There are a few reasons why your credit score could have gone down.
- Not making payments on time
Since your payment history makes up 35% of your credit score, it is essential to pay your bills on time. Each and every one of them! Doesn’t matter if it’s a $4 payment or a $400 payment—missing it affects your credit score negatively.
For missed payments, the later you are on them, the lower your score will be.
Take note if your missed payments have gone into collection. Some creditors (even city parking ticket collectors) may report you to your credit bureau, or use a third-party collection agency to get their money back. Always know who you owe money to.
- A high utilization ratio (aka your level of indebtedness)
This is how much of your total available credit you’re using. If you’re using more of your total available credit than before, your score could be lowered. Try to keep your balance below 35% of your credit limit, and don’t go over 70%, even if you pay it off every month. Definitely never max out your credit card as that’ll affect your credit score too.
- You’ve had an increase in credit inquiries
Inquiries (in terms of hard credit checks) make up about 10% of your credit score. Don’t worry, opening a MogoAccount involves a soft check. Hard checks occur when opening a new account or applying for credit. If you’re applying for your dream rental apartment, ask if your landlord will be doing a soft or hard credit check.
If you know your financial behaviour hasn’t changed but you see a big drop in your score, it’s smart to look into it. A decline in your score that’s not based on your own financial habits could be an early sign of identity fraud. Don't panic. Here's what to do:
- Get a full report from Equifax (for free)
Get a full credit report from Equifax; you can get your report for free by filling out their form and faxing or mailing it in. We know, it’s pretty old school, but it’s a relatively easy process, and it’ll give you full insight into your credit activity. When you receive the report, review it, and look for any activity that doesn’t belong to you, like collections or credit trade lines that you didn’t take out. If you spot anything that looks off, contact Equifax and let them know right away.
- Look at your credit card statements and bank account activity
It’s also important to review your bank account and credit card transaction history. Again, look for any transactions you did not authorize and report any issues to your bank or credit card company right away. Cancel any cards that could be compromised, and change any passwords and PINs to accounts you think could be affected.
- If you find something suspicious, report it to the authorities
Contact your local police and file a report. You should also report it to the Canadian Anti-Fraud Centre.
- Continue to monitor your credit score
One of the best ways to avoid fraud is by monitoring your score on a monthly basis. Help protect yourself by keeping a close watch on your credit score (shout out to Mogo's monthly credit score updates). You can also go one step further by subscribing to MogoProtect. MogoProtect helps you protect yourself against identity fraud by monitoring your Equifax credit bureau for inquiries, which happen when your name is submitted to open a new account or complete an application for credit. Learn more here.
If you’ve been affected by identity fraud, and you’ve taken the necessary steps above, you’ve done everything you can for the time being. If it's determined that your score dropped due to identity fraud, it can take several months to improve it; but rest assured, you will see it increase.