Credit score on the decline? This could be why

Why Did My Credit Scores Drop? Common and Uncommon Reasons

Credit score on the decline? This could be why

Your credit scores aren’t static numbers. the digits on a scale, a credit score can rise or fall. In the case of a credit score, this movement is the information contained in one of your credit reports from Equifax, TransUnion, or Experian.

Yet un the numbers on your bathroom scale, when you discover that your credit scores dropped, it’s usually cause for alarm.

First, it’s worth pointing out that you don’t technically “lose” points from a credit score. Rather, when a new negative action on your credit report increases your level of credit risk, you earn fewer points. Either way, the result is still a lower overall credit score.

Below is a list of common actions that might net you a lower credit score.

1. You made a late payment

One of the fastest ways to sink your credit scores is to fall more than 30 days behind on a credit obligation. FICO bases 35% of your credit score on your payment history, so late payments can have a major impact.

Setting up automatic payments for loans and credit cards is a great way to help make sure your monthly payments stay on time. (Though you should always double check to make sure payments go through as scheduled.)

Credit card debt can have a big influence over your credit scores. This is because credit scoring models are concerned with the relationship between your credit card limits and balances, also known as your debt-to-limit ratio or credit utilization. When your debt-to-limit ratio increases on credit cards, your credit scores often decline.

It’s best to pay your balances off in full every month. This will help you avoid paying expensive interest fees.

However, if you wait until the due date to make your credit card payment, you might still have high utilization for the coming month.

If you’re worried about this possibility, you can make a payment before the statement closing date on your account. Doing so can help make sure the balance reported to the major credit bureaus for the upcoming month remains low as well.

It’s true that applying for new credit has the potential to hurt your credit scores. However, the impact of hard credit inquiries is often exaggerated. The effect of an occasional credit inquiry on your credit scores is often minor (and sometimes nonexistent).

That being said, adding a new account to your credit reports might be a bit more problematic — at least in the short term. A new account can lower your average age of credit. Since 15% of your FICO Scores are factors related to your length of credit history, a new account has the potential to lower your credit scores.

Credit scoring models consider a collection account to be a major derogatory item on a credit report. Depending upon the rest of your report, a collection account could significantly increase your level of credit risk. If your credit scores suddenly decrease without warning, it’s wise to check if any collection accounts have been added without your knowledge.

5. Someone made a mistake

Sometimes a credit score drop happens not because you did anything wrong, but because a mistake was made. Did a lender report a late payment when you have proof that you paid on time? Did a credit bureau accidentally add the account of someone with a similar name to your credit report?

The Fair Credit Reporting Act (FCRA) gives you the right to dispute any inaccurate information that shows up on your credit reports. If you need to dispute credit report errors, this helpful guide can show you how.

Sometimes a credit score can go down for seemingly no reason at all. However, there’s always an explanation behind a credit score decrease — even if it’s hard to find or understand.

Credit scores used by lenders in the United States have to comply with a law known as the Equal Credit Opportunity Act (ECOA). Per the ECOA, credit scoring systems must be “empirically derived” plus “demonstrably and statistically sound.” In plain terms, this means that credit scores have to be built using accepted scientific methods and they have to work.

If something causes one of your credit scores to drop, legally there has to be a reason (provided it’s a score a lender uses). Remember, a lower credit score means your credit report now represents a higher risk to lenders. In other words, the odds of you becoming 90 days or more late on a credit obligation in the next 24 months have increased.

Below is a list of some unusual reasons your credit score might have decreased.

1. You’re a victim of identity theft

It’s unfortunate, but the truth is we live in a world where identity theft abounds. Millions of people fall victim to identity-impersonation crimes every year.

If someone steals your personal information and applies for fraudulent accounts in your name, credit score damage will probably be part of the aftermath. Thankfully, the FCRA is on your side again.

You can visit to fill out an official Identity Theft Report. From there, you can submit the report to the credit bureaus and any creditors involved in the fraud. Legally, the credit bureaus will have to block any fraudulent accounts from your credit reports within four business days.

It’s also a good idea to freeze your credit reports and perhaps place fraud alerts to boot. This may help reduce the lihood of future fraudulent accounts being opened in your name.

The FCRA requires old, negative information to be removed from your credit reports — typically after 7-10 years. However, the credit bureaus also have a policy of removing most old, positive accounts from your credit reports eventually as well.

