Yahoo Finance 3 Red Flags That Indicate Your Credit Score Is Going To Drop
Your credit score affects everything from your ability to borrow money to renting an apartment to getting insurance. But keeping up with all the factors that impact your score can be a daunting task. Miss one, and you could see your score drop.
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Charging Large Purchases
Charging large purchases is one of the biggest indicators that your credit score may see a decrease.
“You should aim to keep your credit utilization below 30%; any higher than that can decrease your credit score,”‘ according to Time’s Stamped blog.
While it may seem appealing to use a credit card for expensive purchases when you don’t have cash, this decision can harm you in the long run.
Using apps such as Experian can help you track your credit utilization and manage how many purchases you are charging to your credit card.
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Late or Missed Payments
Another red flag that your score is about to drop is that you recently paid a bill late or skipped a payment altogether.
“Late payments typically appear on credit reports when an account is 30 days or more past due,” according to Capital One. The derogatory information can stay on your credit report for seven years, although the impact on your credit score lessens in time.
It’s essential that you put aside enough funds to make at least the minimum payments on your credit cards each month. If you’re prone to forgetting to pay, set reminders for yourself, or put your accounts on autopay.
Canceling a Credit Card
If you had more credit cards than you needed, you might’ve canceled one you weren’t using. This is a potential red flag that your score is about to drop.
Your credit score is based in part on the average age of your credit accounts, according to Capital One. Closing an older card could reduce that average and cause your score to drop.
Canceling cards also reduces the amount of credit you have available — which, in turn, increases your utilization rate, which has a negative impact on your credit score.
If you feel like you really need to cancel a card in the future, eliminate a newer one or one with a low credit limit.
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This article originally appeared on GOBankingRates.com: 3 Red Flags That Indicate Your Credit Score Is Going To Drop
