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Why Did My Credit Score Go Down? 10 Reasons Why It Changed

“Why did my credit score go down when nothing changed?”

This is a common question our financial coaches are asked. The truth is, credit scores can rise and fall for a variety of reasons. When it drops by more than a few points or is consistently dropping over time, there’s a reason your credit score went down.

Keep reading to find out why your credit score might have changed and how you can improve it

1. Your credit report has a mistake

Did you know that 79% of credit reports contain mistakes? Yikes!

Lenders make mistakes, so it’s important to check your credit report for any errors. If you do find a mistake, you have the right to report it to your lender and dispute it with the credit bureaus. Credit companies are required to investigate any confirmed disputes promptly and free of charge.

To prevent any mistakes from sitting on your credit report for too long, sign up on Credit & Debt to get access to credit monitoring with IdentityIQ for free!

2. You’re using too much of your credit limit

If you max out your credit card, this could result in a quick drop of your credit score. Depending on your card’s limit, when you make a big purchase or run up your balance, it impacts your credit utilization rate. This is the amount of available credit you use and according to FICO, it makes up 30% of your overall credit score. So it’s a pretty important factor!

It’s calculated by adding up your credit card balance and dividing it by your total credit limit. Say you usually spend about $2,000 a month and your total credit limit is $10,000. Your utilization ratio would then be 20%. A good rule of thumb is to keep your ratio below 30% (the best scores are below 10%). Increasing your credit utilization can show lenders that you might not be in the best position to take on new debt.

3. You recently applied for a new line of credit

When you apply for a new line of credit, lenders have to request a copy of your credit report to determine your creditworthiness. Your credit report shows everything from payment history to credit usage and will help a lender decide if they want to lend to you or not. This is called a hard inquiry and actually does have an effect on your score for up to two years (even if you pull a hard inquiry yourself!).

This is a totally normal thing to happen as you use credit throughout your life. But, if you apply for too many credit accounts in a period of time, it not only negatively impacts your credit score, and also indicates to lenders you might be a risk. Be sure to routinely monitor your credit–you can always pull a soft inquiry instead! And only apply for a credit card when you need one.

4. You paid off a loan, thereby closing the account

Yes, this seems completely illogical. You paid off a loan and it can cause a score to drop? Unfortunately, the answer is yes. This is because paying off a loan could change what’s called your credit mix. Overall, it’s actually healthy to have a mix of different types of credit (credit cards, mortgages, auto loans, etc.) and is good for your credit score.

But if your loan was the only installment account in your credit mix, closing it might cause you to lose some points. Or if it was your only account with a low balance, all your other active accounts could have a high balance compared to your credit limit, causing your score to drop. Don’t avoid paying off your loans because of this though! That’s still important to do and your credit score will bounce back.

5. Your identity may have been stolen

This one is scary, but first things first, don’t panic. If you feel someone has stolen your identity and applied and opened credit cards in your name, there are steps you can take to help reverse any possible damage it may have done to your credit score. But how do you notice identity theft? First, be sure to monitor your credit with a close eye for any suspicious activity. And know you have the right to one free credit report periodically from each of the three major credit bureaus.

If you learn you’re a victim of identity theft, immediately place a fraud alert on your credit file with one of the national credit bureaus (the other two will be automatically notified). Then, you might want to fill out a report with the Federal Trade Commission (FTC) and start disputing inquiries on your report. Worst case, if the fraud alert isn’t stopping or slowing down identity thieves, consider freezing your credit, which will restrict access to your credit file. 

6. Someone racked up a big balance with your credit card

Sometimes you (or someone you loaned your credit card to) overspent without even realizing it! The Journal of Consumer Research reports that “the use of a credit card as a payment mechanism increases the prosperity to spend as compared to cash in otherwise identical purchase situations.”

This is to say, people with credit cards may be tempted to spend more than if they just had cash. Try to pay down this high balance as quickly as you can and then go back to using only a small portion of your available credit. Or if need be, you could ask for a higher credit limit.

If you’re facing building credit card debt, our financial coaches are trained to help. They can help you create a payoff plan and explain your options for a debt relief program, if that’s something you’re interested in.

