Why Is My Credit Score Dropping?
Looking to up your credit score? Then you may have realized it can be slow and difficult, particularly if you are experiencing setbacks. If you are wondering why your credit score keeps dropping, then you should consider these four factors:
- Overspending / late payments
- Taking out additional credit
- Applying for long-term loans or credit cards
- Inaccurate information / old debts
Any one of these factors can negatively impact your credit score. However, you do not need to fret worrying about how you will bounce back. Addressing potential issues can help raise your credit score over time. For example, paying off a debt that hit your credit score in one lump sum may not only revert your score to normal but raise it a couple of points. In terms of which credit score is the best, having a score of 650 or above is generally considered good. The best scores are going to be around 750 and above.
Overspending / Late Payments
Overspending can come in two major ways. Either you use too much credit by maxing out your credit cards or your bank account drops into the negative. Banks report infractions such as late credit card payments and accounts that have fallen into the negative. Failure to repay overdraft fees or multiple late payments can seriously hurt your scores. If you are in the Mississippi area, then you should consider paying off debts as soon as possible and paying close attention to your bank accounts and cards to avoid overspending.
Taking out Additional Credit
Maxing out your cards and taking out additional credit cards can also negatively impact your credit score. While you may gain access to a pool of money you can rely on, you will also be taking a hit so only apply for one if it is worth it. It’s also more difficult to keep track of multiple cards and to ensure they are all paid on time. While continued payment can help your credit score, it will initially not help. The more cards you have and the more you have on them, the less likely you are to get one in an emergency. Even if you do get approval for one, your credit reports show your score so you will most likely get a low limit.
Applying for Long-term loans or More Cards
Applying for long-term loans like a car or home loan will also impact your credit score. Even though you intend to be on time, loan companies will still place a hard inquiry into your credit history. Unfortunately, this will lower your credit score. How much does applying for a credit card hurt your credit? Not by a huge margin but it does stick on your account for up to two years. If you have been rejected for a credit card in the past couple of months, then you should avoid applying for additional cards.
While some credit cards are soft inquiries, you are still less likely to be approved for one if you’ve previously been rejected. This may also lead to a hard inquiry, which will impact your credit score even if you were pre-approved with a soft inquiry. So, to answer the question of does applying for a new credit card hurt your score? The answer is yes!
Inaccurate Information / Old Debts
A common issue for many individuals throughout Mississippi and the United States is an inaccurate mark due to error or fraud. Either some credit is wrongly attributed to your account or you were a victim of fraud leading to massive drops in credit score due to no fault of your own. The solution is tedious but something anyone can handle. You will simply have to send a dispute letter to the various credit reporting agencies to begin the process. Depending on the agency, they will require specific documents and proof of identity before removing fraudulent charges from your credit report.
Old debts can also arise after months or years of non-payment or avoidance. If a debt collection agency has tried to contact you but could not due to changes in address, phone number, e-mail, etc., then they may report the debt to credit agencies which will place a mark on your credit score. In most cases, paying back the debt will revert your score to normal.
Consider a Payday or Title Loan
If you are trying to grow your credit, then applying for a credit card or personal loan is not the best choice due to hard inquiries impacting your score. However, you can always get a payday or title loan (if you own your vehicle). Payday loans use soft inquiries that do not impact your credit score while a title loan uses your vehicle to determine funds and eligibility and does not require a great credit score. You can find your nearest Mississippi title loan or pay loan location here.
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.