Why Did My Credit Score Drop?

While loans can aid your overall financial health, they may drive down your credit score. When you apply for a loan, you endure a hard credit inquiry before the loan lender offers you a loan. You may feel a shock now to know that hard credit inquiries hurt your credit score, almost by five points. Plus, consumers with new credit are usually considered risky borrowers to the lenders. This may also drive down a credit score.

Did you use your credit card more than you paid it off in the last few months? If yes, this could be the answer to your question, “Why did my credit score go down?” Look, as your overall account balance increases, your credit utilization rate increases as well. And it then harms your credit score. Keep your credit utilization rate down as it will compose 30% of your credit score. Hence, use as little of your credit as possible. 

Now many of you would already know about this! We all usually experience a credit denial once in a lifetime. So, if you recently got your loan or credit application denied, it affected your credit score too.

Why?

Because you endured a hard credit inquiry! To avoid such a situation and prevent a drop in credit score, limit the number of times you apply for a loan or credit card every year.

Opening a new credit card account lowers your credit account’s average age.

Let us tell you: Your credit age makes up 15% of your credit score and your credit payment history makes 35% of your credit score.

This is applicable for a total of half of your credit score. This implies that the longer you keep a credit card account open, the more it benefits your credit score. On the contrary, opening a new account negatively affects your score.

Every credit card holder is already aware of this: If you do not pay a loan or credit card payment, your credit score dips after 30 days. And if you fail to pay the payment even after 30-days, there is also a 60-day penalty. This erodes your credit score even worse than the 30-day penalty.

There are some other reasons also like credit card account closure, fraudulent activity, etc. While it is heartbreaking to see your credit score drop, there’s always a solution to boost it. And this is where Priority Tradelines LLC comes into the picture.

As we always say, we are the experts in this field. So, when in trouble or doubt, get in touch with us and we guarantee a solution to it.

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