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Why did my credit score drop? What can make it go down

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Checking your credit score and seeing that it’s dropped can feel scary and disappointing. Why the sudden change?  

While you may have questions about what’s going on, there are several reasons as to why your score has gone down. The first thing to be aware of is that credit scores aren’t static numbers that remain the same. Rather, they’re ever-changing and get updated about every month. Plus, there many are factors that impact whether they go up or down.


Why did my credit score drop? 

Fluctuations in your credit score can vary based on a wide range of factors, which we’ll cover below. 

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But first, knowing what makes up your scores can offer insight into how they work, which can give you a better sense of how and why they change over time. For example, FICO credit scores, which are used by many lenders, are determined by:

  • Payment history (35%): This is the most heavily weighted factor and is represents whether a borrower makes on time payments in the past. 
  • Amounts owed (30%): This is how much overall debt you carry. If you have high loan balances relative to your credit limits, it’s perceived as a risk by lenders. 
  • Length of credit history (15%): How long you’ve had accounts open can affect your credit score, so the longer the better. 
  • Credit mix (10%): Having different types of credit accounts can be seen as a good thing. For example, having a mortgage which is an installment loan, plus a credit card which is revolving credit. 
  • New credit (10%): Applying for many new credit accounts at once may affect your credit and appear risky. 

Some activities will have a greater impact on your credit score than others. But that doesn’t mean some of the lower impact activities won’t lead to a drop in your score. Let’s take a look at some common reasons why your credit score may have dropped.  

1. You applied for one or multiple credit accounts 

Applying for any type of loan generally requires a credit check to determine if the borrower is a qualified candidate. So when you apply for a mortgage, a credit card, or a personal loan you’ll end up with a hard inquiry on your credit report for two years.  

In general, this may lead to your credit score dropping by a few points—but it will typically recover after a few months. In some cases, your credit score may actually increase by a few points. For example, when you open a credit card, your total credit limit will increase, which, in turn, lowers your credit utilization or “amounts owed.” 

Effectively, this illustrates that you have more available credit to use but you’re using a smaller percentage of it, which is attractive to lenders. 

While applying for a single loan or line of credit may have a nominal impact on your credit score, applying for multiple credit accounts or loans is a different story. Borrowers applying for many loans within a short time frame can be seen as a red flag to lenders and seen as a risk. 

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This can impact your “new credit” and may lead to a drop in score. Lenders are looking for borrowers who can repay their loans. Taking on many loans can lead to more monthly payments and be a signal of financial instability or risk. 

But how much is too much? Equifax, one of the three credit bureaus, suggests consumers have two to three credit cards as well as another type of loan. For example, this could be a mortgage or student loan. This would add to your overall “credit mix,” which may positively impact your score. 

2. Your credit limit was reduced

Once you get approved for a credit card, you’re offered a set credit limit based on the information you provided during the application process. Over time, your lender may choose to change the credit limit it initially offered to you by increasing—or decreasing it. 

A decrease in limit will affect your credit utilization ratio. “Lowering your credit limit lowers your credit utilization ratio, which is your total outstanding balance on all accounts divided by the credit limit on all accounts,” explains Avanti Shetye, CFA, and founder of Foolproof Financial Freedom.

So even though you may be charging the same amount to your credit card each month, you’re now using a higher percentage of available credit since your limit is lower. This may lead to a drop in score based on “amounts owed.”

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So why does this happen? There are several reasons, such as a shift in the economic climate, or if you use too little or too much of your credit limit. 

If this happens to you, contact your credit card issuer right away to see if you can reinstate the previous limit. If not, work toward paying down balances. To avoid this issue entirely, you should aim to use your card consistently and responsibly to avoid this altogether. 

3. You’re carrying a balance

There’s a pervasive and damaging myth that carrying a balance is a good idea and can help your credit. Not only is that wrong, but it can also cost you more in interest over time which adds to the cost of borrowing. 

The main reason carrying a balance may actually lower your score: your credit utilization ratio.

Lenders view credit cards with high balances that near the limit as risky. That’s why it’s recommended that borrowers maintain a credit utilization under 30%. 

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So if you have a $6,000 credit limit with a loan balance of $1,000, to get your credit utilization ratio, you can divide your credit card balance by its limit ($6,000 in this example). 

1,000/6,000 = 0.1666

Multiply by 100: By doing this, you can convert the decimal to a percentage.

0.1666 x 100 = 16.66  

From there, you can see your credit utilization is 16.66%, which is good and meets the recommendation for below 30%. However, there’s one sneaky culprit that’s affecting consumers’ credit utilization right now and that is inflation. 

