Credit scores are important if you want to be able to achieve success in life. Usually, people have average credit scores; however, there are some strange cases of low credit scores. If you have ever wondered what could cause someone’s credit score to drop, you will find out today in this article.
Disputing a Credit Card Bill
When your credit report is not correct, you have the right to dispute it. However, even though you have the right to do this, it may not always be a wise choice. For example, if you are filing a dispute for a credit card that has a zero or low balance you will hurt your credit utilization rate.
Paying of old Collections
Many people think that paying off collections will result in their credit score increasing. However, if you pay off an old debt, you are at risk of having it added to your credit report even if it was not initially there. It can come with a payment status that triggers a credit score drop or it may reactivate the legal statute of limitations. Neither of these possibilities is good for your credit rating or your finances.
This is why real estate agents will advise against paying off old debts when you plan to apply for a home loan.
Purchasing a Motorcycle
For one reason or another, you decided to get a motorcycle. However, you are unaware of the negative effects that come with the new set of wheels.
Motorcycle loans are known for being reported as revolving credit. This makes it looks like you have a large amount of credit card debt. Therefore, your credit utilization rate skyrockets and your credit score plummet as a result.
To reduce the chance of negative impacts put down a larger amount of money upfront.
Using a Business Credit Card
At one point, your business credit never affected your personal credit. Those times are gone and now if you use your business credit card frequently, it can lower your personal credit. Having a high balance on your card will increase your utilization rate, which causes your credit score to drop.
Maintaining good credit is hard and many of the things that will lower your credit score are encouraged to those trying to fix their credit. Before doing anything drastic in the financial department you always have to take a moment to step back and think how your action will affect your credit.