Your credit score fluctuates because of a variety of reasons. This happens because lenders use credit scores to determine your ability and risk to repay a loan. This is particularly true if you are applying for a home loan. Three common reasons your score may be dropping are discussed in this article. Follow these tips to get your score back up and keep it there. We'll also discuss the importance of a clean credit report to help boost your score.
Paying off a loan
You might wonder why paying off loans can cause a drop in your credit score. While debt-free is a great thing, there are many other factors that could affect your credit score. Lenders might view you as a threat if you have too much credit. This can be countered by paying off one or more lines of credit to increase your credit.
Applying for new credit
Lenders will conduct hard inquiries and credit checks when you apply to credit. Although your credit score will not be affected significantly, one inquiry can lower it by up to three to seven points. Within a few weeks, this drop will reverse itself. Limit your credit applications to avoid having your credit score drop too much. A credit card is a good idea if you have great credit. Secured credit cards are available for those who don't have great credit.
Medi-Cal debt repayment
Are you wondering if medical debt will impact your credit score? Most people who experience medical bills go into debt. If you pay your medical bills on time and within the grace period, your medical debt will not appear on your credit reports. Your medical provider may send your bill to a third party collection agency. They will then report it to credit bureaus, depending on your circumstances. 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.
Be careful when applying to 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, limit your credit card applications to the ones you need and only pay for them on time every month. Your credit score will rise if you have multiple credit cards with different limits.
Hard inquiries should be avoided
Your chances of getting a loan are affected if you make several hard inquiries on credit reports. This type of inquiry reveals to lenders that you are taking on many debts at once. Often, mortgages and auto loans are combined. Identity thieves may use your personal data to apply for credit in your name if your inquiries are not separated. This could ultimately lead to late payments.