Your credit score is more than just a number: It’s a key to your financial life, opening doors to opportunities and savings. Whether you’re applying for a mortgage, a car loan or even a job, your credit score affects how lenders and employers perceive your financial reliability.
Keeping your score in good shape comes down to the basics: Pay your bills on time, don’t max out your credit lines and don’t apply too often for new credit.
But if you wonder if you’re making the right financial moves to keep your credit score humming, here are some simple answers to frequently asked questions.
I just paid off my loan successfully. Why did my score drop?
The answer is: It depends. Making a financial change – even a good one – can temporarily reduce your score. Here are some factors why it might drop once a loan is paid off:
- Change in credit mix: Credit scoring models react positively to having a mix of credit, such as an auto loan, credit card and personal loan. If your personal loan is your only installment loan, closing it might lower your score slightly.
- Reduced credit history: Having an established credit history is important to your score. So, if your loan is one of your oldest accounts, closing it could shorten the average age of your accounts, which in turn impacts your score.
- Less active credit usage: Paying off a loan means one less account that’s showing a positive payment history, which can cause a small drop.
Will keeping a balance improve my score?
No. This is a myth. Keeping a balance, especially a high balance, hurts your credit utilization ratio, which is the total amount of available credit you have.
I just closed an old credit card account I never used. Why did my score drop?
When you close your account, your credit score drops because it may reduce your average age of accounts and increase your credit utilization ratio, even if you haven’t changed your spending habits. There’s no harm in keeping an old account open unless it has annual fees or a high interest rate. But even if you do close one, your credit score dips temporarily but will bounce back.
Does getting married affect my credit score?
No. You both will always have individual credit scores. But if you apply for joint credit, your spouse’s credit history will affect your ability to borrow.
I check my credit frequently. Will this hurt my score?
No. When you check your own credit score, it’s considered a soft inquiry, so it doesn’t harm your credit score at all. Soft inquiries are just checks performed by you or creditors to pre-approve you for offers and they have no impact on your score. However, when you apply for new credit, you’ll incur a hard inquiry which can temporarily lower your score.
Why is my credit score different for Equifax, Experian and TransUnion?
Each credit bureau gathers information from various sources, including lenders, debt collection agencies and public records. Not all lenders report to all three bureaus, meaning one bureau might have data another doesn't.
Can I improve my credit score quickly?
One of the most effective ways to boost your credit score is to check your credit report for errors and dispute them immediately. Errors on your credit report can range from incorrect payment histories to inaccuracies in your personal information, and they can drag down your score. You are entitled to a free credit report from each of the three major credit bureaus at AnnualCreditReport.com. If you find any discrepancies, file a dispute with the respective bureau. This process can take some time, but correcting errors can lead to a noticeable improvement in your score.
Paying down high credit card balances will improve your credit score dramatically. Aim to keep your utilization rate below 30% if you’re trying to make a rapid improvement.
Avoid late payments. Payment history is one of the most important factors in your credit score, accounting for about 35% of the total. Missing even a single payment can cause your score to drop. By automating your payments, you can avoid the hassle of remembering due dates and ensure that your bills are paid on time.