Credit scores can be frustrating – “My credit was fine the last time I checked it; what happened?” Sometimes a seemingly small mistake can affect your score for up to seven years. The following can cause your credit score to drop 100 points or more.
Missing a Payment
If this happens to you try calling your creditor and ask for a good faith adjustment. This may work if you don’t have many other derogatory items. If you are unsuccessful, make sure to be on time with subsequent payments and you will see your credit score recover over the next 12 months.
Closing an Old Account
This one seems counter-intuitive but trust me, I’ve seen it happen. Here’s why:
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It lowers your credit-to-debt utilization ratio
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You lose credit history
If a credit card is paid off, rather than close the account, charge something small every now and then.
Running a Credit Card up to the Limit
A credit card with a $5,000 limit that has a $4,500 balance will lower your score because it is close to being maxed out. The same card with a $1,500 balance will cause your score to increase. Tip: keep your loan balance ratio to credit limit at 30% or lower.
Making Large Purchases at the End of the Statement Period
Make large purchases at the beginning of the statement period. This will allow you to make a payment before the statement closes. That way the reported balance will be lower – once again we’re trying to maximize the credit-to-debt utilization ratio.
Ignoring Collections
It doesn’t matter whether you are right or wrong, you may be able to head off trouble before it gets in the hands of a collection agency. If not this will be a serious derogatory that will remain for seven years.
Disputing derogatory information on your own is possible. Your goal is to get it deleted! However if you need professional help, call me at (615) 895-4265.
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