You’re ready to take out a loan, only to realize that your credit score actually dropped since you last checked it. With a low credit score, you’ll be paying higher interest rates than you expected – and you may not qualify for the loan at all.
Remember that your credit score reflects your risk to a lender at any point in time. As new information is reported to credit bureaus, your credit report is updated. Your credit score is periodically recalculated to incorporate that new information. If the update implies any risk of non-payment, your score will suffer.
To find out why your score dropped, ask the following five questions and think like a lender. Would you be less likely to lend someone money if you didn’t like the answer?
1. Did You Miss a Payment? – On-time payments are the most important factor in your credit score. Lenders assume that if you’ve missed a payment before, you’re more likely to do it again….