Are you frustrated because your credit score dropped suddenly for no apparent reason? Laura answers a listener question and covers 5 lesser-known reasons why credit scores can drop unexpectedly. These tips will help you raise your credit score as quickly as possible.
Reason #5: Your credit mix has changed
While it’s not the most important factor in how your FICO or other credit scores are calculated, having a mix of different types of accounts helps increase your credit scores.
For instance, having revolving accounts, such as a credit card or line of credit, in addition to installment accounts, such as a car loan or mortgage, shows lenders that you can handle different types of credit responsibly.
So, if you just paid off the only installment loan you have, your credit mix looks less diverse to lenders and there’s not much you can do about that. Unless you need to finance a purchase, like a home or car, I don’t recommend taking a loan just for the sake of boosting your credit.
If you maintain good habits, like paying credit cards and utility bills on time, and maintaining low utilization rates, your credit scores will naturally go up over time.
As is often the case, you’ll get the best scores by using credit — as long as you use it wisely.
A final tip is to check your credit report using a free site like Credit Karma to make sure there are no errors dragging down your credit scores. Inaccurate information could be a sign that a lender reported bad data to your file or that you've become the victim of identity theft. Dispute any inaccurate information with the credit bureau right away so it won't hurt your finances.
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