7 Common Reasons Why Your Credit Score Went Down (PT. 2)

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Video Transcript:

hey dreamers and welcome back to my channel we talk about all things money why so you can use money as a tool to build a life that you actually want to live in this video we're going to be continuing a list yes that's the word a list that we actually started on Wednesday and the list is all about seven common reasons of why your credit score dropped even though you're doing all of the right things and know there's a mistake in your credit report did not make this list because it's so obvious that there was no point in even covering it I'm just saying if you have not actually seen the first part of this video I highly encourage you to go and check that out because it's a good video like seriously it's a good video and it's information that you definitely want to know so that you can manage your expectations and manage your behaviors so you're looking out for these things because you don't want to be like why is my credit score dropping I don't know what to do about it some of these things you can do something about especially the things that we covered in the first video so go check it out now if you're wondering who in the world I am like why am I talking about this and why you're still listening to me my name is kenabeek lewis and i'm a financial lifestyle coach with my labor of love seal off financial coaching which that means is that I've dedicated my life to helping women entrepreneurs to use money as a tool to build a life they want to live so we're gonna increase the money in your business we're gonna use the money from your business to accomplish the things you want to accomplish in life it's really that simple so that's what we're here that's what my goal is and we're going to do this by talking about credit scores and reasons why your credit goes to credit score dropped in this very video how am i starting the video tongue-tied guys guys now before we can dive into all the goodness of the rest of this list I want you guys to go ahead and like this video because YouTube likes likes and so do I but I also want you to subscribe to this channel now make sure you hit the bell because if you don't hit the bell you won't get notified when I drop new content every Wednesday and Saturday and trust and believe you want these tip tricks and strategies for how to use money okay because well I've done it let's just put it that way I've done it so you want these tips these tricks and these strategies so hit that big red button hit the bell and now okay we can get back with the list let's go let's move on to reason number four of why your credit score may have gone down when you're doing the right things it could be as simple as a credit card company has closed an account that you're not using let's say you're one of those people that you had three or four credit cards you've been paying them off using a debt snowball and you have one last credit card that you have open or you have one last credit card that you decided you're gonna keep and that's the one you're going to actively use well those other two three four credit cards that you previously were using are now inactive you're not paying for debts on them you're not doing anything with them like it's just sitting there well one of the things that actually can happen is that a credit card company might look and see that there's no activity on these cards and decide to close it many of us don't realize that the credit card company has the right to increase the credit limit decrease the credit limit or straight-up shut down the account for pretty much any reason that they want to and if you're not using the card that is definitely a reason of why they might decide they're going to completely closed that credit card so here's the thing that means you have to keep your eyes open and be paying attention for whatever mail that they send you because more often than not they're not gonna send you an email you're not gonna get a text message you're not gonna get some nice easy to find notification you're gonna get a piece of mail like snail mail and that snail mail you have to read it and understand what they're saying because they're going to tell you through the mail that they've closed the account but if you're like so many Americans nowadays who doesn't read their mail they might glance at it say oh Captain America toss Bank of America throw it away if you're one of those people you run the risk of not getting vital information such as your cards been closed and the reason why this will drop your credit score in a lot of instances is because it's jacked with your credit utilization you originally had $15,000 available now has gone to ten but you have a $5,000 balance so your credit utilization went from 33% to 50% and one fell swoop if you're not reading your mail from your credit card companies you don't even know they've closed the account and so now you're functioning thinking your credit utilization is low when it's actually gone up quite a bit so this is my recommendation to you read your mail when you see your credit card companies send you something in the mail I know most of the time they're trying to get you to buy something else but make sure you at least read it quickly to understand what's going on that way if something like that happened you know that it's going on and you know immediately how to start making some adjustments to account for the fact that they've now closed this account now reason number five is one of those ones that a lot of people have no clue about and I find it rather fascinating so it's something called scorecard Hoppe and you're like okay what's the scorecard and why are you hopping then I got you so a scorecard is basically how credit reporting bureaus group together people that have similar risk so a risk would be something like bankruptcy that puts you in a certain kind of risk so that's gonna put you on like you know one of those bankruptcy score cards or if you're someone who tends to have a very high crate utilization that's another set of score cards if you have say a mortgage that might be another set of score card so they have a bunch of different score cards then they use to lump together people that have similar types of risk well what happens is that as your life changes as things change for you you might jump from one score card to another so let's say for example that there was a derogatory account that you managed to get settled and it's over like it's done with and maybe you even gotten those who agree to completely remove it from your credit report well once that's removed removed from your credit report now you're going to hop to another score card another prime example are people who are in bankruptcy typically if you were in bankruptcy once your bankruptcy is over you've you know finished it out you all hop from the bankruptcy scorecard to another scorecard well when you hop from one score to another you're being evaluated against other people in that scorecard and because of that it's going to mess with your credit score so even though good things may have happened on your credit report it actually can drop your credit score because now if switch you in a new score card and frankly it sucks but there's nothing you can do about it so that's one of the things that could be going on you may not have done a single thing like you might not have had in a single stet you've continued to pay your debt like you normally have you have not changed your behavior at all but simply because something fell off of your credit report you didn't hop from one score card to another and because you're being compared to other people now your credit your credit score has gone down a little bit because you look a little different