Have you checked your credit score recently? Were you happy with the number looking back at you? If not, there are a number of reasons as to why your score may have dropped. Your credit score represents how well you pay your bills, control your debt and overall shows how financially responsible you are. While you may not even realize the mistakes your making, it’s important to be aware of what exactly causes a drop in your score.
Problem #1: Missed Payments
A missed payment can cause a huge dent in your credit score. It makes up 40% of your credit score, so making payments on time is so important. One missed payment isn’t going to do much harm, but a habit of this will be sure to have a negative impact.
Solution #1: Be Proactive
If you know you aren’t going to be able to make a payment on time, don’t wait until after the bill is due to do something about it. Call your creditor and let them know the issue. They may be able to work something out with you.
Problem #2: Using Too Much Credit
This is how much credit your using versus the amount available to you. You should only be using 10% to 30% of your available credit on each card. If you use more than this, your score will drop.
Solution #2: Payoff Some Debt
Get yourself on a payment schedule and try to get into the 10% to 30% range. You can also open another credit card, but you must be able to qualify and handle the additional credit. Doing this will make the credit available to you go up and your debt ratio will go down.
Problem #3: Too Many or Too Few Lines of Credit
You may not have known this, but closing credit cards will cause your score to drop. It will also drop if you have too many lines of credit open. The method here is to keep your utilization ratio in the right place.
Solution #3: Manage Your Credit Carefully
If you’re planning to apply for more credit in the future, don’t open another card. If there’s a card in your wallet you don’t want to use anymore without annual fees, don’t close it. Take it out of your wallet and put it in a safe place.
Problem #4: COVID-19 Dropped Your Credit
The pandemic has caused chaos in all businesses. This may have caused some lenders to lower credit limits and close out credit cards that aren’t being used. These types of things can lower your score.
Solution #4: Use Your Dormant Cards
If you have cards stashed away somewhere, get them back out and use them every so often. A smart thing to do is choose a bill that stays the same each month, put it on the card, and pay it off right away. If there was a decrease in your credit limit, call your lender. You may be able to get it changed.
A Trusted East Texas Federal Credit Union
At Eastex Credit Union, you’ll find a team of financial and banking professionals that you can trust. As a sought-after East Texas Federal Credit Union, we know what it takes to keep our members satisfied, financially secure, and at ease. Give us a call today at 409-276-2525 to learn more about our membership benefits, mobile banking options, insurance programs, and more.