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Factors That Affect Your Credit Score

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. Most people will struggle with their credit score as the most popular aspect of financial literacy. Most people will watch their credit scores drop without knowing the cause or exactly how to raise it. If you find yourself in this category, you can learn more by reading through this. Read on to boost your knowledge on the common factors that affect your credit rating and how you can raise it to its best. There are a lot of reasons why your credit score may be dropping.

One of the most common reasons for a credit score drop is because of failure to make your payments on time or completely failing to make payments altogether. 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.

Your credit could also be dropping due to high credit utilization. Using your credit card way too often affects your credit utilization ratio which could, in turn, hurt your credit score. The credit utilization ratio is the ratio of credit you are eligible to and the amount of money you have charged to your credit card. The most recommend credit utilization ratio should be below 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.

Your credit score could also be reduced due to many credit card application. Having too many credit card applications at once could lead to a lender pulling a hard inquiry report on you. you may end up loosing up to 5 points from your total credit score if you have a hard inquiry on your credit report. Many credit card applications also send a negative message to loaners and show that you are in desperate need for financial aid. If a lender thinks you are desperate, they will question your ability to pay your bills in time.

Unemployment is just one of the other ways you can see a notable drop in your credit rating. Credit bureaus will not be notified when you lose your job, but they will notice a drop in your income. 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. Paying down your debts is an excellent way to improve your debt-to-credit ratio.