What Caused My Credit Score To Drop?

Few things are as frustrating as an unexpected credit score drop when you are working so hard to achieve your home-buying dream. Fortunately, while many factors can negatively affect your credit score, most are easily remedied and your credit score can begin its upward momentum once again.

Late Payments

Credit accounts report late payments to credit bureaus, so late payments on any of your loans or credit cards will be reflected in your credit score. Paying even the minimum payment on time will help prevent negative marks from late payments. In the case of loans, if you cannot make the full payment, talk to the lender to see if you can make a smaller payment rather than paying late. Most are understanding of life’s circumstances and are willing to work with you.

Using Too Much Credit

A good rule of thumb is to use no more than half of your available credit. If you have a credit card with a limit of $1,000, never let the balance get above $500. Likewise, if your total available credit from all credit cards and lines of credit is $10,000, be sure not to charge more than $5,000. Your credit score can be reduced by using too much of your available credit. Closing old accounts reduces your total available credit, which can also reduce your score if you are using more than half of the remaining total credit available. Using some credit – but not too much – shows creditors and credit bureaus that you are wise with your credit and not likely to get in over your head.

Bills Entering Collections

Any time a bill is sent to a collections agency it will be indicated on your credit report. Not surprisingly, this can lower your credit score. If you have unpaid bills and cannot pay them in full, be proactive about calling the creditor and working out terms before the bill is turned over to collections. They would prefer to work with you than hire a collection agency to collect the debt.

Multiple Credit Inquiries

Shopping around for credit is an excellent idea when you are considering a new purchase or trying to obtain another credit card. Credit bureaus understand this, but too many inquiries can negatively affect your credit score. Do as much research as possible before applying to narrow down your choices and the number of inquiries on your credit report. While each of these factors can reduce your credit score, taking steps to remedy the situation by getting caught up on payments, refraining from new inquiries and working with creditors can help that downturn become a minor bump in the road to good credit. Credit scores are fluid, changing things and being dedicated to improving your credit will pay off in relatively little time.

If you have any questions about buying or selling a home, please "Ask An Expert." Don't hesitate to contact the team at William Raveis Real Estate for assistance, or call (941) 894-1255.