Featured

**Why is my credit score dropping?**

This question why is my credit score dropping? is a common question we get asked all the time! You may have noticed a drop in your credit scores with TransUnion, Experian or Compuscan. Take a deep breath and stay calm!

Witnessing a decline in credit scores from time to time is common, and it does not mean that you did something wrong. Credit scores are influenced by a variety of factors. Any one of them or a combination of one or more could result in a drop in credit scores.

To save a declining credit score, you need to understand which factors might be influencing your scores. We will discuss these factors which cause a credit score to drop.

Read further to understand all the reasons a credit score can drop.

Skipped or short payments affect credit scores!

Credit scores depend on your payment history, and you need to take care in maintaining your payments. Missing a payment on any of your credit accounts will affect your credit scores. You may have never missed a payment before, but one overdue payment could affect your credit scores. Short paying an account can also drop your credit score by a substantial amount.

Tip: Paying your debts on time can be challenging if you have several loans, credit cards, and clothing accounts. You should consider using debit orders if you are concerned about missing payments.

The average age of your credit history

Several changes to your credit can happen at once, making it hard to identify which specific change resulted in your score dropping. For instance, suppose you get a new credit card. Depending on your credit situation, this could lead to a chain of events. Upon application for the card, the creditor will run a credit check. Accordingly, your credit utilization might go up or down, depending on how much you use and by how much the new card's credit limit is. There is a possibility that your average age of credit history will decrease. You may be able to benefit from another credit line in the long run by using it correctly.

During the lending process, credit providers evaluate your credit history to make sure that you will have the ability to repay the new loan on time. A long credit history shows you have more experience using credit, while a short credit history shows you have less experience.

Credit providers can determine a borrower's level of risk more accurately when they consider their credit history. The longer your credit history, the better.

The average age of all open accounts gets used to determine whether a consumer is managing their credit responsibly. Age of credit history is a measure of the duration of the use of credit. A short average will reduce credit scores. The average age of your accounts may decrease in the short term due to the opening or closing of accounts.

Typically, the average age of credit histories reduces when:

An old account gets updated as closed.
You pay off a credit card, car, or another loan that you already have.
You open a new line of credit or loan.

Tip: Avoid closing an account with a long history of good account behavior.

Newly listed defaults or judgments on your credit reports

Credit reports with adverse listings can lower your credit scores and affect your scores for a considerable length of time. A negative listing on your credit report can stay on your credit report for one to ten years.

Listed below are credit report retention periods for each adverse listing:

In the case of a court judgment, the listing will last for five years.
Payment profile conduct: After 30 days, most creditors report delinquent accounts to credit bureaus. Credit reports may reflect multiple delinquencies, which negatively affects your credit score. The overdue payment will appear 30, 60, 90 or 120 days late based on how far behind the debt is. Your credit scores can be adversely affected by defaults that have occurred repeatedly or for an extended period. Overdue payments of 120 days will have a significant impact on a credit score.
The listings relating to enforcement actions will stay on a credit report for a year.
Debt Counselling or Debt Review - The listing will remain on your profile until a clearance certificate is issued.
The sequestration period is five years. Another five years after a rehabilitation court order is issued.
Administration orders - 5 years
Trace Alerts

**Credit Enquiries might affect your credit score dropping.**

You may be subject to credit inquiries when you apply for new credit facilities or rent an apartment. The credit provider may request a copy of your credit report when you apply for credit. This credit enquiry will appear in your credit report under inquiries. Please be advised that your credit score is only affected by new credit inquiries. Credit reports will reflect all your credit inquiries for two years.

Single credit Enquiries. Depending on the credit history of each applicant, credit applications have varying effects on the applicant. A single credit inquiry generally does not have a significant impact on your credit score. A single credit inquiry will typically result in a drop of fewer than five points off most people's credit scores.

A high number of enquiries. Please note that a high number of new credit inquiries in a short time will lower your score. The reason for this is because credit providers will view you as a borrower desperately looking for credit. Debt Management company - Can they really help you get out of debt

High Debt-to-income Ratio will cause credit score dropping

The debt-to-income ratio calculates your monthly debt payments as a percentage of your gross income and gets used by credit providers to predict how likely you will repay the new debt on time.

