What to Do if Your Credit Score Drops

With the ease of services like Credit Karma and Credit Sesame, it’s easier than ever to go online to check your credit score. Fluctuations of a few points …

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With the ease of services like Credit Karma and Credit Sesame, it’s easier than ever to go online to check your credit score. Fluctuations of a few points up or down, say, from 720 to 725, or 680 to 670, are normal, but a sudden massive drop of 30 or more points could be cause for concern. What do you do if you find your credit score has dropped drastically overnight?

First, you have to figure out why your score dropped so you can figure out what to do.There are only three factors that can cause a sudden decrease in your credit score: you didn’t pay your bills, you’re using too much credit, or there’s a security issue. That’s according to Adam Levin, a cybersecurity expert who spoke at CardCon, a conference about the credit card industry that I attended last week.

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Let’s break down each one of those potential culprits so you know what to do if you check your credit score online only to find it far lower than you anticipated.

You didn’t pay your bills

Check your inbox and that pile of mail on the kitchen table for any unpaid bills that may have slipped past.

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Since credit card issuers, lenders and other companies report your payment status to the credit bureaus monthly, you often have a little leeway with a late bill before it hurts you. But any late payment beyond 30 days is fair game to show up on your credit report. Your credit report will not show your score, but it shows all of the information that’s used to calculate that score, including seriously delinquent bills.

If you haven’t used up your three free passes for the year (one from each of the three major credit bureaus), go to AnnualCreditReport.com to pull a fresh one. If the culprit of your score drop is unpaid debt, you’ll see it on the payment record for the account in question.

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If you’ve used up your freebies, a free credit monitoring service will note whether your accounts are in good standing.

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What to do: If one of your financial accounts is showing up delinquent when you swear you paid the bill, check with that lender or utility to check your status. If that’s all clear, you can dispute the error on your credit report. If you truly didn’t pay your bills, it’s time to get caught up ASAP. You may see an instant boost to your score by a few points as soon as the lender reports that you’ve paid up, but it could take several months before your score fully recovers.

You’re using too much credit

The second-biggest chunk of your credit score, after your payment history, comes from credit utilization, or how much debt you have. If your ratio of credit used (balances on credit cards, for example) to credit available (what the limit is for all your cards put together) is too high, your credit score will drop. Experts say to keep your utilization below 30%, and the lower that ratio is, the better your score will be.

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If you recently put a large purchase on a credit card or recently took out a new loan, you’re likely to see your score drop.

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What to do: As you pay your balances down, your score will go back up. If you can pay off large balances in full, that’ll provide the fastest boost to your score and you’ll see that change within three months (delinquencies often show on your credit report faster than paid loans).

When you pay off a credit card, don’t close it! Having that credit available makes you look very attractive to future lenders, and the lower your utilization is, the stronger your score will be.

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There’s a security issue

Go back to that credit report you pulled. See anything unusual? An account you don’t remember opening, or a credit card bill that seems unusually high? You may be the victim of identity theft.

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What to do: First, call the credit card company or other lender to report the fraud or theft. You’ll want to place fraud alerts on all your other financial accounts. You should file a police report, contact the Social Security Administration and the IRS to report suspected identity theft, and file a police report.

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Getting everything straightened out and back to normal will likely take months, so buckle in for a frustrating ride. In the meantime and long after the problem has been fixed, you’ll need to be vigilant, monitoring each of your financial accounts for delayed fraud activity.

If everything looks legit on your credit report, take a moment to make sure your identity and credit are protected from fraudsters by freezing your credit with each credit bureau—it’s free!—to make sure no one opens new credit accounts in your name, and by setting up security alerts with each of your credit card issuers. It may seem like the most boring task now, but it can give you major peace of mind in a world ripe with data breaches.

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You’ll have to unfreeze that credit whenever you want to make a big purchase with new credit, and freezing doesn’t prevent criminals from stealing your current credit card info. For that, see if your card issuer allows you to lock your card, which you can do as often as you wish online or through your card’s app. Doing so prevents anyone—including you!—from making purchases on your card unless you unlock it.

