There are many small things that can unexpectedly drive your credit scores down. Here is some information on how to avoid nasty surprises in your credit report.
In a balance transfer, you transfer your debt from one credit card to another that has lower interest rates. Balance transfer offers can save you money by reducing the interest rate but they might also lower your credit scores.
This is because FICO scores look at the ratio of the credit you have already taken to your available credit limit. If the limit on the new card to which you transfer your credit is lower than the limit on your old card, and you cancel the old card, then you would appear to be closer to your credit limit. Another reason your credit score will fall is because opening and closing accounts affect FICO scores.
If you want to benefit from the lower rates of a card, then do not close the earlier credit card so that your credit utilization ratio does not increase. Further, a credit card that has a good payment history is good for your FICO score. If you close it, then you will have a new card without any payment history, which would be harmful for your score.
Opening an Account
Even opening an account could reduce your credit scores for almost a year. FICO scores group people with similar credit histories. Your group will change when you open a new account due to which your score will decrease. However, this will settle down in a year when you will be out of the group of people who open new accounts. All you have to do is not open a new account for some time.
Debt settlement is not good for your credit score when you settle by paying lesser than your full debt. When the debt is referred to a collection agency, your scores will dip significantly. Bankruptcy petition can be even worse for your credit score. If you are in financial trouble, then a debt repayment plan from a credit-counseling agency will be the best option for you.
Other than these, closing of an account and using many limitless credit cards can also lower your FICO score. Be careful when you engage in any such transactions to make sure that you are not hurting your credit score.