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Why Did My Credit Score Drop Suddenly? 10 Possible Reasons

It can feel like your credit score went down for no reason, but there’s often a clear cause and an easy fix.

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Updated December 5, 2024
Written by Rachel Alulis
Here at MoneyFor, our goal is to help you make informed financial decisions. We are committed to accuracy and impartiality in all our content. It’s important to note that articles may reference products from our partners who compensate us. This influences which products we feature and their presentation on our site, not our evaluation.

Key takeaways

  • Late or missed payments, high balances, or closed accounts often cause a credit score drop.
  • Second Check your credit report for mistakes or inaccurate negative marks that could affect your score.
  • Most credit score dips are temporary. Pay on time and keep your usage low; your score will increase.

Why did my credit score drop for no reason? A sudden dip in your score can feel like a financial punch in the gut. It can leave you angry, frustrated, and anxious about what went wrong. Moving a few points up and down is typical and nothing to worry about. A downward trend or a large drop, on the other hand, is a big deal.

Credit scores change every month as lenders send new data to the credit bureaus – Equifax, Experian, and TransUnion.

While it can feel like your score dropped for no reason, there likely is an underlying cause. You could have paid late, closed an old card, or paid off a loan. Even seemingly minor actions like spending a little more one month can impact your score.

With so many possibilities at play, it’s a good idea to check your credit report to pinpoint why your score dropped. Then, take steps to fix it. The good news is that many dips are temporary, and you can easily recover.

Let’s review what makes your score go down and what you can do about it.

Jump to:

You missed a payment

Everyone misses a payment now and then. While perfectly normal, paying late can be a big deal. Your payment history accounts for 35% of your FICO score and 40% of your VantageScore. It is the most significant scoring factor in both models.

If you pay a few days late, your card issuer may not report the payment. Instead, they may charge a late fee and penalty APR (annual percentage rate). If you pay more than 30 days late, your issuer will report you to the bureaus, and your score could drop. The longer you wait to pay (60 or 90 days late), the bigger the drop will be.

FICO estimates that if you have a very good or excellent credit score, it will decrease by 63 to 83 points for a 30-day missed payment. Whereas, if you have a fair credit score, the drop will only be 17 to 37 points. For 90-day missed payments, the same scores decrease by 113 to 133 points and 27 to 47 points, respectively. In other words, the higher your score, the further it will fall.

Next steps: Pay your bill. Then, call your creditor and ask them not to report it. If this was your first missed payment, they may very well agree. Otherwise, it will stay on your credit report for up to seven years. Next, set up automatic payments or put reminders in your calendar so you never miss a due date.

If you cannot afford to pay, ask if your creditor has a hardship or payment plan you can participate in.

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You made a large purchase

Credit cards are a convenient way to make large purchases or cover unexpected expenses. Charge the item to your card, and you don’t have to pay for it all at once. The problem is that when you have a higher credit card balance, you’ll end up with a higher utilization ratio.

Your credit utilization ratio is how much of your available credit you use at a given time. It accounts for 30% of your FICO score and 20% of your VantageScore.

Ideally, your utilization ratio will be less than 30% of your credit limit — lower is even better. FICO found that consumers with excellent scores have utilization ratios below 7%. If your usage goes up, even if it stays below 30%, your score could drop.

Next steps: Pay down your balance before your issuer reports it. Most providers report at the end of your billing cycle. Check your statements or call your provider to know precisely when they report to the bureaus.

Your issuer lowered your limit

Your score could be going down because your issuer reduced your credit limit. A lower limit will cause your utilization ratio to go up if your spending stays the same. In turn, your score will drop.

Your issuer may have lowered your limit if you didn’t use your card much or your income declined. Another way you could end up with a lower cumulative credit limit is if you closed an old account.

Say your credit limit was $5,000, and you spend $1,000 each month. That comes to a 20% utilization rate. That’s good. If your issuer reduces your limit to $2,000 and you continue spending $1,000, your utilization jumps to 50% – way too high. You need to increase your limit, reduce your utilization, or do both.

Next steps: Reduce your spending or ask your issuer for a limit increase. They may be happy to oblige if you have a history of on-time payments or recently received a raise. See if they can do it without a hard inquiry – hard inquiries can cause a temporary drop in your score.

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There are mistakes on your credit report

Your score is calculated using the information on your credit reports. Any mistakes on your reports can cause your credit score to drop seemingly for no reason.

