With years of experience and a passion for helping clients achieve their financial goals, our team is committed to guiding you on your journey to credit recovery and financial success.
Reviewed By:
Ashley Davison
Ashley Davison
Editor
Ashley is currently the Chief Compliance Officer for Credit Saint, previously the Chief Operating Officer. Ashley got into the Financial world by working as a Logistics Coordinator at Ernst & Young. Coming from a previous career in education, she is eager to teach the world every...
Your credit score usually drops because something on your credit report changed: a higher reported balance, a late payment, a new hard inquiry or account, a closed account or lower limit, or a new collection.
If nothing seems to have changed, you may be comparing different scores, or there may be an error on your report.
Your score drops when your report shows something that makes you look riskier to lenders. According to myFICO, FICO Scores weigh five categories, so most drops trace back to one of these:
6. A collection, charge-off or other negative item appeared
A new collection account, charge-off, repossession or bankruptcy can cause a significant drop. Check: the accounts and collections sections for anything new.
7. You were removed as an authorized user
When you’re taken off someone else’s card, Experian explains that the account no longer appears on your report and its history no longer counts in your scores. Check: whether a card you didn’t open has disappeared.
8. An old account left your report
Closed accounts in good standing generally stay on your report for up to 10 years, according to Experian. When an old one finally drops off, your credit history can look shorter. Check: whether an old, closed account is gone.
9. You paid off a loan
Paying off a loan is good for your finances, but it can cause a small dip. The section on paying off debt below explains why.
10. There’s an error or fraud on your report
An account that isn’t yours, a wrong balance or a payment marked late by mistake can all pull your score down. Check: every account, inquiry and personal detail. If something isn’t yours, see repairing credit after identity theft.
Why Did My Credit Score Drop for No Reason?
A score rarely drops for no reason, but the reason isn’t always something you did. The most common causes of a “no reason” drop are:
You’re comparing different scores. The CFPB says you don’t have just one credit score. Scores vary by scoring model, by which bureau’s data is used and by the day they’re calculated. A free app may show a VantageScore while a lender sees a FICO Score.
A balance was reported at a high point. If your card reported before you paid it down, your utilization looks higher for that month.
Something left your report. An old account or an authorized user card can drop off without any action from you.
A limit changed. An issuer can lower your limit, which raises your utilization.
There’s an error or fraud. A mistake or an account opened in your name can show up at any time.
To rule these out, compare the same score type from the same bureau over time, then look at your report itself.
How Do I Find Out Why My Credit Score Dropped?
Compare your current credit reports with what you expected to see. These steps cover it:
Get your reports from all three bureaus. You can get free reports from Equifax, Experian and TransUnion every week at AnnualCreditReport.com.
Read your score’s key factors. Many score providers list the top reasons your score isn’t higher.
Compare month to month. Look at balances, limits, new accounts, inquiries, closed accounts and negative items.
Dispute anything inaccurate. Send a dispute to each bureau that shows the error. Under the Fair Credit Reporting Act, the bureau generally has 30 days to investigate, and up to 45 days in some cases (15 U.S.C. 1681i).
Errors aren’t rare. In a 2013 FTC study, one in four consumers identified errors on their credit reports that might affect their credit scores.
If information can’t be verified or is wrong, it must be corrected or deleted, according to the CFPB. The guide on how to dispute items on your credit report walks through the process.
You can dispute errors yourself for free. If you’d rather have help reviewing three reports and following up on each dispute, a credit repair company can do that work with you. To see what’s on your reports, start a free credit review.
It depends on the cause and on the rest of your credit history. There’s no set number of points for each event, because the same change affects different people differently.
Some changes are usually small. For most people, one additional hard inquiry takes less than five points off their FICO Scores, according to myFICO. Bigger drops usually come from the heavier categories: a new late payment, a collection, or a large jump in your card balances.
So is a 20-point drop bad? It depends on why it happened. A drop caused by a higher reported balance can reverse once a lower balance is reported. A drop caused by a late payment or collection lasts longer. If you can’t match a drop to anything on your report, check for errors.
Why Did My Credit Score Drop After Paying Off Debt?
Paying off a loan can lower your score for a while because the account closes. myFICO explains that if you pay off your only active installment loan, like a car loan, having no active installment loans can result in a lower FICO Score. Your credit mix is part of the calculation.
myFICO also says the drop shouldn’t be viewed as permanent, and it doesn’t recommend opening new credit just to improve your mix. Paying down credit cards works differently: lower card balances usually help, because they reduce your utilization.
How Long Does It Take for Your Credit Score to Recover?
On-time payments are only part of your score. High reported balances, a recent hard inquiry, a new account or a short credit history can still hold your score down even with a perfect payment record.
Most credit score drops come from a change on your report, like a higher balance, a late payment, a new inquiry or a closed account.
If you can’t find the reason, make sure you’re comparing the same score, then check all three reports. Dispute anything that’s wrong, and let on-time payments and low balances do the rest over time.
Reviewed By:
Ashley Davison
Editor
Ashley is currently the Chief Compliance Officer for Credit Saint, previously the Chief Operating Officer. Ashley got into the Financial world by working as a Logistics Coordinator at Ernst & Young. Coming from a previous career in education, she is eager to teach the world everything she knows and learn everything that she doesn’t! Ashley is a FICO® certified professional, a Board Certified Credit Consultant, a Certified Credit Score Consultant with the Credit Consultants Association of America, UDAAP certified, and holds a Fair Credit Reporting Act (FCRA) Compliance Certificate.
