Your credit score, or FICO score, is a three-digit number that represents a statistical analysis of your creditworthiness. Your credit score is based on the information in your credit report, which is usually sourced from the three major credit bureaus: Experian, Equifax, and Transunion. Since each of the three credit bureaus collects and analyzes information independently, they may give you scores that differ, sometimes widely. But in general, the factors that make your score go down will be the same at all three bureaus.
The information in your credit report reflects your bill-paying history and debt profile. If you are late on a payment by 30, 60, or 90 days, that will be noted in a credit report. If you default on a loan or a credit card, or if a bank has to “charge off” a debt that you incurred, those will be noted on the credit report as well. All of these factors will be analyzed when determining your three digit credit score. Typically, factors that would be analyzed in determining your score would be things like:
- Any late payments (30 days or more)
- Defaults, charge-offs or non-payments
- Your level of debt
- What type of credit accounts you have (i.e., revolving)
- Length of your credit history
- Number of “hard inquiries” on your account
- Whether you have made a lot of credit applications recently.
If you have a history of on-time payments, and you still experience a decline in your credit rating, check to see if any of the following apply to you:
Are you carrying high balances on your credit cards? Your balance-to-limit ratio is weighted heavily in your score – and if you are maxing out your cards, that could be the problem. If you carry forward a balance at all, it’s considered advisable to use less than 75% of your overall available credit.
Did you recently apply for a lot of new cards? Numerous hard inquiries can have a negative impact on your score.