Why Your Credit Score May Have Dropped

Credit may be less than expected

Credit may be less than expectedIf you’re starting your search for your Chicago real estate purchase, you probably have either pulled a copy of your credit report yourself or have had your score pulled by your lender in the mortgage application process. If you were disappointed to learn that your score has fallen and are curious as to why, the credit experts at Equifax have shared a few of the most common reasons why credit scores drop in the recent article, “
Five Reasons Your Credit Score Could Drop” on the Equifax Finance blog.
There are several reasons your score may have fallen. Here are just a few:
You’re carrying too much credit card debt – Your debt-to-credit ratio (the amount of available credit you are using) is part of your credit score. The lower this ratio, the better. Lenders like borrowers with credit utilization rates of 30 percent or less (meaning you are using 30 percent or less of the credit available to you). The higher the credit balances that you carry, the higher your ratio and the lower your score. Retail credit cards are notoriously bad for this; they offer a relatively low credit limit and if you keep a balance close to that limit, you could be hurting your score.
You recently opened multiple credit accounts – while you want to have more available credit to improve your credit utilization rate, if you open too many accounts at one time, it can hurt your credit score. It may be a red flag to lenders if you start opening up a lot of credit at one time. A longer credit history, which you can order on www.annualcreditreport.com, looks better to lenders.
There are mistakes in your credit report – there could be inaccurate information in your report, either as a result of a simple human error or identity theft. Make sure that the information in your report is accurate by carefully checking your credit report every four months (you can get one free credit report from each of the three national credit reporting agencies each year).
Since lenders use your credit score to make important decisions about whether or not to approve someone to borrow money, the information contained in your credit report is very important if you are looking to make a big purchase anytime soon.
Learn more about credit and credit scores (including the full list of explanations for why your score may have dropped) at the Equifax Finance blog. While you’re there, you can also find information on other personal finance topics, like saving/money management, retirement, insurance, identity theft protection, taxes, real estate and more.