If a positive account (one with no negative history) is closed, it will generally stay on your credit reports for 10 years. After that, the credit bureaus remove it. Unfortunately when the bureaus remove such an account, your credit scores might drop.

In most cases, a credit card issuer has the right to decrease your credit limit as it sees fit. Just as a credit card company can give you a credit limit increase without warning, it can lower your limit as well. Unfortunately, not only can a lower credit card limit be inconvenient, it might also hurt your credit scores.

A lower credit limit can increase your credit utilization — both on an individual account and on all of your credit cards as a whole. If your credit utilization rate increases, you’ll need to pay down your credit card balances (perhaps on multiple cards) to try to undo any credit score decrease you experience.

Another way to accidentally trigger a credit utilization increase is by closing a credit card account. As mentioned, any increase in credit utilization could spell trouble for your credit scores.

It’s worth pointing out that closing a credit card won’t cause you to “lose credit” for the age of the account. That’s a myth. FICO and VantageScore both will continue to factor the closed account into your average age of account calculations.

Just your savings and investment accounts, remember that your credit is an asset. A good credit rating can help you save money and give you the opportunity to tap into lucrative rewards. Both can have a genuine impact on your bottom line.

It’s wise to make a habit of monitoring your three credit reports and scores frequently. When you keep an eye on your credit reports, you’ll be the first to know when something goes wrong. Credit monitoring won’t prevent a problem from happening. However, it will put you in a position to react quickly when and if you need to take action.

Have any other questions about credit or credit cards? Learn more about all kinds of credit topics in the Insider Academy.


6 reasons why your credit score dropped

Credit score on the decline? This could be why

An airline credit card with an insane rewards program was released recently and you just have to have it. Or, the apartment of your dreams just popped up on Padmapper and you need your name on the call box, , yesterday.

So –– naturally –– you use one of your free annual credit checks through Experian, EXPN, +0.36%   Equifax, EFX, +1.49%   or TransUnion TRU, +1.

48%   to check up on things, and suddenly you find yourself in crisis mode: why is my credit score lower than it was last time I checked?

In the life of a grown-up, there are few feelings as anxiety-inducing as the moment when you get your credit report back, only to find that it’s not nearly as high as you anticipated.

But fear not: there are a variety of perfectly good reasons why your credit score has taken a hit, and in this case, knowledge is power.

The more you know about how your credit score operates and what can affect in, the easier it will be to get it back up to scratch.

Here are six reasons why your credit score might have dipped:

1. You’re using too much credit

For some who have had a limited financial education, it can be hard to figure out how best to use credit. You might be a perfectly upstanding citizen who pays their bills on time every month, but it’s going to take more than that to keep your credit score low. Enter credit utilization.

While your credit limit might seem the number not to exceed on your credit card, experts actually recommend that to minimize negative credit impact, you should only be using 30% of your credit allowance.

That means if you have a $9,000 credit limit, you should not exceed spending more than $3,000 before making a payment. This might seem a little counterintuitive, but the reality is credit restrictions this are put in place to protect you.

By spending much lower than your credit limit, you decrease your interest payments and ultimately your debt.

2. You accidentally missed a payment

Listen, it happens to everyone. Adulting is hard and sometimes, life gets in the way of life. With so many responsibilities to juggle, it’s not unusual or shameful when something falls off your priority list.

If you do miss a payment, don’t panic. Consider calling the credit card company or lender to ask them to remove the fee –– especially if you’ve never missed a payment before. Then, pay the balance as soon as possible.

If automatic pay isn’t an option with your bank or lender, it might be helpful to set a calendar alert every month to remind you to pay your bill. If this wasn’t simply an accident and you purposefully let the bill fall by the wayside due to constricted funds, consider talking to a credit repair agent to discuss your options.

3. You cleaned house on your old credit accounts

Especially if you’ve had good enough credit to open an elite credit card with an excellent rewards program, it makes sense that some of your very first credit accounts are collecting dust.

It might seem financially responsible to clean house financially and close some of your older or neglected credit accounts, but consider this: your oldest accounts are also your greatest and longest source of credit history.

If you close them, the pool of information that dictates your credit score will shrink, making you more vulnerable to credit report dings.