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What credit score do you need to qualify for popular rewards credit cards like the Chase Sapphire …

Credit Karma can be a good tool in this research — when you look up a card on its website, you’ll see that many reader reviews include their credit …

If you’re new to rewards credit cards, you may wonder whether your credit score is sufficient to obtain the card you want. And it’s a good question — after all, many of these cards are aimed at luxury travelers.

You might expect all rewards cards to require a high credit score, but not all do. Every card issuer has its own underwriting criteria, which isn’t based strictly on credit score. Other factors can include employment, income, and any existing relationship with the bank.

What credit card issuers look at in your application

Although no banks make their underwriting criteria public (in fact, banks consider this a trade secret), consumers are free to report their experiences applying for credit cards. Online forums (such as /r/churning on Reddit) contain hundreds of posts with anecdotal information.

Keep in mind that this is “anecdata.” Underwriting criteria for the banks can change at any time, and general criteria may not apply to your specific situation. For example, it’s not unusual for banks to tighten lending requirements in a slowing economy, or to have tighter lending criteria for people working in historically volatile industries. Remember that the bank is ultimately making a calculation about risk, and specifically how high of a risk you will be.

Read more: The best credit card sign-up bonuses available now

How to determine what credit score you’ll need to open a credit card

You won’t find one definitive answer to what credit score you need to open a given card like the Chase Sapphire Preferred. Instead, you can get a sense of the range of scores of successful applicants.

Credit Karma can be a good tool in this research — when you look up a card on its website, you’ll see that many reader reviews include their credit score at the time of their application

Here are the five categories of credit score according to FICO:

  • Poor: 300-579
  • Fair: 580-669
  • Good: 670-739
  • Very good: 740-799
  • Excellent: 800-850

Chase Sapphire Preferred

Credit score of successful applicants, as reported on Credit Karma: High 600s to 850

What’s a good consolation prize if you have great credit, but won’t qualify for the premium Chase Sapphire Reserve? The Chase Sapphire Preferred, which comes with many of the same excellent benefits and a higher sign-up bonus than the Chase Sapphire Reserve: 60,000 Chase points after you spend $4,000 in the first three months vs. 50,000 points with the same spending requirement.

The Sapphire Preferred has a minimum $5,000 credit line. Although a credit score of 720 or above is typical for successful applicants, the underwriting criteria are more relaxed than for the Chase Sapphire Reserve, and even college students with income from a part-time job have been approved for this card. You must fall under the strict Chase 5/24 requirements to obtain this card — that means you can’t have opened more than five new credit card accounts in the last 24 months.

Our verdict: If you fall under the 5/24 requirement, the Chase Sapphire Preferred is one of the best travel cards to put in your wallet.

Click here to learn more about the Chase Sapphire Preferred from our partner The Points Guy.

Read more: Chase’s 5/24 rule — what it is, and what it means for your credit card applications

Chase Sapphire Reserve

Credit score of successful applicants, as reported on Credit Karma: Low 700s to 850

Chase is a notoriously strict card issuer, but for the Chase Sapphire Reserve, it really takes it to the next level. This card is a Visa Infinite card, with a credit line minimum of $10,000.

You’ll need an excellent credit score (typically above 720) to qualify for this card, along with a sufficient income to service an account with this large a credit line. You also must meet the infamous Chase 5/24 rule.

Should you apply if you don’t meet these criteria? Maybe. The best way to apply is with a Chase banker in a branch, who can work to understand your personal financial situation and advocate for you with underwriting.

Another option is to apply for the Chase Sapphire Preferred (which is easier to get) and ask to upgrade after the first year. This is often possible.

Our verdict: If you have a high income, a high credit score, and fall under 5/24, this is one of the best cards to put in your wallet. It’s hard to get, and worth keeping if you do!

Click here to learn more about the Chase Sapphire Reserve from our partner The Points Guy.

