Why Did my Credit Score Drop? Reasons for Sudden Bad Credit

Why Did my Credit Score Drop? Reasons for Sudden Bad Credit

Posted by on Nov 30, 2022 - Archived under Uncategorized

Have you noticed a slump in your credit score recently? A low credit score can cause you some serious financial issues, which is why you should start working to fix it. However, in Order to fix a problem you need to know its source, so in this article we’re going over some usual suspects.


We’re going to help answer the question “why did my credit score drop?”. Our auto loan team explains.


Errors on Your Report


One of the first things to look for why your credit score dropped is an error on your report, they’re more common than you might think and they can have a big negative impact depending on the error.’


common errors on a credit report


Order a credit report and scan it for anything out of place. Closed accounts that are still marked as open, on time payments that have been marked as late, in serious cases there could be entire accounts that you don’t recognize, meaning your account may have been mixed up with someone else’s.


Missing Loan Payments


One of the most common things to drive down a credit score is a missing or late loan payment, even just one missed payment will leave its mark on your credit score. There is a scale of severity depending on how late the payment is, after 3 months it will become a permanent mark on your credit report.


what happens if you miss more than one car payment


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 


When your in extreme financial peril bankruptcy may be your only option, however it will have long term impacts on your financial situation, especially your credit score. Like a loan default it signifies to lenders you’re a risky investment and they’ll be very hesitant to give you a loan.


Large Credit Purchases


For something less extreme but still impactful, making a large credit purchase or several credit purchases at once can have some impact on your credit score because it will decrease your Credit Utilization Ratio, which is a calculation of how much credit you’re using, be it how much you have access to use. Having a larger CU ratio makes for a better credit score.


Credit Utilization Rate Experian


Multiple Credit Inquiries 


Having multiple hard credit inquiries will have a temporary negative effect on your score. A hard inquiry is when a lender or bank checks on your credit report which they’ll usually do when you apply for a loan, so if you apply for several loans over a short period, it will have a negative effect on your score.


Situational Bad Credit


Situational bad credit is different to ‘standard’ bad credit in that it’s a blip in an otherwise exemplary credit history. It happens a lot after serious illness, after divorce, after being made redundant or another life-altering situation.


You may have a spotless payment history and a high credit score. Then, the situation hit, everything went crazy and you were unable to manage everything at once.



What Can You Do If Your Credit Score Drops?


You can deal with it. Life happens. People get into situations through no fault of their own. It happens. What you will be judged on is what you do next.


If you take control, contact lenders and work something out to repay what you owe, you will be judged fairly and positively. Paying on time will help rebuild your payment history and your credit score, which will be to your benefit.


how credit score is calculated


If you bury your head in the sand and try to ignore the situation, you won’t be viewed quite as positively. The debt will still be there and will still accrue interest, which is to your detriment.


One approach will definitely not prevent you from getting a bad credit car loan while the other may make life harder.


Can You Get a Car Loan With Situational Bad Credit?


Yes, you can get a car loan with situational bad credit!


The process is exactly the same as applying for any bad credit car loan. For the most part, it is often easier as you had a positive record before the situation happened.


As long as you can demonstrate to the lender that the situation has passed, that you have everything under control and that you can afford the loan, you should have no trouble qualifying for one.


Bad credit, situational or otherwise, doesn’t have the stigma it once did. While you may not like the idea of having it, nobody is going to judge you for 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.

Dixie Auto Loans