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7 Factors That Contribute To Bad Credit Score Fluctuations

by | Nov 28, 2023 | News

Credit scores can go through fluctuations, especially when they head in a negative direction. These fluctuations can be attributed to various factors. Let’s take a look at seven common factors that contribute to these bad credit score changes:

1. Late or Missed Payments:
Your payment history plays a significant role in determining your credit score. When you make late payments, miss payments altogether or default on loans, it can have a substantial negative impact on your credit score.

2. High Credit Utilization:
Using a large portion of the credit available to you can have an adverse effect on your credit score. If your credit card balances are high compared to your credit limits, it may indicate financial strain and result in a lower credit score.

3. Opening Too Many Credit Accounts:
Opening multiple credit accounts within a short period, especially if you have limited credit history, may raise concerns. Each new inquiry into your credit can slightly decrease your overall score and having too many new accounts could suggest financial instability.

4. Closing Credit Accounts:
Closing old or unused credit accounts has the potential to impact both your credit utilization ratio and the average age of your active accounts. If you choose to close a long-standing account, it could lead to a reduction in your overall credit score.

5. Public Records and Collections:
Unfavorable occurrences like bankruptcies, tax liens or accounts being sent to collections can have a significant and long lasting impact on your credit score. Any new entries in this category can lead to notable fluctuations in your credit score.

6. Changes in Credit Mix:
Having a diverse range of credit types (such as credit cards, installment loans, mortgages) can positively influence your credit score. However, sudden changes like closing a mortgage account or paying off a long-term loan may affect your credit mix and result in fluctuations.

7. Credit Report Inaccuracies:
Errors on your credit report, such as incorrect account details, unauthorized accounts or incorrectly reported late payments, can cause unexpected drops in your credit score. Regularly reviewing your credit report for inaccuracies is crucial to ensure the accuracy of your credit information.

It’s important to note that fluctuations in credit scores are normal and can occur for various reasons. However, consistently negative trends in your credit score should be addressed promptly by taking steps to improve financial habits and manage credit responsibly. Taking the time to regularly check your credit report, correcting any mistakes you find and being responsible with your finances can gradually stabilize and enhance your credit score.