What to Do If Your Credit Rating Drops

With the simplicity of services like Credit Karma and Credit Sesame, it’s now easier than ever to go online to check your credit score. Swinging a few points up or down, say 720 to 725 or 680 to 670, is normal, but a sudden sharp drop of 30 points or more could be cause for concern. What will you do if you find that your credit rating has plummeted overnight?

First, you need to find out why your account dropped so you can figure out what to do. There are only three factors that can cause a sudden drop in your credit score: you didn’t pay your bills, you spent too much. credit or security issue. That’s according to Adam Levin , a cybersecurity expert who spoke at CardCon, a conference on the credit card industry that I attended last week.

Let’s break down each of these potential culprits so you know what to do if you check your credit score online and find it to be much lower than you expected.

You didn’t pay your bills

Check your inbox and your stack of letters on your kitchen table for unpaid bills that might slip by.

Since credit card issuers, lenders, and other companies report the status of your payment to the credit bureaus on a monthly basis, you often have a little leeway with an overdue bill before it hurts you. But any late payment in excess of 30 days is fair game and will be reflected on your credit report. Your credit report will not show your score, but it will show all the information that is used to calculate that score, including seriously overdue bills.

If you haven’t used up your three free passes in a year (one from each of the three major credit bureaus), head over to AnnualCreditReport.com to get a new one. If unpaid debt is the reason for your rating downgrade, you will see this in the billing record of the relevant account.

If you’ve used up your free services, the free credit monitoring service will note if your accounts have a good reputation.

What to do: If one of your financial accounts shows an overdue debt when you swear that you paid the bill, contact that lender or utility to check your status. If everything is clear, you can dispute the error on your credit report. If you haven’t really paid your bills, it’s time to get busy ASAP. You may see an instant increase in your bill by several points as soon as the lender tells you that you paid, but it may take several months before your account is fully recovered.

You are using too much credit

The second largest portion of your credit score, after your payment history, depends on how much you use your credit or how much debt you have. If your ratio of used credit (for example, your credit card balance) to available credit (what is the limit for all your cards combined) is too high, your credit rating will drop. Experts say the utilization rate should be below 30%, and the lower the rate, the better your result will be.

If you’ve recently made a large credit card purchase or recently took out a new loan, your score is likely to drop.

What to do: As you pay your balance, your account increases again. If you can pay off a large balance in full, it will provide the fastest growth in your account, and you will see this change within three months (delays often show up on your credit report faster than loans paid off ).

When paying with a credit card, do not cover it! Having this loan makes you very attractive to future lenders and the lower your utilization rate, the higher your rating will be.

There is a security problem

Go back to that credit report you pulled out. Do you see anything unusual? An account you don’t remember opening, or a credit card account that seems unusually large? You can become a victim of identity theft .

What to do: First, call your credit card company or other lender to report fraud or theft. You will want to post fraud alerts on all of your other financial accounts. You should file a report with the police, contact the Social Security Administration and the IRS to report suspected identity theft, and file a report with the police.

It will likely take months to get things right and back to normal, so get ready for a disappointing trip. In the meantime, and long after the problem has been fixed, you need to be vigilant by monitoring each of your financial accounts for pending fraudulent activities.

If everything looks legitimate on your credit report, take the time to make sure your identity and credit information is protected from fraudsters by blocking your credit at every credit bureau – it’s free! – so that no one opens new credit accounts in your name, and by setting up security alerts for each issuer of your credit card. This may seem like the most boring task right now, but it can give you complete peace of mind in a world full of data leaks.

You will have to unfreeze this loan whenever you want to make a major purchase with a new loan, and the freezing does not stop criminals from stealing your current credit card details. To do this, see if your card issuer allows you to block your card , which you can do as often as you want online or through your card app. This will prevent anyone, including you, from making purchases with your card unless you unlock it.


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