The Consumer Financial Protection Bureau says that inaccurate data on credit reports are among the most frequent problems they handle. Common mistakes include:

  • Incorrect personal details: Misspelled name or incorrect address
  • Wrong account information: Accounts that aren’t yours or duplicate accounts
  • Inaccurate activity: Payments recorded as late that were made on time or incorrect balances.
  • Outdated information: Paid-off accounts still listed as active
  • Unauthorized inquiries: Hard inquiries not authorized by you.

Next steps: Check your report for errors and derogatory marks. You can get a copy from each bureau once a year for free. Go to annualcreditreport.com.

Dispute any errors you find. If you find accurate negative marks, then you know what behavior you need to change in the future.

You’re a victim of identity theft

One of the most alarming reasons for a sudden big dip in your score is that someone stole your identity. Check your credit report for suspicious activity.

Spot hard inquiries you didn’t authorize, unfamiliar accounts, or address addresses where you’ve never lived? A fraudster may have submitted credit applications in your name or opened accounts without permission. Notice a higher-than-expected balance? It could be a scammer stole your card information.

Finding out you’re a victim of identity theft can be frightening. Act quickly to mitigate the damage.

Next steps: Report the theft to the Federal Trade Commission (FTC). Place a fraud alert on your credit file with one of the bureaus. The other two will be notified automatically. Dispute the inaccurate information on your credit reports and close affected accounts.

You may also want to implement a credit freeze, which will make it difficult for thieves to open accounts in your name.

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Other people used your credit card

Say your child took your card without your permission. Or an authorized user spent more than expected. In both cases, your utilization increased, hurting your score, but you still have to pay the bill.

Next steps: Pay down the higher balance as soon as possible to keep your usage low. Talk to the person who used your credit account. You may have to limit or even revoke their access. If the person is an authorized user, their credit score can still benefit without them using your card.

You’re a co-signer on a loan or credit card

A friend or relative with a poor score may have asked you to co-sign their loan or credit card for them. Your good score increases their chances of approval, and simply signing won’t hurt you.

The thing is, you are now equally responsible for payments on the loan or card. If the primary account holder misses a payment, then your score will drop. If the primary cardholder has a high utilization ratio, yours will increase, too.

Next steps: Pay the bill this one time to preserve your score. Then, talk to your co-applicant about their behavior.

For the future, make sure you have full access to the account. Review the statements so that if you spot issues, you can deal with them immediately. Close the account if the primary user cannot be trusted.

You closed an old account

Closing an old account you don’t use can be tempting, but think twice. You will lose that card’s limit, which reduces your cumulative credit limit. If your spending stays the same, your credit utilization ratio will increase. That’ll cost you a few points.

Closing old accounts will also shorten the length of your credit history. Lenders want longer histories since it gives them more data to go on. The longer you’ve had credit accounts, the better your score.

When you rarely use a card, the issuer may close it for you without asking. If this was one of your older accounts, closing it can have a significant effect.

Next steps: Consider whether closing an account is absolutely necessary. If the card has an annual fee, ask if you can switch to one without fees. If you rarely use your card, put a small recurring charge on it, then set up auto pay. This will allow you to continue using your account, keep your credit usage low, and avoid missing payments.

You paid off a loan

It’s counterintuitive, but paying off a loan can cause your score to drop. If it was your only installment loan, your credit mix would be less. Lenders like it if you have a mix of installment loans (mortgages and auto loans) and revolving credit (cards). If the loan was one of your first lines of credit, then the average age of your accounts will be lower.

Although repaying a loan may decrease your score, it is worth the dip. Paying off debt is very good for your overall financial health.

Next steps: Make payments on time and maintain a low credit utilization rate. Do these two things, and you will get an excellent score.

While a mix of accounts can boost your score, it is only 10% of your FICO score. There is no reason to go into debt for this small scoring factor.

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You applied for multiple cards at once

Every time you apply for a card or loan, the financial institution conducts a hard inquiry. Hard inquiries cause a slight drop of five to ten points and stay on your credit report for up to two years. One is not a big deal. But, several within a short time can cause a pretty big dent.

The exception to this rule is if you are rate shopping for a personal loan. Comparing loan offers is vital to getting the best deal. For this reason, the bureaus count hard inquiries made within 14 days as one credit inquiry. You can apply with multiple lenders, compare offers, and select the best loan, all without hurting your score.

The same is not true of credit card applications. Your score will dip slightly every time you apply.

Next steps: Research credit cards and only apply for ones you’re qualified for. If you’re rejected, wait at least six months before applying again.

A lot of providers let consumers pre-apply or get pre-qualified. Preapproval does not guarantee you’ll get the card when you formally apply, but it lets you know if you meet the basic criteria.