7. You closed a credit card (or it was automatically closed)

When you close a credit card, it reduces your amount of available credit. And if you don’t reduce your spending at all, this will mean your credit utilization rate will go up (thus, dropping your credit score). Plus, the length of your credit history could also affect this. The older an account is the more likely it will negatively impact your score. So be sure to consider if it’s completely necessary before closing your oldest account!

Additionally, make sure you’re aware of your credit card’s terms. Sometimes, issuers will close a card after so many months without use. So, make sure you’re using all your credit cards for at least a few transactions.

8. You co-signed a credit card or loan

If you’ve recently co-signed a new credit card or rental agreement for someone, you’re legally obligated to make payments if that person can’t. And while we’re sure you trust the friend, family member, business partner or whoever you’re helping, this does have the potential to hurt your credit score.

First, if a payment is more than 30 days past due, the creditor can report this to the credit bureaus. Every late payment hurts your credit score. Yikes! Another major credit score damager is if an asset you co-signed for is repossessed. For example, if you cosigned a vehicle and it’s repossessed, this will hurt your score whether you drive the car or not. And lastly, if the account is in collections because of late or missed payments (even if you had no idea this was happening).

9. You have a derogatory mark on your credit report

A derogatory mark on your credit report shows lenders that you didn’t pay back a loan in the agreed-upon way. A bank or credit issuer could have placed a derogatory mark for many reasons including a late payment, bankruptcy, an account collection, lawsuit, foreclosure, or tax lien.

They can remain on your report for up to 10 years. ???? Derogatory marks do go down over time, and you may be able to get them removed if you dispute it with the credit bureaus. If you see one, be sure to verify immediately whether it’s legitimate or not.

10. Your credit limit was reduced

This one may also seem a bit contradictory. But, if your credit limit is reduced, your credit utilization will go up (even if your spending habits don’t change!). If this happens, you may have to decrease your credit card spending to improve your score. Or, you could look into opening a balance transfer credit card that can 1) help increase your credit limit consequently, lowering your utilization rate, or 2) if you qualify for a 0% introductory rate, you could potentially pay off your balance quicker.

What you can do to improve your credit

Hopefully, by now, you have a better understanding of why your credit score went down. Now here are five steps you can take to help bring it back up.

1. Pull a copy of your credit report and look for errors

You’ll want to pull a copy of your credit report from all three of the national credit bureaus: Experian, Equifax, and TransUnion. You can do that for free once a year at Then, take a look at your report with a fine-tooth comb! Check for anything that’s hurting (or helping) your score. Key factors that hurt include late or missed payments, high balances on your credit card, and collections.

Things that play a part in a higher credit score could be a mix of different credit and loan accounts, a history of on-time payments, and low balances. If you plan to check your credit report more than once a year, be sure to pull a soft inquiry so it won’t affect your score! And check with your lender to see if they offer alerts if and when your score ever changes.

2. Communicate with your lenders and credit bureaus about inaccuracies

Even just one mistake could bring down your credit score. If you see a mistake, say something! You have the right to dispute any report errors with your lenders and credit bureaus. It does take time for the request to go through and follow up with your lenders, but it’s important to go through the process. Especially if you’re building credit or planning to apply for a large loan. Typically, credit bureaus do have 30 days to investigate and respond, but some banks are faster or slower depending on their system.

3. Pay down outstanding balances

If you see outstanding balances, pay them! This can be overwhelming, but there are a few tried-and-true methods you can use. The snowball method involves paying off your lowest balance first, while the avalanche method has you pay off the balances with the highest interest rate first. You could also roll your credit card debt into one balance transfer card. Either way, choose the plan that’s going to consistently work best for you.

4. Monitor your credit for changes

Get into the habit of routinely monitoring your credit for changes. There are plenty of different credit monitoring services you can use to track your progress. Most of them are free, too! Alerts could include whether you paid off an account or opened a new one. They’re also great for helping prevent fraud and identity theft.

5. Work with a reputable company to work on your behalf

Sometimes, it’s easier to just pass the job along to the experts. Credit repair services are there to help you improve your credit score when you need it (and don’t want to do it alone!). A professional finance analyst will first evaluate your credit report and history. Then they will work with you to find any discrepancies. Your analyst (also known as an advisor) will dispute incorrect items on your behalf as necessary. They keep you updated so your involvement is to a minimum!

Abigail Masterson

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Get financial freedom! Talk to a financial coach for free!