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“What we’ve seen over the past six months is we’re seeing the stimulus balances and deposits decrease, and we’re seeing the credit card utilization and credit card balances increase as well,” says Dr. David Tuyo, CEO of University Credit Union. “What’s interesting about this is that the consumers are not spending more money, we’re actually literally seeing the high inflation hitting everyday transactions…they’re doing the same thing, that behavior hasn’t changed, the risk hasn’t changed, but their balances are going up because of inflation, that’s causing their score to go down.” 

If inflation hurts your credit card balances or an unexpected expense arises, your credit utilization can exceed the recommended 30%. 

For example, if you have a balance of $2,500 your credit utilization would skyrocket to 41.6% (2,500/6,000 = 0.416 x 100 = 41.6%). 

As noted in the FICO formula above, “amounts owed” contribute to 30% of your credit score, making it a significant factor as to why your credit score may be lower. 

4. You closed a credit account 

Whether you decide to close a credit card because you’re dealing with debt or to avoid paying an annual fee or you want to simplify your finances, that action may impact your credit score. Doing so affects the “length of credit history” part of your credit score as well as credit utilization and may lower it. 

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The length of credit history generally favors accounts that have been open for a long time. By closing an account, you can affect the average age of accounts as well. The average age is based on how long accounts have been open divided by the number of accounts you have. 

Let’s say you have an account that’s four years old, another that is one years old, and a third account that is seven years old.

Add up the account ages (4+1+7 = 12) and take the sum and divide it by the number of accounts (12/3 = 4), which would be the average of accounts.

So if you closed your one credit line, it can hurt your score. The good news is that if you kept the account in good standing and made payments by the due date, closed accounts will be on your credit report for 10 years. 

5. You made a late payment  

When reviewing the factors that affect your credit score, the one that has the most impact is your payment history (35%). Lenders like consistency and reliability. So if you miss a payment, it can lead to a drop in score. 

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But it depends on if it’s a one-time mishap or a frequent occurrence as well as how much time has passed since you missed your payment. 

“You get a yo-yo effect with a single missed payment,” says Tuyo. “Your score goes down and it pops right back up again, after 30 days. But as you get into that 60 days and 90 days, now you get into what is considered ‘serious delinquency.’ And that is going to cause the score to go down and trend downward as well. And so if you have multiple missed payments, again, now that’s going to qualify as serious delinquency.” 

If you make a late payment, you may face late fees and interest as well as a drop in your credit score. But timing also matters. If you can remedy the issue before the activity gets reported to the credit bureaus, you may get ahead of the issue. According to credit bureau Equifax, late payments may not be reported until 60 days after the due date. 

Once a late payment is reported though, it can stick around for a much longer time on your credit report. That one missed payment—a blip in time—can be on your credit report for seven years. 

6. You paid off debt 

Let’s say you finally manage to pay off debt, maybe a credit card or personal loan. You’re feeling great about this accomplishment—until you check your credit score and see that it’s actually gone down. This is a scenario that’s very surprising to those trying to pay off debt, like students paying off school loans for example. 

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“When a student loan, which is typically paid off in installments unlike a credit card debt, disappears from the credit mix, your score takes a temporary hit,” explains Shetye. “By eliminating one type of debt, you are now perceived as a risky borrower by lenders with a reduced ability to manage various types of debt.”

Paying off a loan and having a closed account may also affect your length of credit history, and potentially your credit utilization. 

While it can be disheartening to accomplish something noteworthy like paying off debt and seeing a drop in credit score, it’s generally a temporary issue. You may see improvements in your score in a couple of months. 

“Borrowers shouldn’t worry about the temporary decrease in credit score. Instead they should use their new-found financial freedom to direct what would have been their student loan installments toward other goals, such as investing,” says Shetye. 

7. There’s a mistake on your credit reports 

It’s always a good idea to review your credit reports on a regular basis because mistakes can happen. In fact, a 2013 Federal Trade Commission (FTC) study found that 1 in 5 consumers had an error on their credit report. 

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For example, you may notice that an account isn’t properly updated or with the correct credit limit. Having such errors, especially in regard to payment, can adversely affect your credit score. If you notice any errors when reviewing your credit report, contact the credit bureau and file a dispute.

To keep tabs on your credit report and avoid credit report mistakes, you can access your credit report via AnnualCreditReport.com and sign up for credit monitoring so you’re notified about changes in your accounts. 

8. Your identity could be compromised 

Identity theft is another cause for concern and can negatively impact your credit. Let’s say someone steals your personal information and opens a credit card in your name, racking up a bill. 

This may impact your credit because it’s a new inquiry. If the fraudster in question makes charges close to the limit, that can impact your credit utilization in a negative way. Finally, missed payments on the account can hurt as well. 

Unbeknownst to you, your credit score could free fall because of identity theft. If you’re experiencing identity theft, use IdentityTheft.gov to report the activity and create a plan to move forward. 

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You can also activate a fraud alert via the national credit bureaus Equifax, Experian, and TransUnion. Credit monitoring may also help you stay on top of credit activity so you can flag any suspicious activity.  

