Knowing These 5 Secrets Will Make Your Credit Score Look Amazing

Credit scores are essential in modern society. These numerical calculations are a direct reflection of your credit reports. Credit scores paint a portrait of how well you manage your finances. Banks, loan providers, mortgagers, landlords, employers, and other credit-based product and service agencies evaluate your scores to determine risk levels, interest rates, monthly payments, and funding amounts. As a result, maintaining a healthy credit score is paramount.

A Changing Credit Score

Knowing the importance of a good credit score and maintaining one are two different things. While striving for a 750 or higher is ideal, several factors cause your score to fluctuate from one day to the next. Although minor changes don’t have much impact, significant dips in your score can prove detrimental. Keeping a high score ultimately means identifying the causes for these fluctuations and making improvements.

Common Reasons Your Credit Score Fluctuates

What causes your credit scores to change regularly? While everyone’s credit situation is different, here are some of the most common causes of credit score fluctuations:

Debt – Any time a person borrows money to pay for a product or service, they accumulate debt. These accounts, in many instances, are reported to one or all of the three major credit bureaus and are monitored from their establishment until they’re closed/settled. The amount of debt, number of accounts, and how these accounts are managed all cause a credit score to increase or decrease.

Credit Inquiries – When a financial institution, company, or service provider wants to evaluate your risk level and financial history, they place an inquiry with a credit bureau. Each inquiry results in a slight decrease in your credit score.

Large Life Purchases – Buying a house, car, or other large-ticket items to sustain a reasonable quality of life often costs more than you can afford to pay yourself. As a result, you use credit cards, lines of credit, or take out loans. When any of these avenues are used, they increase your debt-to-income and credit utilization ratios, causing your credit score to decline.

Payment History – Payment history is another factor that causes fluctuations in a credit score. When you have an open financial account, you are responsible for paying these balances in full and on time. Should you miss a payment or pay less than the minimum required amount, your score drops.

Little-Known Secrets To Maintaining A Healthy Credit Score

Are any of the above factors contributing to a significant drop in your credit scores? Here are a few little-known secrets to help give your scores a boost.

Diversification – The types of credit accounts you have can cause a fluctuation in your credit scores. Individuals with a more diversified portfolio like credit cards, auto loans, and a mortgage, will have a higher score than those with just credit cards accounts. Ultimately, it shows lenders that you know how to manage various types of credit.

Lower Credit Utilization Ratio – Credit utilization or the amount of credit spent compared to the overall amount borrowed is another factor to consider. Keeping this amount under 30% is ideal for a healthy credit score. For instance, if you have a credit card with a $1,000 limit, your balance shouldn’t be more than $300. You can lower your credit utilization ratio by knocking out high-balance accounts with larger payments.

Credit Builder Accounts – A credit builder account enables you to use the money you have to develop a positive financial history and, ultimately, boost your score. Companies like ONE offer credit builder pockets where account holders can set aside money to use for purchases. Every month, money is automatically deducted from the credit builder pocket to make timely payments. Your payment history is reported to credit bureaus, which improves your score over time.

Keep Financial Applications To A Minimum – When applying for a loan or line of credit, be mindful of how many applications you complete. While you want to get a few options, every application results in a hard inquiry, which reduces your credit score.

Make Timely Payments – Payment history accounts for 35% of your credit score. Therefore, you should make timely payments, even if all you can afford is the minimum.

Credit scores say a lot about your level of financial responsibility. As managing money is essential in almost every aspect of life, a poor score could cause a lot of issues. If you’re concerned about large fluctuations in your credit scores, consider the little-known secrets listed above to make improvements and get on top of your finances.


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