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Why Did My Credit Score Drop? 5 Most Common Reasons

Why Did My Credit Score Drop? 5 Most Common Reasons

No one wants their credit to drop. It is never a good feeling! But what do you do when your credit drops for no apparent reason? How do you determine its cause and, more importantly, mitigate it?


Credits drop for several reasons. In this post, our Delhi car loans team will be discussing five reasons why your credit score dropped.


Do you want to find out why your credit score dropped? Read on!


Causes of Credit Score Dropping

Missed or Late Payment: Your payment history greatly contributes to your credit score. According to FICO, your payment history contributes as much as 35% to your credit score. So, your credit score takes a hit if you are late for up to 30 days.


This is because, within 30 days, card issuers report you as delinquent to credit bureaus. If you wait for 30 more days, your credit score further sinks. Although you are a few days late, your credit should still be fine.


Keeping track of your credit cards isn't easy. However, if you can automate your payment to be able to pay as and when due.


Bad remarks on credit report: Anytime you refuse to pay the loan as agreed or default, there are negative remarks on your credit report.


Most times, negative remarks appear on your credit report when there is a late payment. It also appears when you file for bankruptcy, have a lawsuit or judgement, or experience a foreclosure or tax lien.


Unfortunately, negative remarks stay on your credit report for up to a decade. Although, its effect goes down with time. Therefore, you must verify a negative remark to ensure that it is legitimate and dispute it if it is not.


When you close a credit card: Normally, closing a credit card seems like an excellent idea to reduce debt and unnecessary expenses.


However, for your credit score, not so much. This is because when you close a credit card, you reduce the amount of credit available.


Also, closing a credit card reduces the average length of your credit history. This is because the older your credit score, the more the average length of your credit history.


Paying off a loan: I know it sounds absurd, but hear me out. Your credit score thrives on a factor known as credit mix. A credit mix allows you to grow your credit score from different types of credit.


Paying off your credit removes a type of credit from your credit history, which reduces your credit mix. Therefore, before deciding to pay off credit, ensure your credit report or history is as diverse as possible.


A mistake on your credit report: The information on your credit report plays a huge role in your credit score. What do you do when this information is false?


The fact is that lenders or financiers make mistakes on your credit report. Therefore, you must always verify and report any mistake or disparity to repair your credit score.


There are several reasons why your credit score might drop. However, the key to repairing your credit score is finding out why and acting accordingly.


When you’re ready for a car lease or loan, get in touch with the Delhi auto loan experts at Northway Ford for great deals on auto finance.

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