9. You have blemishes on your credit reports

While some of the other reasons that your score has dropped may not be as obvious, there are more obvious credit implications if you have blemishes on your credit report. 

For example, there may be negative marks on your credit report—often referred to as “derogatory.” These can include: 

  • Bankruptcy. Discharging debt through bankruptcy can have a lasting impact on your credit. “A bankruptcy is likely to stay on your credit report for seven to 10 years, depending on the type of bankruptcy,” says Shetye. “And while a bankruptcy can wipe off your debt almost immediately, you’ll continue to be perceived as a risky borrower for a long time.”
  • Liens. A lien ensures the legal right to a particular asset that can be used as collateral to secure a debt. So, for example, a mortgage lien can give the lender the right to recover costs and seize someone’s home if they don’t make mortgage payments. Since 2018, tax liens are no longer included as part of your credit reports. According to Experian, liens aren’t on your credit reports but any missed payments might be and would affect your score. 
  • Foreclosure. If you skip out on mortgage payments, you may end up in foreclosure. Through this process, the lender takes ownership of the home as collateral to recover the costs of missed payments. This could stay on your credit report for a period of seven years. 
  • Lawsuits or judgments. According to the Consumer Financial Protection Bureau (CFPB), lawsuits and judgments can be on your credit report for seven years. 

Student loan default. Federal loan borrowers who don’t make monthly payments for 270 days end up in student loan default. The CFPB states that this period is just 90 days for private student loans. Ending up in default can leave a negative mark on your credit report for seven years. 

The takeaway 

Credit score fluctuations are absolutely normal and should be expected. Big swings and jumps may tell a deeper story though. Understanding the story your credit score tells and what drives the score can help. Monitoring can also give you clarity about changes in your score over a period of time and help regain some control.

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Fauci warns that China risks a “wave of infections” after relaxing its coronavirus eradication policy

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Joe Biden’s chief medical adviser has warned that China’s reversal of a zero-Covid policy threatens to put pressure on the country’s health system and create conditions for new variants that could spread around the world.

Dr. Anthony Fauci urged Beijing to import Western Covid vaccines based on messenger RNA (mRNA) technology, which are more effective than Chinese-made vaccines, to increase the vaccination rate and boost overall immunity.

He said a wave of casualties would occur A large number of elderly people in China About 85 million people over the age of 60 have not received the third dose of the vaccine needed for strong protection against Omicron variants – and people with underlying health conditions are particularly challenging.

“If they don’t do things like launch and implement a proactive vaccination campaign, and open up, you’re going to have a wave of infections that will certainly be associated with some degree of disease severity,” Fauci said. The FT Global Boardroom event Wednesday.

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He added that any large wave of infections in China would give the coronavirus a chance to mutate into new types.

“When you have a big wave of transmissions of the virus, you give it a huge chance to mutate. When you give the virus a chance to mutate, that allows it to create potentially new variants. And once you have a completely new variant it can have an impact on the rest of the world.”

‘When you have a huge wave of virus transmissions, you give it a huge opportunity to turn around,’ Anthony Fauci told the FT Global Board of Directors © Abbie Coonan / FT

The risk of an uncontrolled wave of Covid infections across China creating conditions for new variants to flourish was “possible” but “very low,” Eric Topol, founder and director of the Scripps Research Translational Institute, said on Wednesday.

“The much bigger concern is that there will be countless deaths and morbidity unless there is an accelerated and much better vaccination rate, including more effective vaccines, in the population,” he said.

Fauci, who is stepping down from his position in the US government at the end of the year, added that he had not had contact with Chinese officials in a long time. He said Beijing’s strategy earlier in the pandemic had “some flaws” because it did not use lockdowns to vaccinate people.

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Beijing announced this week widespread relaxation President Xi Jinping’s controversial zero-COVID policy emerged as evidence of the economic damage caused by the pandemic’s restrictions emerged. But Wigram Capital Advisors, a macro advisory group focused on Asia, predicts that relatively low vaccination levels among China’s aging population could lead to million deaths If infection rates rise under relaxed restrictions.

Fauci echoed the advice issued Last week by Ashish Jha, the White House coronavirus coordinator, on how China should change its policy and import Western vaccines to tackle the virus. China said it would provide the BioNTech vaccine, but only to foreigners.

I would suggest they import western types [vaccines], particularly the highly effective mRNA vaccines used in most countries of the world. Unfortunately, the original Chinese vaccines were not as effective as some of the other vaccines.

Even in the United States, Fauci said, the number of deaths from Covid remains unacceptably high. He said cooler weather, increased social activity in the upcoming holiday season, and Omicron’s new BQ.1 and BQ.1.1 variants mean the pandemic is far from over.

