Why Did My Credit Score Drop?

Your credit score dropped likely due to late payments, increased credit utilization, recent credit applications, closed accounts, or errors on your report.

Common reasons your credit score decreased

Most drops happen when you miss payments or use too much of your available credit.

1. Late or missed payments

Payment history makes up 35% of your FICO score. Even one payment that's 30+ days late can significantly impact your score.

The damage worsens at 60 or 90 days late, and if the debt goes to collections, your score can plummet. These negative marks stay on your report for seven years.

2. Higher credit utilization

When you use more of your available credit, your score often drops. If your balance exceeds 30% of your credit limit (like carrying a $3,000 balance on a $10,000 limit), your score will likely decrease.

For best results, keep utilization under 10%.

3. Recent credit applications

Each time you apply for credit, a hard inquiry gets recorded. Multiple applications in a short period signal risk to lenders.

While a single inquiry might only drop your score slightly, several can cause more significant damage. These inquiries affect your score for about a year.

4. Reduced credit limits

Credit card companies sometimes lower limits if you rarely use the card or if you've had financial issues.

If your $10,000 limit drops to $6,000 while maintaining a $3,000 balance, your utilization jumps from 30% to 50%, causing your score to fall.

5. Closing credit cards

Cancelling cards reduces your available credit and can increase your utilization ratio. It may also shorten your average credit history length, which accounts for 15% of your score.

Unless a card has high fees or encourages overspending, keeping it open is often better for your credit.

6. Credit report errors

Mistakes happen. Lenders might report incorrect information, or you could be a victim of identity fraud.

Regular credit report checks help catch these issues early. You have the right to dispute inaccuracies with all the major credit bureaus.

7. Major financial events

Bankruptcy and foreclosure severely damage your credit. Chapter 7 bankruptcy stays on your report for 10 years, while Chapter 13 and foreclosures remain for 7 years.

These events not only tank your score but can prevent you from qualifying for certain loans in the future.

Rebuilding your credit score

The good news is credit scores can recover. Focus on making all payments on time, reducing debt, and avoiding new credit applications. Consider setting up automatic payments to prevent missed deadlines.

As negative information ages, its impact lessens, and positive actions gradually improve your score.

Monitor your credit regularly to catch issues early and verify improvement. While rebuilding takes time, consistent responsible credit behavior will help your score bounce back stronger than before.