I don't have any late payments or any other negative marks on my credit report, so why is this happening to my score? Keep in mind that your FICO score is essentially a predictive tool that evaluates your risk to a lender at a given time.
So there may be reasons why your score has been dropping that may not be apparent, but still are considered from a risk perspective. The first step is to look at the negative factors returned with your current FICO score. Factors like "seeking credit" or "high credit usage" can be puzzling since they aren't obvious, so let's take a closer look at both of these in a bit more detail.
A very common, yet not entirely obvious cause, for a score to drop is an increased utilization ratio. An increased what ratio? Yes, this is credit scoring lingo, but it basically measures how much of your credit are you using in relation to your total available credit.
In general, the lower this ratio, the better for your score. Therefore, if you've been using more of your available credit lately, that could account for a drop in your FICO score. For a more detailed description of the credit utilization ratio, read this article. In this case, you need to contact the credit bureau that issued the report and file a dispute. Depending on the error, you may also want to follow up with your other financial institutions like your bank and anywhere you have a financial account and check for fraud.
Needless to say, checking your own information on a regular basis is important. Not only can you catch fraud if it happens, but you can also spot errors that might unfairly drive down your score. Again, if you find mistakes, open a claim or dispute with the credit bureaus. Next, reduce the amount of credit you use.
Then, hit pause on generating hard inquiries on your credit. Each hard inquiry causes your score to drop by about five points. You can start the process of removing the error by contacting the credit bureau that issued the report — either Experian, Equifax, or Transunion. But you can see improvement in a few months if you consistently make payments on time, limit how much credit you use, and carefully manage the accounts you open and close. Advertiser Disclosure: Many of the offers appearing on this site are from advertisers from which this website receives compensation for being listed here.
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