Clues That Your Credit Score Is Tanking

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Cassandra Hubbart, AOL

What You Need to Know

By Janene Mascarella

Nothing sends fear through the heart of a child more than report card day. Prepare yourself for a sense of d'j' vu when applying for a loan ... many say the situation ignites that same blast-from-the past feeling as they await their financial fate. And what to do if, ultimately, that application is stamped "denied'? Figure that your credit score had a lot to do with it, and start making big changes.

Now is the time to get savvy about your finances and credit standing -- being clueless about any aspect of your credit health can really cost you.

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Junk Mail: the Good ...

Credit-card companies often troll for customers based on credit scores. "That way, they know an applicant is likely to be approved," says Tom Dailey, a Chicago-based card industry consultant, and a former senior executive at Discover Card. The lower your score dips, he says, the less likely you are to receive low-interest offers -- so if your mailbox is cluttered with credit-card come-ons, take heart. "Issuers won't waste their time reaching out to someone they know they don't want as a customer," Dailey says.

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... the Bad, and the Ugly

If you're not receiving attractive low-interest offers -- but you are getting a different kind of offer -- it might be a red flag. "Being offered cards with low limits and high fees is a sign there's trouble with your credit score," says Monika Ecsedy Nagy, CEO of FinancialFutureCoach.com in Orlando, Florida, and author of Give Yourself the Credit You Deserve. Rarely does someone with a score of 720 or higher receive these offers. "Poor credit is often equated with financial desperation," says Nagy, a certified credit analyst. "And issuers extend these offers to people with bad credit, hoping they'll be desperate enough to accept them."

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You've Got Mail! (Uh-Oh!)

Unsolicited letters from law firms or mortgage companies offering to help you modify your loan is another message from your mailbox that your credit score is slipping, or lower than you'd thought. "Companies purchase lists that may be used as criteria for consumers with low credit scores," says Scott Stevenson, president and CEO of Eliminate ID Theft, an Atlanta-based identity-theft protection and credit-monitoring agency.

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More Bad News

And don't be too quick to discount the junk mail touting credit counseling, bankruptcy attorneys, or other credit-related information. "If you're receiving those messages, it's pretty safe to assume your credit score has probably dropped," Stevenson says. "And a good reason to check your credit report."

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Cassandra Hubbart

Beyond Your Mailbox

But junk mail isn't the only sign that something is going awry with the three most important numbers in your life (the three major credit bureaus' credit scores, in other words). Experts say several other signs will help you spot credit-score troubles -- and remind you to check your credit report -- before they cost you dearly.

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chalkboard with credit history written on it

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Sign No. 1: Rising Rates

Surging interest rates on credit cards can be sign your score is slipping, says Curtis Arnold, founder of CardRatings.com and co-author of The Complete Idiot's Guide to Person-to-Person Lending. "Credit card issuers keep an eye on customers' credit scores," Arnold says. "And if yours starts to slide downhill, you're considered a bigger risk, so they'll raise your interest."

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Sign No. 2: Lower Limits

Credit-card issuers often slash the limits of customers whose credit scores have fallen -- even those who've yet to skip a payment, or go over the limit. "The current economic climate has issuers closely scrutinizing their customers," Arnold says. And if your credit score gets dinged, the ever-vigilant credit-score-watching card issuers lower your credit limit, to reduce their exposure and cut possible losses.

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Sign No. 3: You Can't Get a Job

Arnold says your job history isn't the only thing that can keep you from landing a new job; your credit can, too. "More and more employers are screening credit these days," he says. Credit score, he says, is often seen as a personal reflection of your level of reliability and responsibility.

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person looking over ledge at credit cards

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Sign No. 4: Eye-Popping Premiums

Sign No. 4: Eye-Popping Premiums "Insurers check credit because they want to determine the likelihood that you'll file a claim," which rises as your score drops, says Ashley M. Hunter, a construction-risk insurance specialist who owns HM Risk Group in Austin, Texas. And financially stable people have been shown to have fewer traffic violations or accidents than those who are financially stressed. "So you're charged high premiums in anticipation of the violations, accidents, or claims you'll have in the future," Hunter says.

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