You’ve been working really hard to increase your credit. You’ve done everything you thought you were supposed to do to present yourself as a creditworthy individual. So, why did your score suddenly drop?
Unfortunately, this is a common occurrence with many consumers today, a situation that likely could have been avoided if you knew the impact of some of your decisions. Remember, there’s no shame in seeking help with your credit. Credit scoring models are based on a number of factors that, when combined, add up to a formula that might not seem logical to those who don’t deal with these kinds of issues on a daily basis.
The following are just a few examples of seemingly innocent actions that could cause your score to suddenly and dramatically drop.
- I paid off my credit card debt and closed the account, but my score dropped anyway. This is one of the most frustrating situations for many people. You would think that paying off your debt and closing your account would be a good thing – and it is. But, because of the five factors of credit this action could reflect poorly on your credit because you chose to close the account. Depending on your situation, the account you closed could have been your oldest credit account with the highest credit limit, two major factors in calculating your score.
- I maxed out my card, and even though I paid it off completely when I got my statement, my credit still dropped. By maxing out your card, your overall credit ratios were adjusted. And even though you paid it off, your statement reflects your current status. In other words, your credit report shows that your account is maxed out, even if you pay it off the next day. The best thing you could have done here was to pay your bill before your account was reported to the credit bureaus.
- I was only one day late on my payment but I still received a 30-day late on my credit report. Unfortunately, your creditors do not distinguish the difference between one day and 30 days late. You must pay your monthly bills on time every time to avoid this penalty. Depending on which credit cards you have, you could suffer an additional penalty for being late on your credit card payments, even just one time.
- I paid off an old negative account and my score dropped significantly. While it might seem illogical or even unfair, sometimes paying off a negative account can actually cause more harm than good. Remember, credit scoring models typically lend more weight to your recent activity than to the mistakes you may have made in the past. By paying off this old account, you may have inadvertently added more weight to this mistake from the past by making this item current. Don’t be shy about asking for help when it comes to your credit. Remember, your credit is the most valuable financial tool you have at your disposal, and having an expert on your side is always smarter than learning the hard way on your own.
For more information about how to get started building and maintaining good credit, please contact us today at 877-896-2831 or info@visioncreditservices.com.
