iQuanti – Seeing a change in your credit score can make anyone a little nervous, especially if that coveted number has dropped by a few points. But don’t panic just yet. There are quite a few reasons why you might see your credit score change, and with every problem, there is a solution.
Payments can make or break your credit score. If you missed a payment on one of your credit cards or installment loans, like a car or house payment, you’ll most likely notice a change in your credit score. If you’re only a couple of days behind on your payment, you shouldn’t have a problem. When payments are more than 30 days late, creditors will report a record of late payments to all three credit bureaus. So it’s important to pay your bills on time so your score doesn’t suffer.
Closing a credit card can reduce your available credit limit and reduce the length of your credit history. The longer your credit history, the better. Prospective lenders want to see that you have a long history of paying back loans of all kinds. So if you close an account that’s ten years old, it can negatively affect the average account age on your credit history. Consider how closing your accounts may affect your score before doing so.
you paid a loan
Paying off a loan is a satisfying experience worth celebrating, but unfortunately, it can also lower your credit score. This is because your credit mix changes from Credit cards and installment loans. When you pay off a loan, your overall credit utilization will decrease, causing your credit score to change.
The drop in your score is only temporary. Once the canceled loan account is officially reported to all three credit bureaus, you’ll notice your credit score go up a few points. You’ll be able to improve your score over time by continuing positive financial habits, like paying down your debt and making payments on time.
An error on your credit report
Inaccuracies in your credit report are very common. Errors can include a misspelling of your name, an incorrect address, or a debt that does not belong to you. It’s essential to monitor your credit report regularly, so you can be aware of errors like these and dispute them when you find them. Otherwise, you may see an adverse change in your credit score and not know where it came from. You have the right to dispute any errors you may find on your credit report, and lenders must investigate the legitimacy of the dispute and correct the error as soon as possible.
The bottom line
Seeing that your credit score has changed can be upsetting, but it’s not the end. Once you figure out what caused the change, you can work on improving your score. Some of those causes include late payments, closing accounts, paying off loans, and errors on your credit report.
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