Read more: Chase Sapphire Preferred vs. Chase Sapphire Reserve

Capital One Venture Rewards card

Credit score of successful applicants, as reported on Credit Karma: Mid 700s to 850 (but very few data points)

Unlike most card issuers, Capital One provides detailed information on credit quality required to open its cards. And yes, we did say credit quality; it isn’t looking just at your credit score, but how you use credit.

To Capital One, “excellent” means: “I’ve never declared bankruptcy or defaulted on a loan; I haven’t been more than 60 days late on any credit card, medical bill, or loan in the last year; I’ve had a loan or credit card for 3 years or more with a credit limit above $5,000.”

The Capital One Venture earns 2x miles on all purchases, plus 10x miles on paid hotel bookings made at hotels.com/Venture. You can redeem miles to offset travel purchases on your statement, or transfer them to airline partners like Air Canada and Etihad.

Our verdict: Capital One makes its underwriting criteria clearer than most issuers. We recommend not applying unless you meet these requirements.

Click here to learn more about the Capital One Venture from our partner The Points Guy.

American Express cards

Although American Express is perceived as an issuer with tough underwriting criteria, some online forums disagree: As long as you’re currently in good financial shape, it’s believed to be relatively easier to get an American Express card than other cards.

That being said, not all Amex cards follow the same underwriting criteria. It’s generally harder to get approved for cards like the Platinum Card® from American Express that have higher credit lines. Meanwhile, even college students (with no adverse credit history) have reported being approved (with a low credit line) for lower-tier Delta cobranded cards like the Gold Delta SkyMiles® Credit Card from American Express.

Our verdict: If you have terrible credit, you probably won’t be approved for an American Express card. But you might be approved (albeit with a low credit line) if your credit isn’t perfect, especially if your recent credit history is good and your income and employment meet the criteria.

Alaska Airlines Visa Signature credit card

Bank of America has an unusual approach to the Alaska Airlines Visa card. It has a Visa Signature version of the card, which has a minimum credit line of $5,000. It also has a Platinum Plus version, which has slightly different card benefits and a credit line below $5,000.

When you apply for the Alaska Airlines Visa, your application will be evaluated against the criteria for both cards —meaning that if you don’t qualify for the higher credit line of the Visa Signature card, you could still be approved for the Platinum Plus card.

The sign-up bonus and companion fare offer used to be different for both cards, disappointing many applicants. Fortunately, this has now changed and you’ll receive the welcome bonus you expect (and the companion fare you expect) if you’re approved for either credit card.

Bank of America is relatively lenient when it comes to approval for the Platinum Plus card, offering this card even to people with limited credit history. Accordingly, this may be one of the easier travel rewards credit cards to get.

Our Verdict: One of the easiest rewards cards to get, and one of the best airline programs in which to bank points. What’s not to like?

More credit card coverage

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Unexpected Growth Seen in Credit Scores, Credit Reports & Credit Check Services Market Global …

Experian, Equifax, Trans Union, Identity Guard, IdentityForce, PrivacyGuard, Credit Sesame, MyFICO, Credit Karma, and others. Company analysis …

Research N Reports offers a detailed analysis of market performance and validates every aspect based on interviews and extensive research. Numerical data backed by supportive graphs makes the report easy to understand and offers an all-round approach. Market drivers are discussed in detailed therein to offer a complete understanding of factors that have a ‘cause-effect’ relationship on the market. Market trends are discussed wherein the segments are covered within a broader scope and backed by relevant figures that fulfills the client’s buying objectives.

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Credit Scores, Credit Reports & Credit Check Services Marketreport is a blend of statistical figures, facts and data that are derived out of extensive research by a bunch of professional analysts. The report contains chapter wise content on every aspect of the market offering a comprehensive analysis. Data analytics and data mining techniques have been adhered to, so that the clients can form a subtle opinion prior heading for a detailed market report.

Key Players:

Experian, Equifax, Trans Union, Identity Guard, IdentityForce, PrivacyGuard, Credit Sesame, MyFICO, Credit Karma, and others.

