According to a 2013 survey conducted by Experian, 83 percent of Americans have checked their credit scores. The good news, though it could even be better, is that half of those respondents would like to IMPROVE THEIR CREDIT SCORES —they just do not know how.
If you notice a drop in your credit scores, there is a reason. Start the discovery process by checking the risk factors you received with YOUR CREDIT SCORES, and ask yourself the following questions:
Missed payments can cause your credit score to drop, and can also result in late fees or increased interest rates. As items go from 30, to 60, to 90 days late or more, your credit score can drop even further. Never let it get to that point. If you are having trouble making payments, notify your lender. There may be payment options available that can help you protect your credit scores.Question 2: Have I significantly increased the balance on any of my credit cards, or worse, maxed out any credit cards?
It is not difficult to lose track of credit card spending. And credit card debt can be a reason for a drop in your scores. It can be tough to pay off your cards each month. The key is to get as close to that goal as you can. If it appears to be unreachable, keep your credit card balances below one third of their limits.
Question 3: Have I closed a credit card account? While closing an unused credit account might seem like a prudent thing to do, it can actually hurt your credit scores. Doing so can cause your overall utilization rate to increase, which is a sign of credit risk. Your utilization rate is calculated by dividing the total of your balances on your credit cards by the total of your credit card limits. When you close a card you lose the available credit limit on that account making it appear that your overall utilization rate has suddenly increased.
Question 4: Has inaccurate information somehow been entered on my report?
The information on your credit report comes from lenders who report the information. A worst case scenario could be that information on your credit report that appears to be inaccurate is actually proof that you are a victim of identity theft.
Question 5: Have I applied for a mortgage, installment loans or new credit cards?
When you are in the market for a new car or house, things move quickly. Having a lender pull your report will show on your report as a hard inquiry. While one or two inquiries could have little impact on your credit score, having several over a short period of time COULD AFFECT YOUR SCORES.
A ‘yes’ answer to any of the above questions could mean you are closer to solving the mystery. Checking your scores on a regular basis can help you understand the reasons why it changes. And when you know ‘why’ you are already half way to finding a solution.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc., an Experian company. © 2014 ConsumerInfo.com, Inc. All rights reserved.
President and Certified Credit Expert