Why is My Credit Score Dropping?

March 31, 2020 | Daniel Dewitt

 

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In today’s modern American life there are few things more valuable than a credit score. A credit score is an aggregate of how dependable an investment loaning you money is for financial companies: the higher the score the safer an investment you are, and thus companies will loan with low-interest rates. The lower the score…. Well, nothing good resides there.

This is one of the reasons that if you see your credit score dropping panic isn’t an unfair reaction. A low credit score can ruin your financial livelihood and create a vicious cycle where it’s impossible to get out of debt because of punishing interest rates that keep you from amassing enough money to pay back the principal on your debts.

What causes a low credit score to begin with though? That’s what we’re here to answer today.

Late or Missed Payments

This is by far the most common culprit. Going back to the paradigm of a credit score is a value of your safety as an investment to a credit company, by not making regular and on-time payments to your credit cards or other loans, you’re proving that if those companies loan you money they’ll get their money back late or maybe not at all.

Too Much Debt in Total

Even if you’re making regular and on-time payments to whoever you owe though, there’s still a chance that simply by having too much debt in total will hurt your credit score. Too much outstanding debt makes companies skeptical that you’ll be able to pay it off at all. It’s unfair: it’s not as though you’ve broken any contract, but it’s a reality of how the credit score system works.

 

Closing a Credit Card

Closing a credit card is an existential threat to a credit company: after all, what’s to stop them from being next? Ideally speaking a credit company wants to keep you as a customer over a long period of time since if no one burrows from them they go out of business. Thus, any time you close a credit card it’s a slap in their face. Which would be great, but it will hurt your credit score.

Inaccurate Information

For being professional aggregate companies credit agencies can be awfully sloppy and get things wrong. This would be forgivable, but an extra zero here or there can throw your credit into disarray, not to mention the havoc that will be wrecked if they confuse you with someone else with the same name. Unfortunately, getting any information on your credit score corrected can be a months-long exercise of smacking your head against a bureaucratic wall.

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How to Turn It Around

Now that we’ve outlined all the reasons your credit score is dropping, what do you do if you do hit rock bottom? Luckily, there are options. The best one is to take out a flex loan. Flex loans are fast cash loans that welcome all credit scores and don’t report to credit agencies if you default on them. This is invaluable if you’re trying to right your financial ship and worried about how taking out money from a traditional loan company may look.