Find Out Why Your Credit Score Dropped Out Of The Blue

Here are some reasons your credit score may have reduced unexpectedly:

You’ve Been Missing Paying a Utility or Medical Bill

Mostly, information about payments towards utilities, doctors’ visits, and cell phone providers is not sent to credit bureaus. However, if you frequently miss paying these bills, the creditors may send your account into collections, leading to a debt collection agency going after you, and finally, a notice on your credit report. This may cause a dip in your score. The lesson here? Don’t miss clearing any bill (including the monthly rent you pay to your landlord), even if the payment is typically excluded from your credit report.

You’ve Been Building up Credit Card Debt

If you’ve been making your credit card payments on time but still notice your credit score is falling, it may be because you’re increasing the total balances on your cards. This causes a rise in your credit utilization ratio (a measurement of how much of your available credit you’re using), reducing your credit score.

You can solve this problem by paying off enough of your credit debt every month so that the credit available to you reduces steadily instead of increasing.

Someone’s Missing Payments on A Loan You Cosigned

It’s common for parents to cosign an auto loan to help their kids qualify for it as the latter’s credit isn’t mature enough yet. The ideal situation after this is that the person you cosign for makes payments on time.

However, if you notice your credit score has dropped, it may be because the person isn’t making the required monthly payments. As you are equally responsible for the payments, your score takes a beating because the missed payments are included in your credit report as well.

You’ve Applied for New Credit Cards

Applying for new lines of credit or credit cards can also cause your score to reduce by a few points. Every application you submit for a new credit card requires the lender to put a notice of the inquiry into your credit report, which is maintained by credit bureaus.

Every hard inquiry by a lender makes your score fall slightly. The drop may be higher if you apply for several new accounts at the same time.

Credit score also reduces if you cancel a credit card as doing so impacts your credit utilization ratio.