Clues That Your Credit Score Is Tanking

Everyone is entitled to a free copy of their credit report annually, so it's easy to keep track of whether you have any black marks on your credit that may affect your credit score. You can also pay the various credit bureaus to get a copy of your credit score. It's especially important to do this if you start encountering clues that your score is tanking.

Loan Denial

Say you want to buy a house or a car. You've got a good job, plenty of income and the necessary down payment. If you still get denied for a loan, Bankrate.com says that a low credit score is the likely reason for a loan denial. Even though you may fit all other criteria for obtaining the loan, a low credit score suggests to the lender that you are a high credit risk and more likely to default on the loan payments. If you are denied a loan, be sure to ask what the reason for the decision was.

High Interest Rate

If you are approved for that mortgage or car loan but at an interest rate that is much higher than the going rate, it's a good clue that your credit score may be low. Again, risk plays a big role. If a lender considers you a higher risk, it will charge a higher interest rate to make up for that risk. Experian, one of the three major credit bureaus, says that a credit score above 700 is considered good. Generally, the lower your score, the higher the interest rate you will pay.

Premium Increases

If your credit card company or insurer raises your rates absent any other reason, such as a damage claim or late payment, it may be a sign that your credit score has tanked. This is most likely to happen during the renewal process, but an insurer or credit card company may also raise your rates in the middle of your term if it finds out that your credit score has fallen.

Considerations

You should always check your credit report and score before applying for a mortgage or car loan to make sure there aren't any surprises. If there are mistakes on your credit report, you should dispute them in writing as soon as possible and provide any evidence you have that the entry is in error. If you have legitimate negative entries on your credit report, act quickly to reconcile them. For example, get current on any delinquent accounts and pay down high credit card balances if possible.