Should I Be Worried If My Credit Score Dropped 10 Points?

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You’ve decided to check your credit every month. And, since you’ve been working hard to establish a good credit score, you’re a bit disheartened when you learn that your number appears to have dropped over the last 30 days.

Should you also be worried? Not necessarily.

Why the Drop? 

Credit scores are dynamic — they change as the information on your credit report gets added and/or updated. Most lenders report to the major credit reporting agencies in 30 day increments, so it’s fairly common to see slightly different numbers from month to month.

A major culprit behind small dips are credit card balances. Credit utilization — how much debt you’re carrying vs. your total available credit limit(s) — is a major factor among credit scores, so if you charged a bit more to your plastic this month than the last, there’s a chance your score is being affected by those extra purchases.

There are other reasons why you might see a small decrease: Perhaps you applied for a new line of credit last month (that’ll create an inquiry, and ding your score). Or maybe you’re looking at a different credit score. Remember, you have more than one. They can vary by lender or loan product and, though all scores are generally based on the same building blocks, each specific algorithm may be crunching numbers a bit differently.

Stay Alert

None of this means you should simply discount any changes you may see. A dramatic drop in score, for instance, could be a sign that identity theft is occurring. Or there could be an error on one of your credit reports that is affecting your score. (You can go here to learn how to dispute errors with the credit bureaus.)

If you do see a decrease, some digging might be required to see what is behind it. You can start by pulling your credit reports for free each year at AnnualCreditReport.com — a good idea if you’re seeing really big discrepancies in your scores. You can also view your free credit report summary, updated each month, on Credit.com. It tells you how you’re doing in the five key drivers of your credit scores — payment history, debt usage, credit age, account mix and inquiries — and can help you pinpoint what may have gone wrong or what you can do to ultimately improve your score.

Remember, you can build good credit in the long-term by making all loan payments on time, keeping debt levels low, limiting new credit inquiries and only adding a mix of credit accounts as your wallet and score can afford them.

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The post Should I Be Worried If My Credit Score Dropped 10 Points? appeared first on Credit.com.

Should I Be Worried If My Credit Score Dropped 10 Points?

credit_score_drop

You’ve decided to check your credit every month. And, since you’ve been working hard to establish a good credit score, you’re a bit disheartened when you learn that your number appears to have dropped over the last 30 days.

Should you also be worried? Not necessarily.

Why the Drop? 

Credit scores are dynamic — they change as the information on your credit report gets added and/or updated. Most lenders report to the major credit reporting agencies in 30 day increments, so it’s fairly common to see slightly different numbers from month to month.

A major culprit behind small dips are credit card balances. Credit utilization — how much debt you’re carrying vs. your total available credit limit(s) — is a major factor among credit scores, so if you charged a bit more to your plastic this month than the last, there’s a chance your score is being affected by those extra purchases.

There are other reasons why you might see a small decrease: Perhaps you applied for a new line of credit last month (that’ll create an inquiry, and ding your score). Or maybe you’re looking at a different credit score. Remember, you have more than one. They can vary by lender or loan product and, though all scores are generally based on the same building blocks, each specific algorithm may be crunching numbers a bit differently.

Stay Alert

None of this means you should simply discount any changes you may see. A dramatic drop in score, for instance, could be a sign that identity theft is occurring. Or there could be an error on one of your credit reports that is affecting your score. (You can go here to learn how to dispute errors with the credit bureaus.)

If you do see a decrease, some digging might be required to see what is behind it. You can start by pulling your credit reports for free each year at AnnualCreditReport.com — a good idea if you’re seeing really big discrepancies in your scores. You can also view your free credit report summary, updated each month, on Credit.com. It tells you how you’re doing in the five key drivers of your credit scores — payment history, debt usage, credit age, account mix and inquiries — and can help you pinpoint what may have gone wrong or what you can do to ultimately improve your score.

Remember, you can build good credit in the long-term by making all loan payments on time, keeping debt levels low, limiting new credit inquiries and only adding a mix of credit accounts as your wallet and score can afford them.

More Money-Saving Reads:

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Can I Fix My Credit in 30 Days?

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If you’ve got a less-than-stellar credit score and are looking to apply for a loan, chances are you’re going to want to fix those numbers fast. And you just might be able to do it — depending, of course, on what’s weighing your credit down.