The debt-to-income ratio illustrates a good balance between debt and income when the debt-to-income ratio is low. So, if your debt payment ratio is 10%, then only 10% of your income goes to repaying your debts every month. An individual with a high debt-to-income ratio may be unable to repay their debts based on their income.

Low debt-to-income ratio consumers are likely to be able to deal with their debt payments effectively. Thus, banks and credit providers prefer low ratios as criteria for granting credit. It makes sense that credit providers favor low ratios since they want to ensure consumers are not over-indebted and have too many debt payments for their income.

How to reduce your Debt-to-income ratio

You may want to take steps toward reducing your debt-to-income ratio if it exceeds 30 per cent. You could do this by:
You should pay more toward your debt each month. You can reduce your total debt faster if you make extra payments.
Do not take on additional debt. If you have credit card and clothing account debt, consider reducing the balance. Then try to postpone applying for any new loans.
Stay away from payday loans. These types of accounts will destroy your debt-to-income ratio.
Make large purchases later like cars and home. By saving for longer, you will be able to put down a higher deposit amount. It will be easier to keep your debt-to-income ratio low because you will have to fund a smaller portion of the purchase with credit.
Monitor your debt-to-income ratio monthly to see how your progress is going. Maintaining a low debt-to-income percentage can motivate you to stay on top of your debts.

You will have peace of mind knowing you are handling your finances responsibly. To be able to repay your debts, you need to maintain a low debt-to-income ratio. You will have the ability to obtain credit for the things you want eventually if you do this. If you have difficulties fixing your credit report and need assistance with blacklisted matters, click the link below and we will assist with professional credit clearance solutions. We will stop your credit score dropping.

Duplicated accounts on your credit profile

If you have multiple accounts on your credit report for the same debt, it will negatively impact your credit score and your ability to obtain future credit. It is crucial to dispute duplicate accounts in your credit report and have them removed.

You should notify the credit providers that they are reporting the same debt multiple times. Provide copies of supporting documents to the credit provider detailing why the account needs to be investigated. The credit provider must investigate your dispute, just like with the credit bureaus. Once the credit provider confirms that your complaint is accurate, all credit bureaus get notified to amend or remove the listed duplicated account from your credit report. Removing duplicated accounts will aid you in your quest to sort out your blacklisted status.

Identity Theft

Someone might have stolen your identity document to apply for and open accounts in your name. Several articles continue to report on identity theft. There is rarely a month that passes without news of identity theft.

When you learn that a fraudster has used your identity, do not panic. Your credit scores may have deteriorated, but there are steps you can take to turn things around. Your id book or card has been stolen if the fraudster is opening new accounts. You must take the following actions immediately:

Check out a copy of your latest credit report. If you contact all the bureaus, you can download all reports for free. Notify the authorities of any accounts whose opening was fraudulent. Transunion, Experian
If accounts have been opened fraudulently, contact the fraud departments of those banks. Let them know that you have been the victim of identity theft and that they need to freeze or close your accounts. Record every call you make.
Change the password and PIN for all your existing accounts.
Inform the local police department about the incident. You have the right to dispute incorrect information on your credit report with your police report and Identity Theft Affidavit.

You should now follow these steps after receiving your police report and affidavit:

Whenever an account has been opened illegally, contact the company, and ask them to close it if they have not already done so.
If a collection agency has listed a negative item in your report, call them and ask that it be taken off.

The good news is that our banks actively combat identity theft, yet we will have to rely heavily on ourselves to identify and combat fraud. However, there are many tools available to help us to do just that. Using them now is our responsibility to stop credit scores dropping.

Conclusion

You may feel anxious if your credit score drops. In most cases, you can correct the reduction by identifying the factors that caused it and fixing it. The sooner, the better.

Next time your credit score changes, ask yourself these questions:

Has your spending changed since last month? If this is the case, your debt-to-income ratio has changed.
Are you behind on your payments? There is a chance that an overdue payment could harm your credit score.
Did you apply for credit? Your report might have become subject to a credit enquiry, which could negatively impact your score.
Do you have a credit card that you have closed or a loan you recently paid off? You may have seen a change in your credit score if this is the case.

Something has changed that affects the credit score that you were not aware of. It is essential to keep an eye on your credit report to keep track of changes in your score.

Put the right plan in motion to prevent drops in credit scores, whether it is setting up debit order payments to avoid missing payments, paying off adverse accounts, or addressing errors in your credit reports. Following this will ensure you dont see your credit score dropping.