Having a high credit score can make life easy, especially when you need to get a loan for a big purchase. If your credit score has unexpectedly declined recently, you may be a little confused by the jump. There are a million factors that can make your credit score drop, even if you stay on time with your payments. By knowing about these problems, you’ll know what to do to re-boost your score.
Here are some unexpected factors that hurt your credit score.
Excessive Credit Pulls
If you have a lot of people look at your credit report, your credit score will go down. This happens every time you apply for a credit card, a car loan, a house loan, or anything else along those lines. Having a few pulls a year is fine, or even having a set of the same kind of pulls at one time (indicating that you are shopping around). If you start throwing your credit everywhere though, you’ll lose points fast. Be selective in the applications you fill out, and you’ll help your credit go a lot further in the end.
High Credit Card Balances
Having credit cards won’t hurt your FICO score, but maintaining high balances on them will. Ideally, you need to keep all of your revolving credit accounts below 30%. This shows the credit bureaus that you are able to manage lines of credit without going overboard. You can compare credit cards with different terms on them until you find the ones that offer the highest balances at the lowest costs. Then you will simply need to watch your spending on them.
Payday Advance Loans
Some people say that using payday loans will improve your credit score, and others say this will make it worse. Assuming that the latter group is telling the truth, you may want to watch out for these kinds of loans. At the very least, getting a lot of payday loans will make you look unreliable when you go to get a large line of credit because you constantly have to borrow money to pay your bills. That may not be the case, but that is how the bank will look at your situation. If you have to get a loan at all, try to get a large personal loan that you can pay back in a timely manner. This will theoretically improve your credit.
Cancelled Credit Cards
Having a long credit history will do wonders for your credit score, so it’s always a good idea to hold onto your credit cards. Even if you don’t use them, just having them will keep your scores up. Sure, you can cancel a card or two if you feel that you can’t control your spending with them, but doing this repeatedly will send red flags. It is best to search for the right credit cards early on so you never have to worry about cancelling them.
What makes this credit score lowering factor unexpected is the fact that you may not know it’s happening until it’s too late. If the wrong person gets a hold of your personal and financial information, he or she could shoot you into debt without warning. Most credit cards come with some form of identity theft protection, but that only applies if you catch the issues early on. Keep an eye on your credit card accounts, or invest in an ID theft monitoring program to do the work for you. With the right eye, you can avoid this problem and the detriment it does to your credit.
The only way to know what is going on with your credit score is to check it regularly. If you can do this while avoiding the issues above, you’ll be able to keep your ranking as high as possible.
About the Author
Heaven Stubblefield is a wife, writer, entrepreneur, and general force-to-be-reckoned-with. She is the content director for CompareCards.com, where she uses her own experiences in the financial world to help others manage their money wisely.