It's not obvious why your credit score fluctuates. This is because lenders use your credit score to determine your risk of repaying a loan. This is especially important if you're applying for a mortgage. In this article, we'll cover three common reasons why your score may be dropping. These are the tips you need to boost your score. To boost your score, we'll also talk about the importance of having a clean credit history.
Loan repayment
You might be curious as to why repaying a loan can impact your credit score. Your credit score can be hurt by being debt-free. Lenders may consider you a risk if you have too many credit lines open. This can be countered by paying off one or more lines of credit to increase your credit.
Applying to a new credit
Lenders will conduct hard inquiries and credit checks when you apply to credit. Although your existing credit score is not affected, it can be affected by one inquiry that could result in a drop of three to seven percentage points. This drop will even out within a few months. You can limit the number of credit card applications you submit to prevent a significant drop in your credit score. If you have strong credit, get a creditcard immediately. You might also consider a secured card.
Med debt repayment
It's not a common question that paying off medical debt could affect your credit score. Most people who experience medical bills go into debt. The good news is that your medical bills will not show up on your credit report if you make the payments on time within the grace period. Depending on your situation, your medical provider might send your bill to a third-party collection agency, who will report it to the credit bureaus. Your credit report will not reflect medical bills for six months. However, credit bureaus will report them for one year beginning July 1, 2022. Sometimes, you might not receive notice from your medical provider. If this happens, the credit bureaus will report the debt to the credit bureaus for a full year beginning July 1, 2022.
Prudently apply for credit
Opening new credit cards can lower your credit score. Even though these accounts may offer lower interest rates, your credit score can still be affected if they aren't paid on time. Instead, apply only for the credit cards that are essential to your financial goals and make payments on time each month. You will see a rise in your credit score if there are multiple credit cards that have different limits.
Answering hard questions
When you make multiple hard inquiries on your credit report, you are hurting your chances of getting a new loan. This type inquiry shows the lender that you have taken on a lot of debt at once. Many auto loans and many mortgages are combined. Identity thieves can use your personal details to apply for new credit. This could eventually lead you to defaulting on your payments.