Credit scores can fluctuate -- having a high score now doesn't mean you'll always have one. Different things affect scoring and making unwise credit decisions can cause a decrease in your score. A low credit score can stop credit applications or result in a higher interest rate on loans. For this reason, it's smart to understand what can cause your score to go down.
Timeliness
Credit scoring takes into account how well you pay your creditors. Calculations factor in your number of timely payments, late payments and other factors such as collection accounts and judgments. Paying your bills on time each month contributes greatly to a high credit score. Quite the contrary, missing several payments, sending payments late or completely defaulting on bills will lower your credit score.
Owing Too Much
Most consumers have debt, but if you carry high balances on your credit cards or max out your credit cards, your credit score is likely to drop. Good credit management includes keeping credit card balances less than 30 percent of the credit limit. Paying down credit cards to help widen the gap between your outstanding balance and your credit limit is a key way to help improve your credit score. Start making higher payments and limit credit card use. Only spend what you can pay off within a month.
Credit Report
Credit reports include information on every credit account you've held, and creditors use this information when considering approving applications for credit and loans. If mistakes appear on your credit report, these can bring down your credit score. Avoid this situation by ordering your credit report from Annual Credit Report once a year and review your personal file to ensure all information is accurate. Do not hesitate to contact creditors to dispute errors or mistakes.
Closing Accounts
The length of credit history is another factor influencing credit scores. For this reason, it's imperative to keep your oldest credit card accounts opened, even if you never use the account. Closing your oldest accounts reduces the length of your credit history and this one move can cause your credit scores to go down.
Inquiries
Occasionally applying for new credit doesn't have a significant impact on credit scoring. Repeatedly applying for credit cards or loans will eventually cause your credit score to drop because excessive inquiries can have a negative impact on scoring. Avoid a reduction in scoring by only applying for new credit when necessary.
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