Why Did My Credit Score Drop?: All Your Questions Answered

Why Did My Credit Score Drop?: All Your Questions Answered

Posted on March 17, 2023

Have you recently seen a decline in your credit score? You should start striving to raise your credit score because a low score can lead to major financial problems. But, in order to solve a problem, you must first identify its root cause, thus in this post, we'll discuss several common suspects.

Why did my credit score decline is a topic that we will assist in addressing. Explained by our auto loan team.

Errors on Your Report

An mistake on your report should be one of the first things you check for as the reason why your credit score dropped; they occur more frequently than you might realize and can have a significant negative effect.

Get a credit report and look over it for any errors. In serious circumstances, there may be entire accounts that you don't recognize, indicating that your account may have been mixed up with someone else's. Examples include closed accounts that are still represented as open and on-time payments that have been marked as late.

Missing Loan Payments

Missing or making a late payment on a loan is one of the most frequent methods to lower a credit score; even one missed payment will have an impact. A permanent mark will appear on your credit report after three months, depending on how severe the late payment was.

Things will be even harsher should you end up defaulting on the loan, and a default on your record will make it extremely difficult to get approval for any loan.

Declaring Bankruptcy 

Bankruptcy may be your only choice if you're in serious financial trouble, but it will have long-term effects on your finances, particularly your credit score. Lenders will be extremely unwilling to provide you a loan since, similar to a loan default, it indicates that you are a dangerous investment. Click here to learn how to build credit score after bankruptcy.

Large Credit Purchases

Making numerous significant credit purchases at once, which is less drastic but still has an impact, can lower your credit utilization ratio, which is a measurement of how much credit you have access to but are actually using. This will have some effect on your credit score. A higher CU ratio results in a higher credit score.

Multiple Credit Inquiries 

Your score will drop temporarily if you have several hard credit queries. When you apply for a loan, a lender or bank will typically run a hard inquiry, which lowers your credit score. If you apply for numerous loans quickly, this will also have a negative impact on your score.

Situational Bad Credit

Situational bad credit differs from "normal" bad credit in that it is a blip in a credit history that is otherwise excellent. It frequently occurs following a serious illness, divorce, job loss, or other major life event.

You might have a strong credit history and a perfect payment record. Suddenly, everything became chaotic, and you were unable to handle everything at once.

What Can You Do If Your Credit Score Drops?

You can manage it. Life happens. No one intentionally puts themselves in difficult situations. It occurs. What you do next will be used to evaluate you.

You will be treated fairly and favourably if you take charge, get in touch with your creditors, and work out a plan to pay back what you owe. Your credit score and payment history will both improve as a result of timely payments.

You won't be perceived as favourably if you try to disregard the situation by burying your head in the sand. To your detriment, the debt will still exist and continue to earn interest.

One strategy won't stop you from obtaining a bad credit auto loan, while the other can make things more difficult.

Can You Get a Car Loan With Situational Bad Credit?

You can obtain a car loan even with temporary bad credit, so yes!

The procedure is the same as for any other bad credit auto loan application. When you had a good reputation prior to the incident, it is generally simpler.

You shouldn't have any trouble qualifying for a loan as long as you can convince the lender that the crisis is over, that everything is under control, and that you can afford the credit.

Situational or otherwise, bad credit no longer carries the same stigma as it previously did. Nobody will judge you for having it, even though you might not like the notion of having it.

We are all here to help you get the car loan you need and can afford so you can buy the car you want. That’s all we’re interested in!

Hopefully this article answered your question of "why did my credit score drop?". If you have any more questions, please don't hesitate to contact us here.