Don’t miss: Your browser history could decide your credit score

Instead of closing your old accounts, it might make sense to use them sparingly to your advantage. For example, maybe you only use one card when you fill up your car’s gas tank, and then pay it off right away. This kind of calculated credit maintenance will only help your credit score. Just don’t forget to pay the bill!

You finally did it: you paid off that nagging, horrible student/car/home loan, and what do you get for it? A reduction in your credit score. So what gives?

The reason paying off a loan can affect your credit is because it decreases the diversity of your credit in the eyes of lenders. This is similar to what happens when you close old accounts: when the number of credit resources decreases, your credit imperfections –– missing a payment or two, or going over 30% on your credit utilization –– become more visible.

While this might be frustrating, rest assured that the impact of paying off a loan will not have the same kind of enormity that other items on the list will. Paying off a loan is a major win, and should be celebrated accordingly.

5. You applied for a loan or a credit card

When you apply for any kind of credit, the lending institution will run what’s called a “hard inquiry” or “hard pull”, which is a formal credit check that requires your approval. This check is intended to give lenders an opportunity to evaluate your reliability as a borrower, and sometimes will take a few points off your score.

See: More people are now checking their credit scores—here’s why that pays

While a few points here and there won’t ultimately impact your credit score, repeated attempts to secure new means of credit –– persistently applying for credit cards that are your credit league –– will. Lenders think that you’re desperate for credit, which isn’t a good look for you, or your credit history.

Make sure that when you are researching credit cards, you keep in mind your personal financial history, credit score, and payment reliability, so you can select and apply for a card that makes sense for you.

6. A derogatory mark was added to your report

If you’ve recently gone through a bankruptcy, foreclosure, or even a civil judgment, it probably isn’t a surprise to you that your credit has been impacted.

Any abrupt changes to your credit can seriously affect the number that shows on your credit report.

Unfortunately, un the scenarios listed in previous points, these derogatory marks are the result of what lenders consider major delinquencies –– in other words, significant implications about your ability to manage your finances.

Read: 5 tricks you can use to improve your credit score

If a derogatory mark is added to your credit report, it’s important to get assistance as soon as possible. A credit repair professional can help you filter through the overwhelming information and requirements to find a solution that works best for your unique situation. If you do see a derogatory mark on your credit score that you don’t recognize, follow up.

If after careful review you can’t find a pragmatic reason for your dwindling credit score, it may be time to consult professional advice, such as a credit repair company.


I pay my bills on time. Why is my credit score falling?

Credit score on the decline? This could be why

That three-digit number measures if you manage debt responsibly and is a key factor that determines whether you qualify for a loan and what interest rate you will pay. USA TODAY

Who would have imagined a day when a credit score could be as mystifying as an SAT or ACT score? But if you're looking for an elite credit card with amazing rewards or the best rate on a mortgage, you're hyper-focused on getting the best credit score. Sort of trying to get into college. 

But instead of improving over time, consumer knowledge about credit scores is at the lowest level in eight years, according to the ninth annual credit score survey by the Consumer Federation of America and VantageScore Solutions.  

Only two-thirds of consumers surveyed knew, for example, that keeping a low credit card balance helps raise a low credit score or maintain a high one, according to the survey. That's down from 85% who scored correctly in 2012. 

The credit score's main purpose: Give lenders  a way to measure the risk that an individual consumer will not repay the loan. 

Experian says its annual State of Credit report indicates that consumers age 18 to 21 have increased their credit scores by 23 points on average, compared with the same age group 10 years ago.

File photo: Actor Hill Harper (center) is filmed talking about credit scores as part of a new program called Experian Boost at his business the Roasting Plant Coffee in downtown Detroit on May 1, 2019.

 (Photo: Ryan Garza, Detroit Free Press)

More: 'The Good Doctor' star Hill Harper in Detroit to help boost your credit score

More: Mistakes on your credit report could cost you thousands: How to fix them

One reader wrote me the other day perplexed by why his score fell more than 30 points to below 770 — still an above-average credit score — after he took on some “same as cash” offers that need to be paid in full during a certain time frame.

“For me, it's a matter of pride,” said George Feld of Sterling Heights. “It bothers me that you don't get credit for managing your money well.” 

He used the financing deals to buy a refrigerator and a dishwasher. He also turned in a leased vehicle and leased a 2019 Lincoln. 

He plans to pay the financing deals off, and has never missed paying off the balance before the promotion expires.