Dealing With Disputes

Under the Fair Credit Reporting Act, once a dispute has been formally filed, credit bureaus generally have 30 days to investigate a claim and remove the item. So, if your score is damaged due to an inaccuracy, you could theoretically fix your credit within a month’s time.

“I have seen questionable items removed within that 30-day time frame,” John Heath, credit expert and attorney with Lexington Law, a Credit.com partner, said in an email. “However, there is no guarantee that those removals will happen.”

The credit bureaus, for instance, could decide that your dispute is frivolous, elect not to remove the information in question and effectively send you back to the drawing board. Plus, even when dealing with an inaccuracy that is ultimately deemed legit, the law provides a little bit of wiggle room for investigations.

There are certain exceptions when the bureaus can take 45 days to update information on credit reports. For instance, they have an extra 15 days whenever you dispute information after receiving your free annual credit report or when you submit additional information relevant to your dispute within the initial 30-day investigation period. (You can go here to learn more about disputing errors on your credit report.)

Recovering From Missteps

Of course, not all dinged credit is due to errors, and if your credit is lackluster because you made some mistakes, it may take longer for your score to rebound. Exact timeframes will vary depending on your full credit profile, but, in general, negative information can take a full 7 years to age completely off your credit reports (some bankruptcies take up to 10 years), though the effects each item has on your credit will lessen with time. (You can go here to find out more about how long things stay on your credit report.)

That’s not to say there aren’t times you can easily bounce back. In fact, if your score is bogged down by high debt, you may be able to fix it by paying down your credit cards. That should adjust your credit utilization rate (how much revolving debt you are carrying versus your total available credit limits), which accounts for about 30% of major credit scores. Experts generally recommend keeping this rate below at least 30%, and ideally at 10%, of your available limits, though if you’re looking to improve your credit, the lower it is, the better.

“If you have high balances or have maxed your accounts, you can pay these down, which can positively affect your credit score,” Heath said.

This boost could happen within a 30-day window, considering most creditors report to the major credit reporting agencies each month.

Getting Back to Good

In order to really bolster your credit, you need to identify what might be plaguing it in the first place. You can pull your credit reports for free each year at AnnualCreditReport.com and view two credit scores for free each month on Credit.com.

While everyone’s credit problems may differ, you can improve scores in the long run by making all payments on time, keeping those aforementioned debt levels low and adding a mix of credit accounts over time. You can also limit new credit inquiries while you wait for your score to recover. Remember, when you apply for new credit, hard inquiries will appear in your credit report,” Heath said. “These inquiries may negatively affect your score.”

[Offer: If you need help fixing errors on your credit report, Lexington Law could help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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How to Score a Lower Credit Card Interest Rate

lower credit card interest rate

The Federal Reserve raised interest rates for the first-time in nearly seven years this December, citing improvements in the economy. That means anyone with a variable-rate credit card might see their annual percentage rate go up. But you don’t have to weather the storm: Depending on your spending habits and financial health, there may be ways to score a lower APR in 2016. Here’s how.

1. Raise Your Credit Score

A good credit score entitles you to the best terms and conditions on competitive credit cards (and other financing), so getting yours in tip-top shape can help you secure a lower APR. You may want to check your credit to see where you stand and what areas you need to improve. (You can do so by pulling your credit reports for free each year at AnnualCreditReport.com and viewing your free credit report summary, updated each month, on Credit.com.) Generally, you can improve your scores by making all your payments on time, keeping debt levels low (below 30%, and ideally 10% of available credit), removing errors and limiting credit inquiries.

2. Call Your Issuer

Once you’re sure your score is sound, you may want to call your issuer to see if they’ll lower your existing rate. Keep in mind they’ll be more apt to do so if you’ve shown you’re a responsible cardholder who uses the card regularly. If your issuer doesn’t agree, you can always try again later. You may find success with a different customer service agent.

3. Comparison Shop

If you’re not getting anywhere with your current issuer — or think it’s time for a new piece of plastic — you can shop around for a new credit card. You could look for a low-interest credit card or a balance transfer credit card, which lets you transfer an existing high-interest debt to a new card with little-to-no interest for a period of time (typically 12 to 18 months). Just be sure to review the terms and conditions carefully — balance transfers typically have fees and there may be caveats, such as retroactive interest if you don’t pay off the balance within the 0% window. You’ll also want to know what you’ll owe in fees and interest on all cards you’re considering. Each credit card application tends to generate a hard inquiry on your credit report, which can ding your score, so it’s best to keep those to a minimum.

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