What You Should Know About This Year
Most people are not so confident with their financial literacy as much as they would like to be. Most of the world’s population cannot even pass their financial literacy tests. The most popular feature of financial literacy people will struggle with is their credit score. Many people still lack an idea of what affects their credit score or how they can raise it back if it drops. You can learn everything you need to know by reading more here. You can read on to learn more about how to raise your credit score and the most common reasons for its drop. Your credit score could be falling for so many reasons.
Failing to make your payments on time or failing to make the payments at all is among the most common reasons for a credit rating drop. You are going to experience a reduction in your credit rating if you do not make your credit card or loan payments on time or you skip the payments totally.
High credit utilization is also another reason for your credit score reduction. Using your credit card regularly could lead to a reduction in your credit card score because it affects our credit utilization ratio. Utilization ratio is the ratio of the amount of money you have charged to your credit card and the credit amount that has been made available to you. Most experts will recommend having a credit utilization ratio of lower than 30 percent. You can hold conversations with your partner or think about how you can reduce your credit card spending if you fall out of the limits.
Having too many credit card applications is another common reason for a reduction in your credit score. If you have applied for too many credit cards within a short time, a lender may be forced to pull your credit report to determine your qualification. When a hard inquiry is pulled on your credit report, it could cost you up to 5 points on your overall credit score. If you apply for too many credit cards at once, you are sending a bad message to lenders since it shows that you desperately need money. If a lender thinks you are desperate, they will question your ability to pay your bills in time.
Unemployment is going to affect your credit score. Although credit bureaus may not be aware when you lose your job, they are going to notice a reduction in your income flow. If it affects your ability to make timely payments, it could be more damaging than expected.
You can always improve your credit rating by setting up payment reminders for automatic payments to avoid accidentally missing payments. Make regular debt payments to improve your debt-to-credit ratio.