Causes of Credit Scores to Go Down

What Causes Credit Scores to Go Down?

Credit scores, the three-digit numbers that determine much of our lives, sure can be confusing. Sometimes, seemingly good things can even cause your credit score to drop, and vice versa. So what’s the deal, what exactly makes your credit score go down? On this page, we’ll discuss the basics of the credit system and what makes your score drop.

One of the common ways for a credit score to drop precipitously is a late or missed payment. Credit companies are quick to change your credit score when they catch wind of any kind of missed or late payment. Missing or paying late on obligations like your mortgage, credit cards, vehicle, or other major payments are a sure-fire way to bring your score down.

 

If there has been a major change in your credit utilization (how much available credit is being used up) then you can expect your score to fluctuate some. For most credit agencies, a credit utilization rate of above 30% could have a negative effect on your credit score. This, of course, depends on the credit breakdown of the person as well. However, the simple fix is to simply try to bring the utilization rate down to get back into the optimal range.
You may not have expected this to be on the list, but it’s true. Actually paying off a big loan can have negative effects on your credit, at least in the short-term. Why? Well, the simple answer is that your credit score is based on something called your “credit mix”. Your credit mix, essentially, is the mix of credit elements you have (like loans, credit cards, mortgages, etc.). When you pay off a loan, that balance is changed, so it may dip because of that. Don’t worry, though, your score will likely bounce right back over time.
This may seem like yet another potentially good thing that seems to have bad credit consequences. Shouldn’t paying off and closing a credit account be a good thing for your credit score overall? Well, there are a few reasons why this could happen. First, your credit mix could be altered, similarly to our prior example of paying off a loan. Additionally, closing out a long-standing credit line could affect your credit as well by altering the timeline of your credit history. Old accounts in good standing are generally reliable boosters of your score, so closing those accounts could have a negative consequence.
If you haven’t done anything, then you may be the victim of identity theft. Identity theft is an increasingly destructive crime that can lead to people being unable to access what they need. Identity theft is way more common than you might think, and it’s important that you check for identity theft regularly.
If your credit limit is reduced in any way, this could change your total credit mix. This would change your credit utilization ratio, thus lowering your credit score. Not to worry if this is you, there are concrete ways to get your credit score back up.
A very large purchase, as you could likely guess by now, will affect your score because it affects your credit utilization rate. If you suddenly jump from 30% credit utilization to 60% credit utilization, you can expect to see some sort of hit on your credit.

Free Consultation

Denise Gallegos Google Review

Visited many credit services company before but never heard what I needed to hear..Set up an appointment with David and left feeling go about improving my scores. Started at a low 500 and after 3 months my score is high 600..David is wonderful he will get the job done high recommend him .

Albert Morales Google Review

I would like to thank David for helping me with my credit he's been an amazing person I've tried repairing my credit with someone else but had no success with New credit life I'm able to purchase my new home! Thank you David for everything you've done.

Cris Nina Google Review

This was my first time ever trying a credit repair I honestly didn’t know where to start, or what to expect. David was so nice and walked me through everything making sure all my questions were answered, immediately he went to work and would check in with me constantly. If anyone is ever interested in looking into fixing their credit, I would definitely recommend him.

Take Control Of Your Credit With New Credit Life!

Your credit should be an asset, not an obstacle. At New Credit Life, we help clients get their credit under control and use their credit to make their dreams come true. Contact us today to schedule your free credit analysis and consultation!