Why did My Credit Score Go Down when Nothing Changed?

Hi Buddy,

Every month, I make payments for the same amount of bills, use and pay off the same credit cards, and carry forward the same number of loans. My credit score does, however, fluctuate from month to month. As a result, I was wondering why my credit score dropped for no reason.

I was confused and asked one of my banking pals about his opinion of my declining credit score even though nothing had changed. He suggested that, If one or more of my credit scores have lately decreased, I should take a moment to relax. It doesn't necessarily indicate that I have done something incorrect because this is a very typical occurrence. 

He highlighted that before thinking about why the credit dropped for no reason, it's crucial to understand that several variables affect credit ratings, and any one of them, alone or in combination, could cause a decline. Understanding the issue or variables that may be affecting your scores is crucial so that you can take appropriate action.

However, I asked him again,

Your score can occasionally vary as a result of uncontrollable events. There are many scoring algorithms, for instance, that use your financial data to determine your credit score. Score variations from one model to the next are quite typical.

However, if you notice a significant decline in your score, it was likely caused by a certain event. Most of the time, your behaviour affects your score in subtle ways.

Your score will vary if one of those criteria changes.

• High Reported Utilization

Your credit usage is one of the elements that affect your credit score. Your credit card balance as a percentage of your credit limit is known as your utilisation rate. You owe money that is almost as much as your credit limit if you are said to have high utilisation. Low utilisation demonstrates to lenders that you are a trustworthy borrower who pays back the majority or all of your purchases promptly. This will have a favourable effect on your credit score.

Your credit utilisation ratio will increase if you make more purchases using credit. But I told him that my expenditure hasn't gone up, then what changed, and why did my credit score decline?

To this, he told me that if I haven't changed the debt, my credit card provider may have altered the overall credit limit. If my spending patterns stay the same, a reduction in the credit limit would result in a higher credit utilisation ratio and lower credit ratings. Even if nothing else has changed, if the credit limit has just changed, that will modify the utilisation ratio and impact the credit score.

• Closure of an account:

Your credit score may be impacted in a few different ways if you close a credit card account. Closing an account while still carrying a load on another card will raise your credit utilisation score. You still have the same amount of debt overall, but less credit is available to you. Your overall credit limit is decreased when you close the account. In light of your new, reduced overall credit limit and credit balance, your existing debt is larger.

• Hard enquiry:

A hard enquiry is a credit report enquiry done to make a lending decision or extend a contract. Your credit score may momentarily decline after a hard enquiry. The lender likely conducted a hard inquiry on your credit record if you recently applied for a credit card or loan. Your credit score may somewhat decline even though nothing has changed as a caution to potential lenders that you are looking into other loan choices.

• Error:

Even after considering all of the aforementioned factors, if your credit score dropped despite nothing changing, there may have been a mistake on your credit report.

Reread your credit reports with care. Verify that it contains all of your open accounts and that no illegal accounts have been launched in your name. Speak with your lender and the police if you believe you are an identity theft victim.

Make sure to have any inaccuracies on your credit report corrected and erased as soon as you can.

I hope this answer would suffice your query about credit score dropped for no reason. I hope this helps:)

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