers the credit limit that is available to you and you want a high credit limit. Also, experts recommend you build your business credit earlier since the length of your credit history makes up to 15% of your fico score. Plus, the longer you can show that you had credited the better for your credit score. Unless, if you are paying for a credit card that is no longer in use. Therefore, before you close your card, confirm from your issuer if you can downgrade or upgrade it. So, choose according to what will suit you best to help you preserve the credit line and avoid it showing up as a closed card on your credit report.
4.Charging a large purchase on your credit card
Credit cards offer convenience when you need to pay a large purchase for you do not have to pay all the money upfront. Nonetheless, when you have a high balance on your card, the credit bureaus will report a high credit utilization rate. This utilization rate helps to measure how much credit you use in comparison to the credit you have available. Therefore, it is best to opt for a low utilization rate for using too much of it shows you pose a risk to potential issuers and lenders. Importantly, before you charge a large purchase on your credit card, ensure you pay it in full before the billing cycle ends. Another disadvantage of carrying a high balance on your card is it will incur a lot of interest.
In summary, the above ways are some that can cause your credit score to suddenly drop. Therefore, you must consult further on how to maintain a good credit score and what could cause a drop or make your credit score stay lower. All these will come in handy in helping you to have a good credit report.