When beginning credit repair, many consumers hold high hopes of ending their repair process with a clean report and a high credit score. Removing a few items here and there can really make your positive credit shine through and can give you the push you need to acquire financing; but that may not always be the case. The topic of todays blog goes over how and why it is possible that your credit score can actually drop after removing negative items from your report.
So what does it mean when your score is lower than it started after finishing your credit repair process? There are several reasons that can lead to a drop in your score, but remember, a lower score is not always a bad thing!
1- You Do Not Have Enough Active Tradelines
One reason that your score can drop after credit repair could be that you do not have enough open lines of credit reporting to help establish your score. Each open account is meant to show how well you are able to manage your borrowed money and the more accounts you have that are reporting positively (low balance/ low credit utilization rate) the better your score will reflect your responsible actions. If you only have one or no active tradelines reporting after credit repair, there is a good chance you will see a dip in your scores.
2- You Have High Amounts Of Debt
High amounts of debt listed on your account and high credit utilization is another reason your score could drop after credit repair. With fewer accounts reporting, just like positive accounts, negative accounts can hold more weight with a clean account. Paying down your cards and keeping them below a 15% utilization rate will help negate a score drop and can greatly improve your final credit score. It is imperative that you monitor total utilization because it impacts 30 percent of your credit score! Experts frequently recommend consumers to keep their credit utilization rate below 20% to positively effect your credit. It is a good habit to keep your ratio as low as possible since high utilization is very off-putting to lenders. A high utilization ratio tells lenders that you’re having a hard time managing your money and they are at risk to losing their investment.
3- You Have Nothing Left Reporting On Your Account
This situation is a little more rare but is entirely possible after credit repair. In some cases, a clean sweep of a credit report can drop the score due to the fact that there are no accounts left to report. When you first start building your credit, you technically start out at a credit score of zero. When a “clean sweep” occurs and you have a 100% removal, you are essentially back at square one. This is actually beneficial to you when it comes to building credit as it means that any positive credit you accrue will impact your score much more than new tradelines and positive payment history would on an account with multiple derogatory items.
4- You Applied For New Credit Cards or Loans
During the credit repair process, it is imperative that you practice good credit habits to maximize the results after items are removed. One common mistake consumers make is applying for new lines of credit with the belief that opening a fresh tradeline will add positive credit to the account immediately. When you apply for a new card or a loan, you trigger a hard inquiry. Hard inquiries one their own are not terribly impactful on their own but multiple hard inquiries while repairing your credit can be detrimental to your score.
Navigating through the Do’s and Don’ts of credit repair can seem overwhelming at first but avoiding a score drop after credit repair is not as hard as you might think. Our seasoned credit advisers will always audit your report prior to starting the program and provide instructions to maximize your return for your credit report specifically. A drop in your is avoidable as long as you follow the direction of your repair specialist and stay away from poor credit habits during the program.
Author- Joe Peters
Do you have questions about your credit report? If you would like to speak with one of our attorneys or credit advisors and complete a free consultation please give us a call at 1-800-994-3070 we would be happy to help.
If you are hoping to dispute and work on your credit report on your own, here is a link that provides you with a few ideas on how to go about DIY Credit Repair.
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