Company analysis, leading segments, trends, drivers, restraints, opportunities, CAGR and growth factors for trends have been discussed therein. The report offers a holistic approach to assist the clients with up-to-date market research for Credit Scores, Credit Reports & Credit Check Services market. This report will surely allow you to stay ahead in the competition and derive insightful data that will benefit your business in the long run. Suitable examples, figures, and charts have also been adhered for logical analysis with supportive numbers. Strategic analysis of key vendors and the part performance have also been considered as a part of primary research to have a close watch on the market.

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How to improve your credit score for loan applications

You can use an online credit reference agency such as Equifax, Experian or Credit Karma to check your credit file for free. On your credit file, you will …

Applying for loans can be stressful, especially if you have a low credit score. Whether you’re applying for car finance, a mortgage, credit card, personal loan or any other type of credit, you’ll usually need a good credit score to be accepted for a loan.

If you’ve ever been refused car finance in the past or any other type of loan, you’ll know how disheartening it can be. Your best chance of being accepted for different types of loans is to increase your credit score. There are a few easy ways in which you can increase your credit score.

Check your credit file

The first thing you should do before you apply for any sort of loan is check your credit file. Before you can start rebuilding your credit score you should know where you stand. It can also be surprising if you don’t know how good or bad your credit is. You can use an online credit reference agency such as Equifax, Experian or Credit Karma to check your credit file for free.

On your credit file, you will get access to a credit score, personal details, a list of your credit accounts, any financial partners, public record information such as County Court Judgements, electoral roll information and previous/current addresses. All of this information can be viewed by yourself and is sometimes available to some potential lenders, depending on the type of search they provide on your credit file.

Improve your credit score

Register on the electoral roll

Many people don’t know that this is an easy way to increase your credit score. In the UK, the electoral roll is an official list of people in a certain area who are entitled to vote in an election. Even if you don’t care about voting, being registered on the electoral roll can increase your credit score. This information is provided on your credit file and lenders use this info to very that you are who you say you are and your current address. Lenders tend to favour people who don’t move around as much so this can strengthen your applications.

Pay all your bills on time

This may seem simple, but it can be quite hard if you have had trouble in the past making repayments on time. However, even a few months’ worth off meeting all your financial deadlines can increase your credit score. Your credit score is all about future predictions, so showing evidence to potential lenders that you are a responsible borrower can work in your favour. If you struggle making repayments, why not set up direct debits for the day after you get paid or use payment reminders on your phone or calendar? You should also try to make your payments in full as making the minimum payment requested on credit cards or store cards may indicate to lenders that you are struggling to handle your current credit.

Check your file for mistakes

As mentioned, the first thing you should do is check your credit file. When you check your file, you should make sure all your information listed is accurate and up to date. Even an incorrect address history or spelling mistake can affect your credit score. You should also look for any fraudulent activity. If you suspect any fraudulent activity, you should contact your credit reference agency as soon as possible. Your identity could be used to build up debt which you will be liable for. You should also ask the credit reference agency to make a note of any corrections on your credit file to make it clear that the activity was not your fault.

Check for any financial partners

You can take out joint credit with other trusted partners to strengthen your credit applications. For example, many people who are search for bad credit car finance many be worried about being accepted so providing a joint application can increase your chances of being approved. If you have taken out credit in the past with someone as a joint application, you may still be financially linked. If you no longer have an open application with someone else, it’s best to disassociate yourself. If your financial partner has credit difficulties, this can also drag your score down too. You should contact the credit reference agency to make a note of the dissociations on your credit file.

Keep your credit utilisation low

When you take out credit, you will have a credit utilisation which is the amount of available credit which you actually use. For example, if your available credit is £1,000 and you’ve used £500, this means your credit utilisation ration is 50% Usually using less of your available credit can be seen a positive thing to lenders. As a general rule of thumb, you should only use around 30% of your available credit. This indicates to lenders that you are responsible with the money you have borrowed.

Don’t make multiple credit applications

When you apply for any sort of credit, potential lenders will usually check your credit file. If you are shopping around for the best loans, it’s best to stick to companies who only provide a soft search on your file. A soft search is recorded on your credit file but won’t affect your credit score and isn’t visible to lenders. A hard search however is recorded on your credit file so lenders will be able to see when you have been declined for credit. Multiple hard searched in a short space of time can lower your credit score and affect your chances of being approved for loans.

