Poor credit can sneak up on you–when you least expect it. One minute, you’re at the bank applying for a loan, and the next, you’re sitting at the kitchen table trying to figure out when your credit score went downhill. If your credit score is lower than you thought it’d be, you probably want to know why–and how to get it back on track. Having a low score can be especially perplexing if you thought you always paid bills on time and avoided debt like the plague.

Here are a few reasons your credit score might be tanking and how to fix it.

You Have a High Balance on One or More Credit Cards

It’s not enough to pay your bills on time to maintain good standing with your credit; you need to also think about the balance each of your credit cards holds. Your credit utilization ratio–the portion of your credit limit you use–influences your credit score more than any other factor except for paying on time.

Ideally, aim to use no more than 30% of your credit limit on any card; the best credit scores go to those who use less than that.

You Recently Applied for New Credit

Every time you click “apply” on a credit card website, you could lose a few points on your score–whether you’re offered and accept the credit or not. Why? Usually, multiple credit applications are associated with a higher risk that you won’t pay as agreed, and higher risk equals a lower score.

If your score suffered from too many credit applications, the solution is simple–stop applying. Instead of consistently wearing down your credit score, you need to give it time to recover. Unfortunately, hard credit checks take at least two years to fall off naturally.

A Missed Payment Is Lurking on Your Account

On-time payments play the biggest role in your credit score. A single payment that is 30 days late or more can send your credit score in the trenches. What’s worse, late payments stay on your credit score for up to seven years. As with hard inquiry checks, the impacts of a payment mishap fade with time. In order to offset the damage, you need to make sure your payments never miss a beat.

You’ve Been a Victim of Identity Theft

If your score is much lower than you anticipated, it might mean that someone else’s credit activity is being reported on your account. This situation could be because a criminal uses your credit card or opens new accounts in your name. (If this is the case for low credit, notify your credit card company immediately.)

There’s a Default Judgement Against You

There may be a default judgment against you that you don’t even know about. This can happen if a letter was misdelivered or not forwarded, so you knew nothing about the lawsuit. Credit reports contain information from public records, so this will be the best way to find out if there’s a default judgment against your name. If so, you can choose to accept the judgment, settle it, or challenge it.

If you’re in the market for a new home, it’s important that you have a good understanding of your credit score and how credit works in the home-buying process. Our Home Buyer Education Program is an excellent place to start on your home-buying journey if you need help.

Contact Metro Community Development for more information.