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Common Events That Affect Credit Scores

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It can be a sobering event when you apply for a bank loan or department store credit card and get turned down because of your credit rating. There are several things that can affect your credit score and many people who check their credit report are surprised to find what’s on it. Get a copy of your credit report and spend some time studying it. It helps to know what things can affect it in order to act financially responsible.

Lack of Credit

Most people don’t realize that a lack of credit makes it harder to get credit. For example, if you tend to pay cash for everything or use a credit card and pay it off each month, your credit score takes a hit. Lenders want to know how well you manage your money when you have monthly payments. If you have little or no debt, they won’t know if you’re a good credit risk or not.

If this is the case, then get a department store credit card and keep a small balance on it. If you are in the market for a used car, you can also go to a used car dealership, such as ours, that specializes in helping people with credit problems. Buy yourself a nice used car and make the monthly payments on-time. Both give you good marks on your credit report.

Missed or Late Payments

Some lenders give you one “freebie” but after that, any late payments will show up on your credit report. Missed payments always show up. Contact the lender and ask how you can get that off of your report. Sometimes, catching up on payments or paying off the entire balance will convince them to remove the late or missed payment note.

Too Much Activity

Every time someone checks your credit report, a note is made on it by the credit reporting agency. This can happen when you apply for credit, apply for a job or open up a new bank account. Too many notes on your report saying you were trying to get more credit can be a red flag for lenders.

Sudden Drop in Income

It’s happened to many people recently. Layoffs, reduced hours or a cut in pay decreases your income. This immediately affects your credit score. One calculation that is used by lenders is your debt to income ratio. This is the amount of your debt compared to your income. When your income drops suddenly, a healthy ratio now looks poor. The only way to change this is to increase income or reduce debt.

Bankruptcy or Foreclosure

These will initially hurt your credit score, but they do give you a clean slate on which to build a solid credit rating. There are credit card companies that specialize in working with people who have gone through these financial difficulties. We will also work with you even if you have a bankruptcy or foreclosure on your credit report. Do what you must to get some new credit on your report and start building your credit rating back up.

Mistakes on Your Credit Report

It does happen. Lenders put notes on the wrong accounts or state the wrong amount. Accounts that have been closed still show as open and some people have reported seeing accounts on their report that did not belong to them. Go through your report and call about any mistakes and get them fixed quickly.

There are a number of factors that can affect your credit score. Get a copy of your report and go over it in detail. Fix any mistakes and contact lenders to see what you can do about any missed or late payment notes. Keep a healthy credit score so you’ll be prepared when you make important purchases.