This article is all about 620 credit score. It is essential for you to be aware of it and be aware of the reasons behind it and what can you get with 620 credit score.
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A credit score is a vital part of any borrower's financial status. It not only summarises it but also plays a pivotal role in determining the types of facilities one can get from a lender when the time comes. In short, taking care of it is imperative to secure financial services in the best possible way.
Even though this is a dynamic figure, which moves as per your financial behaviour, in case your credit score dropped for reason, it can be worrisome. In that scenario, it is imperative to understand the reasons behind this sudden lowering of this rating.
So, if you are wondering- why my credit score dropped for no reason, then continue reading below:
Suppose your credit score drops for no reason; one reason that can go unnoticed is the sudden alteration in your credit utilisation ratio. It is the ratio between the amount you owe against the total credit limit.
Ideally, if your credit utilisation is not more than 30% (for instance: spending less than 300 AED on a limit of 1,000 AED), you can expect your credit score to remain in a good position. But on the contrary, an increase in credit utilisation can bring down your credit score.
Since the financial institutions hold the discretion of deciding the credit limit, an extension in this regard will be a win-win situation because a sudden increase in your credit limit will reduce your credit utilisation ratio. On the other hand, a decrease in the credit limit will have a contrary effect as your credit utilisation ratio will go up.
So, the next time you see your credit score dropped for no reason, check if your total credit card limit has been decreased.
When you apply for a loan or a credit card issuance, the financial institutions will go through your credit report. In order to do that, they will place a request with the credit rating agency to access your credit report.
This process is commonly known as "hard inquiry", where the lender cross-examines your credit report to decide whether to extend the financial services to you or not.
Since this process can bring down your credit score temporarily, it can be a reason why your credit score dropped for no reason.
When you close one of your old credit cards, your credit score will go down suddenly. The reason behind this is that you lose a significant credit history that helped you build this score, and now with that out of the picture, it will bring down the score. However, it does not leave any negative reflection on your credit history, which is a bonus.
In case of any mistakes while updating your credit report can also lead to a reduction in your credit score. This can be a simple misplaced entry or not updating certain transactions. So, it is ideal for you as a borrower to check your credit report regularly, and if you spot any mistakes, notify the same to the credit bureau and get it resolved.
If you are wondering why my credit score dropped for no reason, you might need to go through your previous transactions thoroughly.
Did you fall behind with any of your bills in the previous months? Were there any credit card payments that you might have missed?
In the UAE, the missed payments are not reported to AECB before it is delayed by 30 days. So, before 30 days, you don't have to worry about your credit score. After 30 days, the missed payment is reported to the credit bureau, which slightly pulls down the credit score. But, if the payment is delayed over 30 days, your credit score will suffer a significant reduction.
Circumstances like- bankruptcy and foreclosure also negatively affect your credit score to a great extent. Moreover, it takes time for such circumstances to appear on the credit report. For such cases, you must wait for a while before your score changes again.
You don't have to worry a lot about changing credit scores, but monitoring your credit reports from time to time is good to stay aware of every change that might occur. After all, with every change in the credit score, some information is being changed. So, if you feel that your credit score dropped for no reason to a great extent, it is better to know what caused it and fix it for your own benefit.
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