If you constantly monitor your credit scores, or happened to pull your credit scores twice or more within a small period of time, you may have noticed that they seem to be “sinking.”
While they may not be plummeting, they’re still not heading in the right direction, which we all know is up.
So what do you do? Well, the first step to make sense of the gravity of the situation is to get your hands on a credit report.
Having just your credit scores won’t do any good because you need to know what’s behind the scores.
Imagine if your professor gave you an A+ on one paper and a C+ on another, but didn’t tell you why. It’d be hard to get your head around it.
Get Your Credit Report
If the credit score provider you use(d) doesn’t provide a credit report as well, head on over to AnnualCreditReport.com and pull one for free.
Yes, it’s the government-backed site that doesn’t require a credit card or a purchase. Just be careful when navigating the site to avoid getting sold into buying something.
Now, before you read your report, think about what you’ve done lately in the credit department.
Have you applied for any loans/leases, cell phones, credit cards, etc.? Basically anything that required a credit pull and is a line of credit. So insurance wouldn’t count.
Have you paid any bills late? Or made a large purchase on your credit card or maxed one out entirely? Think about your recent spending for a moment.
Analyze Your Credit Report
Now grab your credit report and start digging. The great thing about credit reports is that they provide tons of information and details as to why our credit scores may be good or bad.
The first thing you’ll want to do is see if there are any delinquent accounts. This includes late payments, collections, charge-offs, foreclosures, short sales, etc. If you’ve got any glaring issues, they should be listed here.
And you should already know about them, unless it’s something erroneous, like a medical collection. Anyways, take a look and if you find something, that could be why your credit score has sunk.
Fix the Errors and Check Inquiries
If you find something incorrect, you’ll want to dispute it immediately to revive your credit score. Fortunately, the credit reporting agencies allow you to dispute items online.
If you didn’t see any derogatory accounts, take a look at the inquiries section of your credit report. This is the section that details who pulled your credit report, when they did so, and why.
Anything that involved a line of credit will “count against you.” So if you applied for a new credit card recently or an auto lease, your credit score may have sunk some. And if you applied for multiple accounts within a short period, your credit score likely stumbled more.
In short, applying for numerous accounts in a short period of time tells creditors that you’re more likely to go into debt, and also more likely to get into trouble and miss payments.
If you don’t see anything in this section, you’ll want to look into amounts owed, which is an important factor for both the Fico score and VantageScore.
Put simply, if you’ve run up some high balances on existing accounts, thereby reducing your available credit, your credit scores will sink in a hurry. This is why it’s important to spend sparingly and pay off your balances in full each month. You’ll also save a ton in interest.
So there you have it. Those are the most common reasons why your credit score may sink. Also note that it’s quite common for your credit scores to fluctuate from month to month, and from week to week as new data is culled.
Tip: If your credit scores have fallen, but you don’t see anything negative on your credit report, pull a tri-merge credit report, which has data from all three major credit reporting agencies. Or pull the other two individually. If you don’t check all three, you could miss something that’s weighing you down.