9 Common Reasons Your Credit Score Changes
The fact is that your credit score is changing all the time for a number of reasons, and it’s a good idea to know what they are. Most people’s scores don’t change drastically on a regular basis, but there is some fluctuation. Since your credit affects your ability to get a loan and much more, it is a good idea to learn all you can about it. Improving your score means increasing your financial opportunities in life. In this article you will learn about why your credit changes the way it does.
- Old Items Falling Off Your Credit Report
Sometimes your credit score will go up a little bit as old negative items like bankruptcies or late payments begin falling off. It usually takes several years before this happens, but it can help your score considerably over time. If you have noticed your credit rating increase, this could be the reason.
- Changes with your Credit Account Balances
The balance of your credit card is different each month, so it only makes sense that your credit score would be affected. If you are really good about taking care of your balance on time, your score will go up. If you are constantly late on your payments, it will go down. As the balance of your credit accounts change, so does your score.
- You Bought Something Expensive
Another common reason why your credit score changes is because of expensive purchases. Part of the formula that determines your rating is how much the available credit you have is actually used. The more of your credit you use, the more likely you are to see a slight drop in your credit. This change usually isn’t huge, but it can be noticeable. You can offset this change in your credit by taking care of the balance on your account quickly. The sooner you pay it off, the faster you can correct this change.
- An Unpaid Bill Went into Collection
If you do not pay a certain bill, it gets sent to collection at some point. This can take a while, but it does happen eventually. This can have a very significant negative impact on your overall credit score. Once a collection agency receives the balance, you will notice a change in your score. This is why it so important that you make a point to pay off your bills. If you are having difficulties doing this, talk to your creditor to see if you can work out a payment plan. It is a much better option than letting it go to a credit agency.
- You Submitted a New Credit Application
A person’s credit score can also change if they have recently filled out an application for credit. Whether it is for a credit card or a loan, this can have a small impact on your overall score. This is why you should not submit a lot of credit applications within a short period of time. Every time a credit check is run on you, your score can go down a little bit.
- Your Credit Limit Was Lowered
If your credit limit was recently lowered for whatever reason, your score could suffer as a result. It is never a good idea to maintain a balance on a card, especially when it has a low limit. The less allotted credit you use, the easier it will be to maintain a healthy credit rating.
- A Credit Card of Yours Was Cancelled
Those who cancel a credit card because it has been stolen could see a small drop in their credit score. The same goes if the creditor closes a credit account of yours. While it might not seem fair, that is just the way it is.
- Late Payments
Even a single late payment can mean seeing a decent drop in your credit score. This is why you always need to be good about paying your bills on time every time. You should make a point of setting up automatic payment for as many of your accounts as possible. This way you won’t forget to pay any of your bills. Being even just a day late on one of your bills could mean suffering negative credit consequences.
- How do I Maintain a Healthy Credit Score?
There are numerous ways that you can maintain a healthy credit score for the long term. A lot of it is just making sure that you pay your bills on time. Those who put off taking care of the balance on their credit cards usually regret it in a very big way later on. If you don’t want to get in a spiraling pit of debt, it is important that you keep these things in mind. You should also check your credit report once each year to make sure it is accurate.