Credit scores can change for many reasons. If yours has dropped, it’s important to understand why, what you can do about it, and how to avoid future declines.
Check your credit report
Keeping close tabs on your credit report can help you stay on top of any changes to your score and ensure that the information on your report is accurate and up and to date. At the very minimum, it’s a good idea to obtain a free report from each credit bureau, which you can do through AnnualCreditReport.com.
Dispute credit report information you believe to be incorrect
Checking your credit regularly can help you spot inaccurate information that may be the result of fraud or due to your creditor inaccurately reporting account information. If you find something you believe to be incorrect, it’s important to take action immediately—especially if you suspect fraud. You have the right to dispute information in your credit report by contacting the credit bureau on whose report the information appears.
It’s also a good idea to check the other credit bureaus to make sure the same information doesn’t also appear on those reports. Filing a dispute is free, and the removal of negative information that was reported in error could give your credit score a lift.
Take actions to improve your credit score
Depending on how much your score dropped, it could recover relatively quickly or possibly take longer to rebuild your credit.
Here are some actions you can take to improve your credit score:
- Pay your bills on time. Improving your payment history is a key part of getting your score in shape, and a long history of on-time payments can help you achieve excellent scores. Aim to always pay every bill on time. Setting up automatic bill payment can help ensure you don’t miss any payment deadlines. Missing a payment can result in late fees and credit score harm.
- Keep a low credit utilization rate. Credit utilization is the percentage of your available credit that you are currently using. A good credit utilization rate is typically below 30%. Running up credit card balances, or worse, maxing them out, can cause your score to drop. Paying more than the minimum can help you pay down existing balances faster.
- Don’t apply for too many new credit accounts. Applying for new credit can help reduce your utilization rate, but if you apply for too many new credit cards or different types of loans, lenders may question your ability to repay the debts. And you could get hit with multiple hard inquiries which can negatively impact your credit score
The bottom line
Credit scores will fluctuate over time, even with the most responsible credit use. And while some actions, such as not paying your bills on time, can lower your score more than a hard credit inquiry, for example, any dip in your credit score can be stressful. If your score goes down, taking certain steps, such as checking your credit report and score regularly, keeping an eye on your credit utilization ratio and setting up auto bill pay can help you get back on track and prevent future score drops.
For more information on improving credit, see the following articles: