If you are having a habit of checking your credit score frequently you may experience how the credit score will change according to your credit actions. If your credit score is down for quite some time don’t bother that you did something wrong. There are many factors that determine your credit score and some are the factors that more seriously drop your score.
Let us take a look at some significant reasons that make your credit score go down.
1.You missed a payment of credit card or loan for more than 30 days late
Making late payments on your credit card, mortgage loans or student loans will negatively impact on your credit score that affects the overall health of credit report. In general, there will be 30 days trail time for late payments or loan payments if you exceed this trial time the Banks or Financial institutions report the same to Al Etihad credit bureau which will reflect your credit score negatively. Thus, your credit score will most likely drop.
2. A derogatory mark was added to your credit report
If you experience a drastic drop in your credit score, that means. a derogatory mark was added to your report. Derogatory items may include (but are not limited to):
- Civil judgments
- Cheque Returns
If you find any of them in your credit report. Then you need to take care of it immediately. your credit score will be low when compared to those who haven’t filed for bankruptcy.
3. You made an expensive purchase
The major factor in your credit score is credit utilization ratio which the average of total credit balances to the total credit limits. This ratio should always be kept under 30 per cent. Most of the people surprised by checking their credit score after making an expensive purchase by using a credit card, where the score gets dropped even after paying the balance in full on or before the due date.
This happens because credit card issuers typically report the credit card balance as of the last day of the billing cycle. Which is the balance that appears on your credit card statement will also appear in a credit report.
So it is better to avoid other credit card purchases for some time which help you to recover on your credit card statement.
4. You made a new application for a credit card or Mortgage loans
Each time you apply for new credit or mortgage loan. The Banks or Financial institutions will request you give a copy of your credit report to determine your creditworthiness. That lead s a hard inquiry where it cost your credit score points which drops your credit score.
The cost of credit score points depends upon the number inquiries however this credit drop will remain for a short period of time, as long as you don’t continue to apply for a new card.
5. One of your credit limits was lowered
A lower credit limit on your credit card will impact the same as charging on an expensive item. If you have a balance on your card with lower credit limit this will raise your credit utilization ratio. As credit utilization ratio raise your credit score will go down.