Usually, people get frustrated and worried when they realize that their credit score has gone down, and not for nothing. This is not a good feeling, rather it is a matter of great concern, since having a good credit score is the open door to the world of finance, future business and obtaining any service. There are several factors that cause your credit to go down and most of the time people are unaware of them.
Here are the factors that affect your credit and make it go down.
Borrowing money.
When you open a new account, it can hurt your credit score for a few reasons. This happens when the account is not aged, which means it will negatively affect your average account age.
In addition, there has likely been a hard inquiry on your credit report as a result of applying for the new loan. Each recent inquiry on your report can affect your credit score.
The new account can also have a negative impact on the “new credit” portion of your credit score. Having new credit makes you look like a riskier borrower, which means it could lower your score slightly. So it is recommended that you refrain from such a move on a regular basis.
New account.
There is a chance that your credit could be lowered by a new account. The age of a trade line is very important, as is your overall credit age. This is because credit age is tied to payment history, which is vitally important to your credit health.
Payment history accounts for 35% of your credit score and credit age with 15% to your score. When you add the two together, you get 50%, which means that half of your credit score is controlled by these two connected factors.
Within the credit age category, your average account age is believed to be one of the most important variables. The older your trade lines are, the more they can benefit your credit. Therefore, any time your average account age decreases, you run the risk of your score decreasing as a result.
Your account balance increased.
One of the biggest factors affecting credit and lowering scores and the one most commonly used: high unpaid balances. As your account balances increase, so does your credit utilization rate. This is bad news for your credit score, as credit utilization contributes about 30% of your score.
If you’ve been using your credit card more frequently without paying it off in full each month, that could be the source of the change in your credit score.
Applying for credit and being denied.
When you apply for credit, the lender usually has to do a hard pull on your credit report to check how your credit record is and how responsible you are.
This does not always result in a new credit account being opened. Sometimes, for example, your credit application may be rejected by the lender, or you may choose to decline the terms offered to you and not proceed with opening the account.
Ideally, when you apply for such credit it should be accepted, otherwise it will only affect your credit and lower your credit score.
It is recommended to take into consideration the status of your credit record and thus be able to check yourself if you are in a position to be seen by any banking entity as a possible qualified candidate.
On the other hand, when you apply for a credit card the account is automatically opened when the card is approved.
Excessively applying for credit cards.
Having too many hard inquiries on your credit report in a short period of time indicates that you are seeking a lot of new credit, which is a bad sign for lenders, and will lower your score.
Most credit scoring models, credit card inquiries are counted separately, even if they were all at the same time. Since inquiries can cost your credit score up to five points, that can add up quickly.
If you are approved and open all the accounts you applied for, you could also end up with too many new credit accounts on your credit report and this could look risky and difficult for lenders or banks to handle.
