Home › Questions › Credit Score › Why is my credit score going down when I pay on time?
- This topic has 1 reply, 1 voice, and was last updated 4 months ago by Kikoff.
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July 10, 2024 at 10:06 pm #441KikoffKeymasterJuly 10, 2024 at 10:52 pm #476KikoffKeymaster
Even if you’re making credit card payments on time every month, there are still some ways your credit score may dip.
- Payment History
Your payment history makes up about 35% of your credit score and includes your record of paying bills on time. So even if you’re paying off your credit card every month, missing another bill payment can still reduce your score.
- Credit Utilization
Credit utilization means how much credit you’re using compared to your total credit limit. You want to keep your utilization ratio below 30% to show that you’re not pushing your finances to the limit.
- Length of Credit History
The length of your credit history contributes around 15% to your credit score. A longer credit history generally boosts your score, and a brand-new credit account might do the opposite.
- New Credit Inquiries
Applying for new credit will result in a “hard inquiry” on your report, which can lower your credit score temporarily. Multiple inquiries within a short period can have a big impact on your score, even if you’ve been paying on time.
- Credit Mix
A diverse credit mix, including credit cards, installment loans, and mortgage loans, for example, can benefit your credit score. It shows that you can manage different types of credit responsibly. So if you pay off a loan, it might mean your credit mix looks less balanced.
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