How to Check Why Your Credit Score Went Down
Understanding why your credit score has dropped is crucial in order to take appropriate steps to improve it. A lower credit score can affect your ability to secure loans, mortgages, and even renting an apartment. In this article, we will discuss the steps you can take to identify the reasons behind your declining credit score and what actions you can take to rectify the situation.
1. Obtain a Free Credit Report
The first step in checking why your credit score went down is to obtain a free credit report from each of the three major credit bureaus: Equifax, Experian, and TransUnion. You can request one free report per year from each bureau at AnnualCreditReport.com. Review your credit reports carefully to identify any errors or discrepancies that may be impacting your score.
2. Analyze Your Credit Reports
Once you have your credit reports, analyze them to identify the factors that may be causing your credit score to drop. Here are some common reasons for a lower credit score:
– Late payments: One of the most significant factors affecting your credit score is your payment history. If you have missed payments or paid late, it can negatively impact your score.
– High credit card balances: Carrying high balances on your credit cards can lead to a lower credit score. Aim to keep your credit utilization below 30% of your credit limit.
– New credit inquiries: Multiple hard inquiries within a short period of time can hurt your credit score. Be cautious when applying for new credit and space out your applications.
– Collection accounts: Having collection accounts on your credit report can significantly lower your score. Work on resolving these accounts as soon as possible.
– Closed accounts: Closing a credit card or account can impact your credit score, especially if it was one of your oldest accounts. Consider keeping older accounts open and active.
3. Take Corrective Actions
After identifying the reasons behind your declining credit score, take the following steps to improve it:
– Pay your bills on time: Set up automatic payments or reminders to ensure you never miss a payment.
– Reduce credit card balances: Work on paying down your credit card balances and keep them below 30% of your credit limit.
– Limit new credit inquiries: Avoid applying for new credit unless absolutely necessary and space out your applications.
– Resolve collection accounts: Contact the collection agency to negotiate a payment plan or settlement to remove the account from your credit report.
– Keep older accounts open: Avoid closing old credit card accounts, as they can contribute positively to your credit score over time.
4. Monitor Your Credit Score
After taking corrective actions, monitor your credit score regularly to track your progress. You can use free credit score monitoring services or pay for a more comprehensive service that provides detailed insights into your credit health.
By following these steps, you can effectively check why your credit score went down and take the necessary actions to improve it. Remember that improving your credit score takes time and consistent effort, but it is worth the effort to secure better financial opportunities in the future.
