We have been discussing so much on credit scores and its significance. We have understood what a healthy credit score means, and how we can increase our score. What happens in case you observe that your score has decreased? It is a matter of concern. There are some obvious reasons why the score could have dipped.
You need to ask yourself a few questions:
- Have you delayed any loan or credit card repayment beyond 30 days?
Credit payment history is of utmost importance and greatly impacts your credit score. Any payment which is more than 30 days late is reported to the credit bureau and reflects negatively in your credit report and affects the score as and when there is any such delay in payment.
- Have you made any expensive purchase on your credit card?
Whenever you make a big purchase through your credit card, it reduces your credit score. This is because significant purchases use most of your allocated balance on the credit card. Sometimes this happens in spite of your repaying the credit card company on time. This is due to the reason that the company would have reported your balance to the credit bureau even before your repayment.
- Was any unpaid account sent to the collection?
In order to keep your credit score on track, it is very important to keep paying all your accounts, not just your running credit accounts. You need do ensure that all payments are made on time. There should not be a situation where the credit company has to take the support of a collection agency to get the payment from you.
- Did your last collection drop-off your credit report?
Any negative information affects your credit score. Your credit score could have come down in case you have had a credit charge off, and it has just been removed from your credit report.
- Did you make a new application for a credit card?
In case, you have inquired for a new credit card or any loan account then it can lower your credit score. This is because you are under more credit risk with an additional credit account. Score drop in such case rebounds back to normal after a minimum period.
- Was any of your credit limits lowered?
It is possible that you have a lower available credit limit on your credit card. It is always advisable not to use the credit beyond a certain percentage. If your credit utilization has gone up, your credit score may go down.
- Did you close or cancel a credit card?
Closing a credit card account will injure your credit score. This affects the credit score more negatively if you have had an outstanding credit balance in that account. It is also possible that the credit card company has cancelled your credit card.
You need to be utmost careful about your credit score to keep up your financial health. Be vigilant about your credit card activities as you would take care of your other loans. This will help you maintain a credit score of 800 plus.