“This is not a good formula for declaring that this is over,” Fauci added. “We still have to be on our guard.”

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Apple’s Tim Cook celebrates a new chip factory in Phoenix

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When Chinese factory supply Apple’s iPhone has been so riddled with the COVID-19 outbreak that it has shutdowns and staff strikeit directly affected global iPhone shipments.

some Estimates That iPhone production may decrease by up to 30% as a result of curbing the spread of the epidemic in China.

To reduce the risk of slowing down the production of its devices abroad, Apple decided to take matters into its own hands. Apple CEO Tim Cook confirmed on Tuesday that chips for Apple devices will now be made in the United States

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Apple silicon unlocks a new level of performance for our users. And soon many of these chips can be stamped “Made in America,” he wrote in the tweet.

A new plant in Arizona, operated by the contract chip maker, Cook said Taiwanese semiconductor industryIt will mark the beginning of a new era of advanced manufacturing in the United States.

This will be the first time in a decade that Apple will use US-made chips. The California-based company relies heavily on parts manufactured in Asian countries, In particular, China. Most of the chips that power Apple devices are Made in Taiwan.

The Apple CEO spoke at the TSMC factory under construction in Phoenix, along with President Joe Biden.

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“As many of you know, we work with TSMC to manufacture chips that help power our products around the world,” Cook said during the speech. to me bloomberg. “And we look forward to expanding this business in the coming years – as TSMC forms new and deeper roots in America.”

Apple plans to make silicon chips for most of its devices at its Phoenix plant. bloomberg mentioned. In the early years of manufacturing, the factory will produce fewer chips and use lower-quality technology than what Apple may require for its devices in 2024.

The company did not immediately respond luckComment request.

TSMC initially planned to spend $12 billion at our factory in Phoenix. Taiwanese company later increased Its investment amounts to nearly $40 billion, which it said is “the largest foreign direct investment in the history of the state of Arizona and one of the largest foreign direct investments in the history of the United States.”

The chip maker is said to be looking forward another plant Located in the United States as part of a larger effort to reduce reliance on Asia to make much of its chips.

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The plant is set in Arizona Opened in 2024.

The new Impact Report weekly newsletter will examine how ESG news and trends are shaping the roles and responsibilities of today’s CEOs – and how they can better overcome these challenges. Subscribe here.



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RXDX shows promising results in irritable bowel disease

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Prometheus Biological Sciences (RXDX) reported promising results for one of its drugs in two studies on inflammatory diseases on Wednesday, and RXDX stock rose by triple digits.




X



The company studied its drug, now called PRA023, in patients with ulcerative colitis and Crohn’s disease, which are two types of irritable bowel disease. More than a quarter of patients with ulcerative colitis and about half of the Crohn’s disease group entered remission after 12 weeks of treatment.

Gregory Renza, an analyst at RBC Capital Markets, said in a note to clients that the results exceeded Prometheus’ expectations. Now, Prometheus is planning to conduct its final-stage studies in 2023.

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“Netnet results exceeded our expectations,” he said. They provide “a major proof-of-concept in IBS, early validation of a biomarker strategy and a positive readout (ulcerative colitis dataset II) now set for the second quarter of 2023.”

In the morning work on stock market today, RXDX stock rose 181.6%, near 101.50. Stocks set a record opening.

RXDX Stock: Ligand Targeting

Prometheus is an antibody that binds to TL1A, an inflammation-related ligand. The company hypothesized that blocking this ligand — a molecule that binds to a receptor — would relieve symptoms in patients whose bodies make too much of it.

After 12 weeks, 26.5% of patients with ulcerative colitis had achieved remission, compared with 1.5% in the placebo group. RBC’s Renza said this “comfortably beats” Prometheus’ expectations of a 10%-15% improvement. The company attributes the placebo response to the severity of the patient group.

In testing for Crohn’s disease, 49.1% of patients entered remission and 26% had an endoscopic response. The latter means that doctors did not find inflammation in the patients’ intestines after treatment.

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PRA023 was positive for stock RXDX, Renza said, which also showed statistical significance for all secondary targets of the studies.

Thomas Smith, an analyst with SVB Securities, notes that the drug showed “a clear profile of safety/tolerance in both studies.” There were no serious side effects related to the treatment. He rates RXDX stock as an outperformer.

Overcoming recent negative pressure

It is important to note that the RXDX arrow has turned down on the data reading. News followed Pfizer (PFE) And the Spiritual sciences (ROIV) will set up a company to sell the TL1A-targeting antibody. Their drug is currently in mid-stage development for ulcerative colitis.

“We believe (Wednesday’s) positive reception could add to the negative pressure we saw last week from the development of the Pfizer/Roivant competitor,” said RBC’s Renza.

It has maintained its outperform rating on the stock.

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Follow Allison Gatlin on Twitter at @tweet.

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