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Why does your credit score matter?

Your credit score is a measure of how responsible you are with money. Lenders, landlords, and even some employers use your score to assess your reliability or how much of a risk you pose.

A higher score opens the door to better interest rates, lower insurance premiums, and more borrowing power. It can save you thousands of dollars in interest and fees over time.

Conversely, a lower score means you’re less likely to be approved for loans or cards. If you are approved, the lender will charge more in fees and interest.

Credit score ranges

There are two major credit scoring models: FICO and VantageScore. Both range from 300-850 and consider your payment history, credit utilization, how long you’ve had accounts, new applications, and types of accounts. How they weigh the factors differs, as does the exact score ranges.

FICO scores

  • 800-850: Excellent
  • 740-799: Vey Good
  • 670-739: Good
  • 580-669: Fair
  • 300-579: Poor

VantageScores

  • 781-850: Excellent
  • 661-780: Good
  • 601-660: Fair
  • 500-600: Poor
  • 300-499: Very Poor

FICO is used by the vast majority of lenders.

Tips to fix a low score

If your score has taken a hit, there are practical steps you can take to build credit. Here are three effective strategies to achieve a healthier credit profile.

Credit builder loan

Credit builder loans help you increase your score by showing you can make on-time payments. Unlike traditional loans, the lender holds the funds in a savings account. You then make regular payments toward the loan. The lender reports your monthly payments.

As you build a positive payment history, your score goes up. When you pay the loan off, you receive the funds. It’s a great way to both improve your score and save money.

The exact fees, interest, and repayment terms vary among lenders. Compare your options before you apply.

Secured credit cards

Secured cards are another excellent tool. They work like regular credit cards but require a cash deposit — the security deposit sets your credit limit.

Use the card for small purchases and pay off the balance in full each month. This will establish a positive payment history, maintain a low usage rate, and avoid interest charges.

Make sure your issuer reports your credit activity to all three major credit bureaus. Reporting is the only way to increase your score. Over time, you may even qualify for an upgrade to an unsecured card.

Bill reporting

Only credit card and installment loan payments are typically reported to the credit bureaus. This is frustrating if you pay all your other monthly bills on time. Lucky for you, more and more companies are popping up that will report other monthly bills like rent, utilities, subscriptions, and more.

If you sign up for this service, the company will report your payments. If you pay on time, your credit score can increase.

One caveat is that FICO 8 – the credit scoring model used by most lenders – does not consider rent payments. Payments will still appear on your credit report, which lenders look at, even if they don’t boost your score. The good new is, the newer FICO 9 and FICO 10 models incorporate rent payments, and more lenders are switching to these models.

Frequently asked questions

Why did my credit score drop 20 points?

A 20-point drop could be due to a late payment or a higher balance than usual. You could have closed an account, or your issuer reduced your credit limit. Keeping your spending habits the same results in a higher utilization rate and a lower score.

2. Why does your credit score drop when you check it?

Your score doesn’t drop when you check it. When you check your own score, this is considered a soft inquiry and had no impact. Your score will drop by a few points when a financial institution looks at it to decide whether to approve you for a loan or card. This is called a hard inquiry.

3. Why did my credit score go down for no reason?

Your score going down may seem unpredictable but results from updated information on your credit reports. Late payments, higher balances, closed accounts, or paid-off loans all have a negative impact your score. If you’re sure there’s no reason, check your report. Look for mistakes, inaccurate negative marks, or signs of identity theft.

4. Why did my FICO score drop when I paid off a loan?

Paying off a loan reduces the average age of your credit accounts and changes your credit mix. Lenders like it when you have a different types of accounts; cards and loans. A longer credit history is also beneficial. While your score will drop temporarily, paying off a loan best in the long run.

Bottom line

It may appear that your credit score dropped for no reason, but this is hardly ever the case. A myriad of factors make up your score. Tweak any one of them, and it may change.

A lower score can be frustrating and concerning. Take a step back and examine your financial picture. Review your credit report and identify what caused your score to drop. Then, take steps to raise it.

You may need to set up autopay, dispute mistakes on your reports, or spend a little less. These drops are usually temporary setbacks. Anyone can build credit. All you have to do is try.

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About the author

Rachel Alulis

Rachel Alulis has been the lead editor for Moneyfor’s credit cards team since 2015 and for the financial rewards team since 2023. Before joining Moneyfor, Rachel worked at USA Today and the Des Moines Register. She then established a successful freelance writing and editing business specializing in personal finance. Rachel holds a bachelor’s degree in journalism and an MBA.

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