Even so, such plans can be tricky. Some consumers don't understand that they can be charged interest retroactively for the entire deferred interest period if they do not pay off the balance by the end of the period of a deferred interest credit card promotion.

Many consumers correctly know that overall missed payments on any credit card can hurt a score. But even then, only 86% of consumers knew that missed payments are used to calculate credit scores, compared with 94% in 2012, according to the latest survey. (You can take the quiz at

Why the lower scores? 

Credit scores can fall, temporarily at least, when you take on new credit, and taking out more than one new loan would impact a score. The trick here: You need to make a series of on-time payments to recover after taking on new debt. 

Important points to know: Having a good income and paying off the entire balance on one's credit cards every month aren't factors that are calculated as part of credit scores, said Chi Chi Wu, staff attorney of the National Consumer Law Center in testimony in Boston.

“Lenders do consider consumer income, of course, but not as part of the credit score,” she said. 

Many people have room to raise their scores. 

The average credit score nationwide was 680 as of the second quarter of 2018, Experian's VantageScore.

In Michigan, the average was 682. On average, Michigan consumers have 2.9 bank-branded credit cards and their average balances on credit cards was $5,730. On average, they're using 29% of their available lines of credit. Michigan consumers have on average 2.7 retail-related credit cards with an average retail debt of $1,805. Their average mortgage debt is $138,050. 

Here's a look at other credit score puzzles: 

Everyone has a unique credit file. But one thing many people do not realize is that your score is ly to be hurt if you're charging 40% or 50% or more of your available line of credit. 

You'd be surprised at what can happen when you charge too much.

My score, for example, dropped 5 points recently because I used one bank-issued credit card fairly heavily on vacation and the rest of the month. My previous usage was 12.3% and it went up to 28.28%. I also had opened a new credit card at a store the month before, yes, to get one of those discounts. 

All this sort of stuff can cause you to scratch your head. It's bad that I'm using my credit card? Or opening a new one to save money?

File photo: Experian is launching a program called “Boost America” to offer consumers with a limited credit history a new system to monitor and boost their credit scores. (Photo: Experian)

Well, in some cases, yes. It's all relative. 

If a person has a high score but then uses all of the available credit, the consumer might see a score drop by 40 points to 60 points, according to Jeff Richardson, vice president and group head of marketing and communications for VantageScore Solutions, a credit-scoring system created by the three major credit bureaus, Equifax, Experian and TransUnion.

“The exact percentage of impact will vary from one person to the next but keeping credit card utilization lower than 30% is considered a best practice,” he said.

So if you want to help raise your score, it's a good idea to keep the balance under 25% of the credit limit. It is fine — and a good idea — to pay off that credit card every month. Many consumers wrongly continue to think that they must carry a credit card balance in order to improve their credit score.

“The overarching lesson here is that if you plan on financing a large ticket item (auto, home, large installment loan) don’t ramp up utilization or apply for new credit cards,” Richardson said.

“That drop could prevent you from either getting approved or getting the best terms.”

Most people, of course, couldn't tell you what's 25% of their available credit limit. They might know the full limit on a card but not the limit that you shouldn't go above.  

For many consumers, the logic is counter-intuitive. After all, if you've got a $10,000 credit limit, you might think the lender is fine if you borrow close to that limit. Not so. 

“In general, the higher the percentage of credit line that is drawn down, the lower one's credit scores,” according to a report by the Consumer Federation of America and VantageScore Solutions. 

I got a new credit card and my score dropped

“Scores decline after a consumer opens up a new account because, all things being equal, a person seeking credit is slightly more risky than someone not seeking new credit,” Richardson said.

The initial impact, though, could be minimal. The inquiry by a potential credit card issuer or lender would cause the score to decline by a few points, Richardson said. Then once new account is opened, the score would drop too.

All told, Richardson said, that drop shouldn't be more than 20 points to 30 points.

A key concern: Is the borrower taking on more debt as part of normal spending? Or are we looking now at someone who is bulking up on credit because he or she is having trouble making ends meet? 

“By paying on time,” Richardson said, “the score will most ly actually rise from where it was originally.”

I pay rent. Will that boost my credit score?

Maybe yes, maybe no. Paying all bills on time is clearly important. Yet not all bills are treated equally when it comes to credit scoring.