Consider a credit building card

If you have a low credit score because you have no credit history, you could consider a credit building card. A credit building card is designed for people who have little or no credit and can also help people with bad credit. You can use these cards to make a few payments each month and then pay them back on time and in full, this can provide strong evidence that you are able to make your repayments. However, you should only consider a credit building card if you are confident you can make your payments on time. Never take out a credit building card if you are unsure about repayments as this may result in more debt if you can’t keep on top of your payments.

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How is Technology Enhancing Lending Efficiency?

Now that the economic landscape is entering a new realm of future development and competition continues to grow with financial technology firms …

By Banking CIO Outlook | Thursday, September 12, 2019

Digitalizing lending information and workflow bolster efficiency and lower bottlenecks, driving bankers towards quality and transparency.

FERMONT, CA: The transformation of bank operations and core platforms has been palpable over the past decade, providing the foundation for the banking and financial services industry. The economic downturn that sparked newly enforced regulations caused banks to shift their focus from making strategic investments to compliance adherence and reporting tactical investments. Now that the economic landscape is entering a new realm of future development and competition continues to grow with financial technology firms coming to the forefront, banks of all sizes hone their value proposition, supplied to their customers. Leading banks embrace the revolution in digital lending, bringing down “time to yes” to five minutes, and cash time to less than 24 hours. Credit is at the core of most customer relationships and digitizing it offers both banks and customers significant advantages.

Digitization becomes the norm for processes of retail lending. Applications for a personal loan can now be submitted on mobile phone with a few swipes, and time to cash can be as short as a couple of minutes. Overall, giant leaps are changing the finance market. New players are entering the market with aggregators and comparison portals, thus turning loans into products with increased transparency. Also, new regulatory guidelines enhance competition among banks and enable specialized service providers to push into the banks’ value chain. Here are a few principles that banks use to create potential outcomes with digital lending and transform their organizations.

Rearchitecting Lending Proceedings

The need for a revolution in the lending process requires full digitalization and comprehensive automation. Digital channels meet the demand for convenience and ongoing availability of customers. At the same time, they offer new growth opportunities to banks. Digital channels meet the need for clients’ comfort and continuous accessibility. They provide banks with fresh possibilities for development as well. Digital paperless processes enable effective processing. Automated processing is possible with standardized process steps or process chains. The entire lending business also remains highly regulated, however, and is subject to various regulatory and legal requirements. Interestingly, the new revolutionary technical possibilities also provide the impetus for expanding or adjusting this legal framework.

Consumer Centric-Approach

The rise of digitalization has given way to online lending software. These platforms are constructed with a consumer-centric approach. Consumers can register and begin applying for loans on the platform. Debtors can easily submit records, verify their own credit scores, and also monitor the status of loans with a loan management scheme. In essence, the digital lending platform automates the process and ensures borrowers’ adherence. The digital lending platform monitors and encourages borrowers to submit required documents and track credit processing times quickly.

Analytics in Digitalizing Data

One of the limitations in the lending system is that between lenders and underwriters or analysts, calculations and analysis can vary. This can result in unreliable estimates, credit, and reporting choices. A digital lending solution, particularly the one integrated into a digital banking platform, can more rapidly evaluate, decide, and price each loan. At the same time, once the digital lending data is generated, the banks and credit unions can better utilize those data insights which help them better understand portfolio risk and create strategic choices.

Customer Experience

The leaders of the finance industry are prompt to understand the demands of their customers. Consumers are looking to work with ease and comfort. The best financial institutions are keen to leverage digital solutions to improve their customer experience and provide them with the best solutions.

Ultimately, digitalizing lending increases the experience of the client or member in various respects by accelerating the process and growing transparency. It also makes the financial institution more productive, which can translate into better earnings or more resources for service improvement or charges and tariffs. Lastly, digital lending provides financial institutions the capacity to continue to develop their portfolios without adding or rising personnel levels.

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