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 many reasons why you might see that your credit score has changed, and for each problem there is a solution.
Keep reading to learn more about four possible reasons why your credit score has changed to better understand how to build credit.
Payments can make or break your credit score. If you’ve missed a payment on one of your credit cards or installment loans like a car or house payment, you’ll most likely see a change in your credit score. If you’re only a few days behind on your payment, you shouldn’t have any problems. When payments are more than 30 days past due, creditors will report a record of missed payments to all three credit bureaus. It is therefore important to pay your bills on time so that your score does not 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 repaying loans of all kinds. So if you close an account that is ten years old, it can negatively affect the average age of the account in your credit history. Consider how closing your accounts may affect your score before doing so.
You repaid a loan
Paying off a loan is a satisfying experience worth celebrating, but unfortunately, it can also lower your credit score. This is because it changes your credit combination from credit card and installment loans. When you repay a loan, your overall credit usage decreases, which causes your credit score to change.
The drop in your score is only temporary. Once the repaid loan account is officially reported to all three credit bureaus, you will notice that your credit score will increase by a few points. You will be able to improve your score over time by continuing your positive financial habits, such as paying down debt and making on-time payments.
An error on your credit report
Inaccuracies on your credit report are very common. Errors can include a misspelling of your name, a wrong address, or a debt that is not yours. It’s essential to monitor your credit report regularly, so you can stay on top of errors like these and dispute them when you encounter 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 are required to investigate the legitimacy of the dispute and correct the error as soon as possible.
Seeing that your credit score has changed can be upsetting, but that’s not the end. Once you’ve determined the cause of the change, you can work on improving your score. Some of these causes include late payments, closure of accounts, repayment of your loans, and errors in your credit report.
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