The average person may not give their credit score much thought, and it potentially doesn’t impact your daily life all that much. However, when you’re trying to sign a property lease, receive a mortgage, inquire about a loan, or even start a new job, you may be shocked that it’s not as high as you thought. If you’re unsure why your score has suddenly plummeted, it might be because you’ve taken some of the following actions:
Paid Off a Loan
It might seem strange to think that being fiscally responsible can impact your credit score, but it can. After paying off a loan, it might be worth reading a tradeline supply company review since you now have one less credit account in your name and may need to look at your credit-boosting options.
Various credit types make up around 10% of your credit score. When you finish paying your installments and that credit account is removed from your score, it’s adjusted accordingly.
Applied for a New Credit Card
Credit cards are convenient for emergencies, such as a roof leak you want to fix right away or an unexpected car repair. However, the simple act of applying for a new credit card can impact your credit score even before you’ve had a chance to show how responsible you are with your money.
Credit card companies perform a credit check to ensure you’re safe to lend to, known as a hard inquiry. This inquiry can remain on your credit score for up to two years.
Missed a Credit Card Payment
One of the primary reasons credit card companies perform credit checks on people before assigning them a credit card is to ensure they’ll make payments. When you don’t make payments, your credit score can suffer.
Missed payments can significantly impact your credit score, even more so when you’ve started with a high credit score. According to FICO data, a 30-day missed payment on a credit score in the high 700s could result in a drop of as much as 83 points, while a 90-day missed payment for the same credit score could result in a loss of over 130 points.
Used Too Much Credit
It’s easy to assume that you can use as much credit as your card allows. While you technically can, reaching your credit limit may affect your credit score. Some credit card providers see high credit usage as overextension, signaling that you may have trouble repaying your future debts.
Don’t Have Enough Credit History
As a general rule, older people have higher credit scores than younger people, and it can be all to do with having a short credit history or none at all. At least 15% of your FICO score is based on credit history length. Your credit score may improve with time and financially responsible decision-making.
Applied for Too Many Loans and Credit Cards
When you’re applying to get into college, you might approach many different colleges, hoping to be accepted into at least one. If you took the same approach for loans and credit cards, you might find that your score is significantly affected.
Each lender performs a hard credit pull, and if there is more than one in a short space of time, your credit score may end up lower than you expected.
Credit scores can be frustrating, especially when you rely on them to be high for significant life events like purchasing a home. However, now that you’re aware of what can impact it, you may take a more cautious approach to your finances.