Why Did My Credit Score Drop? Nine Common Causes
A score can fall without you doing anything wrong. Here are the usual explanations, in rough order of how often they turn out to be the answer.
A score drop with no obvious cause is unsettling. Usually there is a cause, and usually it is one of these.
1. A card reported a higher balance
The most common answer by a wide margin. Your issuer reports your statement balance, and a month with a large purchase will report higher utilization even if you paid it off in full afterward. The score recovers when a lower balance is reported.
2. You closed a credit card
Closing a card removes its limit from your total available credit, so overall utilization goes up immediately. If it was one of your older accounts, the average age of your accounts can also fall over time.
3. You paid off and closed a loan
Counterintuitive but real. Paying off an installment loan closes an active account, can reduce your credit mix, and removes an account you were building positive history on. The drop is usually modest and temporary. It is not a reason to keep a loan.
4. A new account or hard inquiry
A new account lowers your average account age and adds an inquiry. Two small negatives arriving together.
5. A late payment was reported
Most creditors report at 30 days past due. A payment that was a week late and then caught up is often never reported at all — but once it crosses the 30-day line, it lands.
6. A collection appeared
An old debt sold to a collection agency can show up on your report months or years after the original delinquency.
7. The scoring model changed
Your banking app may show VantageScore; your mortgage lender pulls a FICO model that is several versions old. These are different formulas and they will not agree. A "drop" can simply be a comparison between two different scores.
8. Only one bureau changed
Creditors are not required to report to all three bureaus. If a card reports only to Experian, your Experian-based score moves and the other two do not.
9. Something on your report is not yours
Less common, but it happens: a mixed file, or an account opened in your name. If a drop has no explanation you recognize, read the full report rather than the score summary.
How to find the actual cause
Pull all three reports and compare against your last copy. You are looking for four things, in this order:
- A new negative entry — a late mark, a collection, a charge-off
- A change in a reported balance
- A new account or inquiry
- An account that has disappeared
Almost every unexplained drop is one of those four.