Small Loans Australia :: Articles
SHARE

Share this article with your friends!

Why did my Credit Score drop - and how can I fix it?

Why did my Credit Score drop - and how can I fix it?

Your Credit Rating (or Credit Score) plays a very important role in determining your eligibility to get a loan.
Here we look at the reasons why your credit score may drop and some handy tips to avoid this problem.

Your credit rating is very important. It is used to determine how much interest you need to pay. It is also a reflection of your creditworthiness.

If you have high credit rating, you can enjoy lower interest charges on loans. Apart from that, you also get higher credit limit and great deals on your credit card.

If you find that your rating has dropped significantly, this may mean that you may have made a financial mistake.

There are a number of reasons why you may suddenly have a lower score.

If you know what these reasons are, there is a chance that you can avoid or at least fix your current dilemma. Here are some possible causes of abrupt score drop and how you may be able to avoid them.

Debt Stressed?
If you're struggling to pay your debts as well as covering living expenses, we are here to help. Through our national panel of Debt Management specialists, we can help customers with $10k or more in debt by consolidating your existing loans, stopping Debt collectors from contacting you and re-negotiating repayments on your terms!

Late Payments

Your payments reflect 35% of your FICO score, regardless of whether you pay on time or not.

If you missed a payment, this will not completely damage your rating. However, if you turn this into a habit, your score will eventually be affected.

Moreover, your creditor may charge you with more fees and you may likely end up having to make many more payments, which could include your credit card bills, immediate fees for missed payments, and charges on credit lines and later, loans.

The only solution to avoid all these is to pay your bills on time.

New Credit Card Application

Applying for a new card when you are struggling with paying another can hurt your credit score. Know that 10% of your credit rating is made up of new inquiries for credit.

New card applications will show on your credit report for 12 months.

If you wish to get a new card, do so with control. If you are to make an inquiry, do it only once as much as possible.

One inquiry is acceptable since your score can rebound within a year.

Credit Card Cancellation

You have the option to close your account if you have credit card debt.

However, doing so will actually damage your score, especially if your account carries a balance.

Another possible scenario is that creditors may cancel your account.

Both scenarios can have an effect on your rating; therefore, avoid credit card cancellation as much as possible.

Unemployment Benefits

If you are unemployed and you get benefits, this will have a slight effect on your score. It is advised that you receive the benefits for a short period only. Although the credit bureaus will not find out if you are unemployed, they will certainly see that your income has decreased.

High Credit to Debt Ratio

Your extended credit will take 30% of your credit score.

Sudden increase in balances without higher credit limit will result to a score drop.

If you have balances, strive to pay them off as soon as possible.

Poor Debt Management

Credit score is not only about what you do with your credit cards. There are other factors that can influence your score.

These include your lines of credit and loan balances, which comprise 30% of your FICO score.

If you have too much debt, your rating will definitely go down. It will also be difficult for you to afford the payments each month.

Hence, you should be able to manage your debt by lowering the amount of money you owe from various financial institutions.

Share this article:

Free Super Advice
If you're thinking about rolling over or consolidating your super accounts, need investment advice, help setting up or administering a self-managed fund, we can help save you time and money. Our national panel of Superannuation Specialists are standing by, ready for your questions!
Time to Refinance?
If you are seeking lower rates, lower fees and more flexibility in your home loan. you are in luck! Our national panel of mortgage brokers is looking forward to an opportunity to assist you. Apply online for a free eligibility assessment and one of our broker network refinance specialists will get on the case to track down the best deal for your individual circumstances. Without any obligation and at no charge to you.


Finance Articles

5 top tips when buying a used car in Australia 5 top tips when buying a used car in Australia
Buying the right second-hand car can be a bit of a minefield – from finding a model that fits your needs and budget - to negotiating the best deal with the seller, but with a few tips and tricks, it can be made a lot easier and less stressful. - read more
Managing Credit Card Debt Managing Credit Card Debt
If your credit card debt is starting to get out of control - or you simply want to know how to avoid potential credit card pitfalls, you are not alone. Managing credit cards is a problem faced by many who are now drowning in an ocean of debt. Here are some simple strategies that may be of help. - read more
When should I use a personal loan? When should I use a personal loan?
Unsecured personal loans can really help in a pinch. If your savings are low and your car breaks down, for example, such a loan can patch up your life. Or maybe you're buying a big-ticket item and you need backup money to cover a short-term hole in your bank account. - read more
Why Payday Lending Enhances Consumer Welfare Why Payday Lending Enhances Consumer Welfare
Today, We’ll defy the critics and demonstrate why consumer welfare is enhanced within a competitive payday-lending environment. - read more
Loan Finance: How to Shop Around Without Damaging Your Credit Loan Finance: How to Shop Around Without Damaging Your Credit
If you are considering taking out a loan, you wouldn’t go out of your way to make it harder on yourself to get approved or to get a good interest rate, would you? Yet many loan applicants would enjoy a considerably better outcome on their loan application if they followed this important rule. - read more
7 things you need to know about a Hire Purchase loan 7 things you need to know about a Hire Purchase loan
There are seven things you should know before you ever think of getting a Hire Purchase loan. Knowing these things will give you control and power in the loan process. Power and control will will save you money - read more
Utilising A Chattel Mortgage for Business Finance Utilising A Chattel Mortgage for Business Finance
A Chattel Mortgage loan is a simple yet effective finance option designed for business plant and equipment purchases. Here are six rules to consider when arranging finance for your business that will ensure that you retain full control over the loan process and save money in the process. - read more
Business Loans: Managing interest rate risks Business Loans: Managing interest rate risks
"I want the protection in the current low interest rate environment but I don't want to be locked in for too long a period" - a commonly heard requirement from business borrowers. - read more
Five Worst Credit Card Mistakes Five Worst Credit Card Mistakes
Credit cards can be an excellent way to manage your finances ... they can even be an investment tool. However your credit card can quickly become your enemy if not used correctly. Here are five of the worst mistakes most credit card holders make. If you can avoid these mistakes, you will benefit greatly. - read more

Finance News

Interest rates up another 50 basis points with more hikes to come Interest rates up another 50 basis points with more hikes to come
03 Aug 2022: .

As expected, the Reserve Bank of Australia (RBA) raised interest rates by another 50 basis points this month. The fourth rate hike in as many months, today’s decision takes the cash rate from an emergency low of 0.1% to 1.85%. - read more
Business loans on the rise while mortgage growth remains flat Business loans on the rise while mortgage growth remains flat
02 Jun 2022: .

Australian business loans growth accelerated in April as mortgage growth stayed consistent, with major banks growing at less than the system average according to latest RBA data. - read more
Homebuyers up in the air despite new  government home loan support Homebuyers up in the air despite new government home loan support
29 May 2022: .

The government’s promise of an equity contribution will help the most disadvantaged Australians to get a home loan, but they still won't be able to afford one. - read more
RBA lifts official interest rate RBA lifts official interest rate
03 May 2022: .financialservicesonline.com.au

The Reserve Bank of Australia lifted the official cash rate by 25 basis points at its meeting Today. - read more

Need Help Finding a Loan?
Find out now if you qualify and compare rates, offers and options from multiple lenders - without a credit check!
All finance quotes are provided free (via our secure server) and without obligation.
We respect your privacy.

Knowledgebase
Personal Loan:
a loan that is granted for personal use, normally unsecured and granted by a lender on the borrower's integrity and capacity to repay


Quick Links: | Small Loans | Student Loans | Finance Australia | Quick Finance | No Credit Check | Payday Loan | $5000 Loans