Your credit score is a three-digit number that helps banks and financial institutions examine your credit history. It assures them that there is no risk when lending money to you. Your credit score is decided based on your economic activities and responses collected and compiled by the three distinguished credit bureaus, which include TransUnion, Experian, and Equifax. There are a few factors that can drop your credit score.

Factors that can affect your credit score

• Payment history
  It is no surprise that clearing your dues in time, particularly on the existing credit card, can have a significant implication on your credit score. Most credit-scoring models, including FICO, regard this as the prime factor for determining your credit score. It, alone, makes 35% of your total credit score. Payment history includes information on car loans, home mortgage, cell phone payments, student loans, medical bills, bank payments, and store credit account. Though one missed payment will not hamper your score much, you may soon have to regret it if you make it a habit. Increasing your lowered credit score due to late payments can be one of the biggest challenges.
• Credit usage
  Another vital factor that can drop your credit score is your credit usage. It accounts for 30% of your score. In this, your credit utilization rate will be taken into account. It is the ratio between the total amount owed by you and your total credit limit on all your revolving accounts. If you exceed your credit card’s limit or do not repay your card’s balance, it can increase your utilization rate and lower your credit score. Know that as much as maintaining an overall credit utilization is necessary, the utilization of individual credit cards matters as much. If you have too many accounts with unpaid balances, lenders might see you as a defaulting customer. So, that means you can pay the full amount on the due date and still have a high utilization rate. Thus, it is better to keep lesser accounts with as low unpaid balances at all times. You can do this by making early payments, if possible.
• Opening several new accounts
  The credit age accounts for 15% of your total credit score. Interestingly, not only the age of your oldest account is considered but also the average age for all the accounts matters. So, naturally, having an older credit age would mean a better credit score. Thus, if you close your old accounts and open newer accounts, you will naturally drop your credit score.
• Credit inquiries
  Anytime you furnish an application to the bank, which would require a credit check, an inquiry appears on your credit score. It accounts for 10% of your credit score, so the score will certainly fall if you make too many applications.