If you are like most people, you worry about your credit score.
You will need to have a good credit score to get a good rate on a mortgage, on a car payment, and to open lines of credit.
According to Nerdwallet , if you are taking out business financing, your daily sales receipts matter more than your credit score; however, your credit is a factor as well.
According to Forbes, an average credit score is 695, and 740 is considered to be a good score.
How Does Your Credit Score Work?
Your credit score reflects how well you have handled your credit in the past. If you make a late payment on your credit cards, it will cause your score to drop. If you skipped a few car loan payments, your score will drop even more. If you have too much debt, it will also affect your credit score. Each of these is reasons why your credit score has fallen. If your credit score has gone down, you don’t need to panic. A small dip of 5 to 50 points may seem like the end of the world, but it is something that you can quickly turn around.
Fixing a Drop In Your Credit Score
If your score has dipped below the average credit score, it is something that you can fix. Unfortunately, there is no quick fix. Whether your score dropped just a little bit or if it was a significant drop, it will take time for your score to recover. If your score went down just a bit, start making all of your credit card and loan payments on time. If your score dropped quite a bit, paying a large chunk of your debt is an excellent way to start bringing your score up. While you shouldn’t panic over a drop in your score, you should understand that recovering isn’t something that will happen overnight. The more your credit score goes down, the longer it will take to bring it up.
Common Credit Score Mistakes
Many people who experience a drop in their credit score will panic. This panic will tend to cause people to make big mistakes trying to bring up their score. A few common mistakes to avoid include:
- Closing accounts: The biggest mistake you can make after experiencing a dip in credit is closing accounts. This will hurt your credit score. Even if your cards have a zero balance and you don’t use it, don’t close the account. Canceling the card will reduce the amount of credit that you have available. With the balances on your other cards, closing the one will cause your credit utilization to increase, and this makes up about 30 percent of your credit score. If you aren’t going to use the card, put it away and don’t use it, but don’t close the account.
- Paying Off Old Accounts In Collections: If you have an old debt in collections, paying it off may seem like the right thing to do, but it can actually hurt your credit score. The longer the account sits in collections, the less of an impact it has on your credit score. If you start paying on the debt, it makes it current again, having a more serious impact on your credit score.
- Paying Off Loans Early: Paying off your loans early may seem like a good idea, but it can harm your credit score. Also, there could be an early payment penalty. If you want to rebuild your credit, just keep making your loan payments on time.
- Not checking your score: One common mistake that people make is not checking their credit score regularly. Fortunately, it is much easier to check your score today than it was years ago. Sites like this one will allow you to check your score for free without harming your credit. When you check your score regularly, you will know where you stand credit-wise, and you can check for errors on your credit report.
If your credit score dropped and you are panicking, visit Goalry Mall. We can help you figure out what caused the drop in your score, and we can give you some ideas to help get it back up.