It’s common to be unaware of why you’re being rejected for loans. This is most likely because your credit score is low. But why? There are many reasons why your credit rating might drop. We must be aware of the fact that nothing ever happens for no good reason. Let’s suppose your credit score is gradually going down and you have absolutely no idea why that is. Believe it or not, there are 7 possible things that can affect it. Let’s take a look at each of them.
Reasons why your credit rating might drop:
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You’ve Missed a Payment
The most obvious of all causes. Make sure you’ve made all the monthly payments before their due date. If you have multiple loans, you might have missed a payment on one of them. If you’re sure you’re up-to-date with all payments, it means the credit drop is caused by something else.
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You’ve Made a Big Purchase
Maybe there was not enough available credit on your card. This is one of the easiest causes to correct by paying the balance as soon as possible. Your credit score will bounce back to its original number. A missed payment is the most common cause of a dropped credit score, but this does not mean there are other ones, somewhat more or less known.
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You haven’t Paid an Account
Do you have any non-credit accounts? If yes, make sure you haven’t missed a payment on any of them, because that particular account may be sent to collectors. It will also appear on your credit report and will take your credit score down as a consequence.
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You’ve Applied for a new Credit Application, again
Applying for a brand-new credit application can affect your credit score, especially if you’ve applied once again a couple of months before. You should know by now that inquiries are a crucial part of your credit score, especially if they’re the “hard” type. This, too, can be solved easily. Such a credit drop does not last for more than one year, during which the score will steadily get back to normal. Refrain from applying for new credit in a short time frame, though, and you should be fine.
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You’ve Cancelled a Credit Card
This, too, can have an impact on your credit score, particularly when the cancelled card still had a balance on it. Sometimes, the mere act of closing an account/cancelling the card can cause a drop in credit score. It’s not sure why this happens, but what matters is that it’s not permanent.
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A Credit Limit Went Down
The effect this has on your credit score is almost identical with the one of purchasing something expensive with your credit card. If the card has low credit limit but there’s some balance left on it, it will be seen as an expense, so your credit score will be dropped.This is nothing that cannot be solved, however, so don’t get sweaty. Things have a tendency of clearing themselves out. Before you know it, your credit score will be completely restored.
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Mistakes Were Made
Sometimes, bank employees can make mistakes. It’s only human. For instance, somebody messed up and his credit score had to be dropped. Due to negligence, somebody may have dropped yours. This can happen when your name was identical to the culprit’s. In this case, you need to contact a credit repair and restoration service and ask for additional check-ups to ensure no mistakes were made there. If everything looks okay, it means you’ve done something you can’t put your finger on as of yet, but will definitely surface in the long run.
Conclusion
If you’ve borrowed loans on a regular basis, you know how incredibly important credit score is. If it’s low, you might not be eligible for another loan. Take a look at this list and see whether or not any of the aspects we’ve mentioned could have applicability to your situation. More often than not, your credit score will restore itself, provided you haven’t missed payments, made exorbitant purchases or taken out new loans. If the bank made some computing mistakes, these will be corrected upon request, but you need to act fast so that the score is restored quickly.