Have you been making your payment on time yet you get your credit score dropped? Even if you have been paying in full every month, it does not seem to make any difference. At this point, most people would think that they should have perfect credit score. However, why did my credit score drop after paying off debt? If you have this question, let’s discuss it further in here. You might find what to do to deal with it. There must be reason behind credit score dropping after paying off debt.
What to Know About Your Credit Score
Before you get the answer for why did my credit score drop after paying off debt, it is only right for you to learn more about the credit score itself. Actually, getting perfect credit score is not as easy as always making payment in full on time. You need to know that your credit history is what matters here. However, you will raise your score if you make on time payment every time. It is not the answer to why did my credit score drop after paying off debt. There is no penalty for paying it off.
Other related thing to credit score would be none other than the amounts owed. When it comes to this, utilization rate is the topic. The rate is what’s resulted from the calculation of each card and combined. The lower it is, the better your credit score will be. The possible reason for credit score that drops after paying off debt would be this. How much you are charging each month affects the utilization rate. If it is too high, the score could possibly drop. It might be the answer for why did my credit score drop after paying off debt.
What to Do to Deal with the Bad Score
Now that you find the culprit behind why did my credit score drop after paying off debt, it is the time for you to learn how to deal with it. There are all sorts of things you can do for it. First things first, you need to charge less each month. If this does not seem to be possible for you, you can ask the issuer to increase your credit limit. Either of these solutions should help to deal with the problem of why did my credit score drop after paying off debt. Well, there are other solutions you can try too.
One of them would be to open another credit card. By doing so, you will be able to increase the total available credit. The charging will then be spread among more than one card. Your credit might take the hit at first, but it will disappear in 2 years. If utilization rate does not seem to be the problem of credit score dropping after the payment, pull free credit report from AnnualCreditReport.com and you should find the answer to why did my credit score drop after paying off debt. Give it a try then.