Why Your Credit Score Declined And How To Fix It?
What happened to your credit score? Understand why your credit score declined and what you can do to improve your financial situation.
Your credit score has a significant impact on your finances. You may be wondering why your credit score is declining or how you got a bad credit score altogether. Let us clear all these up and discuss how you can improve your credit score.
Possible Reasons Your Credit Score Declined
1. You Have Late Payments
Payment history is one of the most significant factors in calculating a credit score. So, if you often make late payments, this likely affected your credit score. Try to avoid late payments, or if it is unavoidable, do it within the 30 after the due date. Some credit providers report late payments only after 30 days.
2. You Have A High Credit Utilization
Another significant factor in your credit score is your credit utilization ratio. A high credit utilization ratio means you use up most, if not all, of your available credit. So, if you haven’t been paying off your balance, or if you recently bought an expensive item on credit, your credit score probably declined.
3. You Closed Out An Old Account
The length of your credit history also affects your credit score. Thus, closing an account, even if you rarely use it, may harm your score.
4. You Closed A Credit Card Or It Was Cancelled
Closing out an old credit card has the same effect as closing an old account, especially if you’ve been paying off your balance regularly. However, another impact of closing a credit card is it lowers your total available balance, which increases your credit utilization rate.
5. Foreclosures, Bankruptcies, Collection Accounts
Adverse events like foreclosures, bankruptcies, and collection accounts negatively affect credit score significantly—these mean that you are not in a stable financial situation. These factors are serious and may take time to clear from your record.
6. Fraudulent Use Of Your Accounts
It’s important to double-check that there are no suspicious activities in your accounts. You don’t want thieves messing up your credit utilization and making it hard to pay off your balances.
3 Ways To Fix Your Credit Score
1. Request Credit Limit Increase
A credit limit increase will lower your credit utilization ratio. Just make sure not to use up the additional credit—keep it below 30%!
2. Fix Credit Report Errors
You should monitor your credit score periodically to know where you stand. Doing so will also help you correct any errors in your report like fraudulent information and misreported balance. Generally, it helps you know whether you’re doing well.
3. Pay Off Your Balances
If you have high credit utilization rates, you need to pay off your balances. You can do it slowly or you could consolidate your credit card debt and pay them off at once. Paying off your credit card debt is possible if you get a federal and public sector employee loan from Access Loans