Only 17% of multifamily rental property executives said they report rent payments, according to research by TransUnion, indicating that property managers have been slow to adopt to the process of reporting their data to credit bureaus. 

Yet, a new TransUnion survey, seven 10 renters say they would be more ly to pay the rent on time if their payments were reported. The online survey took place in May and included 1,330 responses from renters who are 18 or older. 

Someone who never had a credit card and doesn't have much of a credit history could even become “scorable” following a year of rent payment reporting, TransUnion said.

A consumer who has subprime credit and makes timely rental payments could see their credit score go up as much as 26 points in the same time. 

TransUnion wants to motivate property managers to implement reporting of rent payments, as a way to attract more reliable renters as well. 

TransUnion ResidentCredit accepts and discloses both positive and negative data. As a result, landlords could see delinquencies in real time as they screen applicants — not just as collections or public records.

So if you're renting, don't just assume that rental payments will be reported to a credit bureau. Ask about the policies before you sign a lease. 

Contact Susan Tomporat 313-222-8876 or Follow her on @tompor. Read more on business and sign up for our business newsletter.

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What does it mean if my credit score dips?

Credit score on the decline? This could be why

Tracking your credit score is easier than ever. An increasing number of banks, including Wells Fargo, provide you with unlimited access to your credit score.

But being able to watch your score so closely over time means that you may notice something unsettling — bumps and dips in that all-important number. So what’s going on from month to month? Why is your credit score fluctuating? And, more importantly, should you be worried?

Here are some of the most ly reasons you’re seeing a score change:

You’re comparing different credit scores

You may think that you have just one credit score, but the reality is that you have a few. So, when tracking your score over time, be sure you’re comparing the same type of credit score.

First, look at the credit model. The two most popular ones you’ll find are FICO®1 and VantageScore. Score models update periodically, resulting in new versions. Next, check the version of that model to ensure, for example, that you’re tracking FICO® Credit Score 8 consistently and not looking at FICO® Score 9 by mistake.

Your payment history has changed

Hands down, the most significant influence on your credit score is paying your bills as scheduled. As a result, if you’ve been a good bill payer but suddenly have a late or missed payment, you’ll ly spot a noticeable dip in your score.

The amount of credit you’re using has changed

Your credit utilization ratio — the percent of available credit you’re actually using — has a major impact on your score. So, your score may drop if you put a big purchase on a credit card. And you may see a bump in your score when you pay down debt or spend less than usual.

Plus, timing matters in terms of when your score is calculated. Even if you cover your balances each month, your score can look lower if you check it before you actually pay the bill — when you’re using more credit. Even after you’ve paid the bill, there may be a timing gap in which you may not see your score change automatically.

You’ve recently closed a credit card

Remember: Your score depends largely on how much available credit you’re tapping into. Even if your spending habits don’t change, you may reduce the amount of your credit limit by shutting down a card. Plus, losing an old card from your credit history can make you look less experienced with credit. And both of those factors can translate to a lower credit score.

You’ve applied for new credit

When you’re actively applying for credit cards, loans, or other forms of debt, a lender typically runs what’s called a hard inquiry on your credit report. Hard inquiries may cause a temporary dip in your score, and several of them can cause a noticeable drop.

Bad information has aged on your credit report

Late payments, debts in collections, loan defaults, and other black marks on your credit report certainly lead to decreased credit scores. The good news is as these issues fade into the past, they begin to have less of an impact. And, eventually, they’re no longer considered at all in calculating your score.

When should you worry about a dropping credit score?

Did your score shift unexpectedly? A few points’ difference from month to month is nothing to worry about. But major movement is worth investigating.

First, review any documentation that comes along with your credit score. Many reports offer a listing of negative factors dragging down your score. Have any of those factors changed since the last time you saw your score?

Second, look at your account activity on loans and lines of credit. Did you accidentally pay late or miss a payment entirely? Is your balance higher than usual? And are there any suspicious charges you don’t recognize on your cards?

Finally, order a free copy of your credit history report. Look for recently reported behavior that could explain the score change you’ve noticed. Be sure to contact the credit bureau issuing the report if you find incorrect information. Bad data may simply be an error or could indicate identity theft.

Many people worry when they see changes in their credit scores. And it’s true that big movement can point to a problem. But minor shifts are normal. Plus, knowing how your behavior impacts your score can make your score less mysterious while empowering you to build yourself a stellar credit history.


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