Do you have an unexpected ding on your credit? Here's what might - MSNewsNow.com - Jackson, MS

Do you have an unexpected ding on your credit? Here's what might have happened

If you suddenly notice a 20 or 30 point drop in your credit, you might be wondering why that happened. Source: WLBT If you suddenly notice a 20 or 30 point drop in your credit, you might be wondering why that happened. Source: WLBT
JACKSON, MS (Mississippi News Now) -

Your credit score determines many things, including your interest rate on a credit card or home mortgage, and even your car insurance premium. 

So if you suddenly notice a 20 or 30 point drop in your credit, you might be wondering why that happened. 

Sometimes, the reasons for that drop are obvious. If you're late with a payment, or run up a big credit card bill, for example.

So will canceling an old card.

Here's why: One of the most important factors in your credit score is your credit utilization ratio. That's the percentage of available credit that you're using at any given time.

So say you have two cards, each with a $5,000 limit, and you're carrying a $2,000 balance. That means your credit utilization ratio is 20 percent, but close one of those cards, and suddenly your ratio shoots up to 40 percent. 

That's high enough to ding it a bit. 

Debt creep also hurts your score. If your balance has been creeping up, month after month, that will push up your credit utilization ratio, too. 

Your first step should be to pull your free annual credit report, take a look at that and then pull your bills out to see if you missed a payment along the way.

Also, if you canceled a card, your utilization ratio may be off. 

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