I know I'm sorry but it is what it is all right so we're down to the final two common reasons of why your credit score may have changed even though you're doing all the right things number six is that the credit reporting agency may have simply changed the FICO formula that they're using to calculate credit scores if you remember from the last video the last episode you heard we talked about the fact that um that there's different formulas for the credit score I know I'm getting really tongue-tied all of a sudden I don't know what's going on but there are different formulas for the FICO score so right now they've recently released a FICO 10 but these different institutions these credit reporting agencies they get to choose which a formula they get to use and so one might be on a FICO 7 another might be on FICO 4 and one might be on FICO 9 but then they might have made the decision you know what we're gonna change from FICO 7 and we're going to make that jump all the way to FICO 10 well FICO 10 is calculated differently from FICO 7 for example FICO 10 as in a new an obit to the formula around how you are behaving like they actually are taking into account your behavior trends so like if you're a person who you put everything on a credit card and then you paid off every month that's actually a different trend and that trend is going to be treated a little in the calculation than people who just you know they paid up and then like once a year they pay the whole thing off at their taxes that's actually different trends and those are going to be approached and viewed in different ways so if they change from FICO seven to FICO ten your credit score might have changed simply because they've added in this trending data as part of the new formula again that's something that you cannot control but it's something that you have to be cognizant of so your credit score may not have your credit report may not have changed at all but simply because they have changed the formula that they're using to calculate your credit score can mean that your credit score will go down okay I have one more thing and again it's something that you can't really control but it is a common reason as to why someone's credit score can go down when they're doing all the right things so there may have been an account on your credit report that was a very positive account like you always paid it on time you never had any many missed payments no late payments and you paid it as agreed you might have even paid it off a little bit early so it was marked as you know paid in full it was marked as you know paid as agreed or whatever one of those really really good indicators well after a certain amount of time once an akai has been closed it only stays on your credit report for anywhere from seven to ten years typically at seven years with some things might fluctuate so it could be 7 to 10 years that it'll say on your credit report well it may have been eight years since you paid that thing off and now it's fallen off of your credit report well if there was a time where say there was like this two-year period where you were struggling really badly between the time that account was closed and now and you were missing payments you had late payments well you no longer have that positive account to offset those missed payments those late payments during that temporary season so because you've now lost that really positive account on your credit report it ends up making your credit score and go lower because you don't have that to offset the bad things again that's something you can't really control there's not anything that you can do about it it's just something you have to be cognizant of so just understand look at your credit report so maybe you might to see your credit report now and you compare it to a credit report that you pulled like two years ago and you'll see that there's an account missing that used to be really really good and that's how you know that okay part of the reason why my credit score changed is simply because this really positive really good-looking count fell off is my credit report and is no longer offsetting the bad things that happened during that thun / airy season so again I know it sucks there's nothing you can really do about it it's just how the formula works and it's just something that we have to understand and know can potentially happen okay so there you go you have these seven common reasons for why your credit score may have dropped even though you are doing all of the things right which of those items really stood out to you are there any that you've experienced any that's ever kicked your butt I know that you can really suck when you consider the items that you have absolutely no control over like changes in the formula or things falling off because they've aged out I know it's not fun especially when it drops your score but you know it is what it is like we just have to work within the system that currently exists now that being said remember that the vast majority of your credit score is still determined by your actions it's still determined by the things that you are able to accomplish so what I want you to do is I want you to look and see what are the things that I'm doing that's contributing to the drop of my credit score some of the things again I'll be on your control but make sure that you take control of the things that you can control and if you're one of those people who is finding it really difficult to get your men your finances managed to get things organized so that you actually can take that control over how your credit score is flowing and functioning and rising and falling well don't worry I got you most of the things that I teach when it comes to being budgeting and being able to pay your bills on time and being able to pay things off and to get rid of debt and to be able to reduce your car utilization the things that I teach will help you do that and if you are absolutely struggling right now then the thing that I want you to do is I want you to hop on a rapid strategy console with me 30 minutes on a video chat and we're going to walk through what's going on and life and how we can create some very simple actionable steps that will help you to get your finances back under your control so that now you can get that credit score under control the beautiful thing about the rapper strategy consult is that it's free oh yeah it's on me I'm paying for it so to get access to your rapper strategy consult all you have to do is go to tiana be clueless comm forward slash book online scroll down to where it says a rapid strategy and click that book now button ok the link of course is going to be in the description but it's really easy Tiana B clueless comm for CH lash book on line and if you're ever having trouble finding it from my homepage just simply click on coaching and it'll be really easy to get to now that you have my strategies in mind and a way to link up for more one-on-one help let's get connected on social media you can find me on instagram and twitter with the handle tiana b clueless or on facebook under seal a financial coaching because facebook is difficult it won't let me change it it's okay though also let me know that you found this video useful by hitting that like button and subscribing to my channel don't forget to hit the bell so that you're notified whenever I drop new content every Wednesday and Saturday finally if you're looking for more strategies on how to take back control of your finances so you can boost that credit score I have two videos here that when you use those strategies together it will help you do just that so click on a video get to watching it and I'll talk to you soon bye bye you

7 Common Reasons Why Your Credit Score Went Down (PT. 2)

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