Why did my credit scores go down?

Credit scores have a tendency to fluctuate based on the information in your credit reports and the credit-scoring company that's running the calculation. When scores rise or fall by a few points, it's not usually something you need to worry about—especially if you've been managing your credit responsibly. However, if you notice a significant drop, it's important to find out why and take action to improve your score.¹  

6 reasons why your credit scores dropped 

An unexpected dip in your credit scores can be frustrating. You may think you've been managing your credit wisely, only to discover a sudden drop. Credit scores can go down for a variety of reasons—missed credit card or loan payments, an unusually large purchase, or an application for a new line of credit, to name just a few. They can even vary, depending on scoring systems.¹   

While FICO^® Score and VantageScore are the two main scoring companies, about 90% of creditors use your FICO Score when you apply for a loan, credit card, or other type of credit account.² Five factors affect your FICO Score, including: payment history (35%), credit utilization (30%), length of credit history (15%), credit mix (10%), and applications for new credit (10%).³   

VantageScore and other companies use slightly different criteria and proprietary software to determine your scores, but they generally consider the same types of factors as FICO.⁴  

Here's a closer look at some common reasons why your credit scores dropped and what you may be able to do about it. 

1. Missed or late payments 

Your payment history is a factor in determining your credit scores. This factor helps predict the likelihood you'll fall behind on future bills. Even just one payment that's 30 days late can cause your scores to drop. More serious issues, like missed payments or an account that's been sent to collections, can cause significant score decreases.³  

• What to do about it: Pay your bills on time, every time. To avoid missed payments, enroll in autopay so you'll never have to worry about forgetting to pay a bill or missing a due date. If you're struggling with your payments, reach out to your creditor to see if they can help. Over time, if you consistently demonstrate a more positive payment history, your credit scores will likely improve. 

2. High credit card balances 

Credit utilization, or the amount you owe compared to your available credit, is the second-most important scoring factor. If you've been using your card frequently or you've made any recent large purchases, it may cause your credit utilization to go up and most likely your scores to go down. Credit-scoring models typically calculate utilization for each account separately as well as your total utilization across all of your accounts.³  

• What to do about it: It's best to keep your credit utilization rate under 10%, but if you have to carry some debt, try not use more than 30% of your available credit. To lower your credit utilization, cut back on your credit card spending and try to pay off all of your balance (or as much as you can) each month. If you've got a lot of high-interest debt and you're struggling to pay more than your minimum due, it may be worth considering a debt consolidation loan.  

3. Recently closed accounts 

It may seem intuitive to close an old credit card you don't use much, but this can actually cause your credit score to drop. A portion of your credit score is determined by the age of your credit accounts as well as your "mix" of different types of credit, like loans and credit cards. Although the length of your credit history and account mix are less significant than your payment history or credit utilization, they're still important factors because they show card issuers and other lenders that you have a solid history of managing different types of credit.³   

• What to do about it: Keep old accounts open whenever possible, even if you don't use them. Unless you're paying a pricey annual fee for a credit card, it's usually a good idea to leave old credit card accounts open. It's also important to consider how you leave an account before it's closed. For example, when you pay off a loan, it will show up as "closed" on your credit reports. If the account was in good standing, meaning no history of missed or late payments, that positive payment history remains on your credit for 10 years. Negative remarks remain for seven years.  

4. New credit applications 

Any time you apply for new credit—like a credit card, personal loan, auto loan, or mortgage—the lender may perform a credit check known as a "hard inquiry." Your score typically only drops a few points temporarily after a hard hit to your credit, but you may experience a bigger dip if you submit too many applications in a short window or apply for credit often.³  

• What to do about it: A hard inquiry usually only affects your scores for about a year, even though it stays on your report for up to two years. Spacing out credit applications can help minimize the number of hard inquiries in your credit file. However, credit-scoring companies recognize that rate shopping is a typical part of comparing loan offers. So submitting your applications in a short window, like two weeks, has less of an impact on your credit. 

5. Issues with a loan you cosigned 

The mere act of cosigning on a loan (or being a co-borrower) doesn't negatively impact your credit score. However, if the primary account holder (or your co-borrower) has missed or late payments, your credit score will be impacted. Remember, when you cosign or serve as a co-borrower, you're also financially responsible for the loan.⁵  

• What to do about it: Make sure you understand the responsibilities and potential risks before deciding to cosign a loan with a friend or family member or take out a loan as a co-borrower. Be prepared to cover the loan payments, if necessary, to avoid default.  

6. Identity theft or fraud 

Fraudsters who get their hands on your personal financial information can do a number on your credit. They can open accounts in your name, run up debt on your credit cards, and more. Fraud is on the rise, and your private information could be exposed in many ways, from physical theft of a wallet to digital data breaches or phishing scams.⁶   

• What to do about it: Monitor your credit reports closely. If you discover anything that's not correct, it could be a simple mistake or could indicate you're a potential victim of fraud or identity theft. Either way, you'll want to report inaccurate information to each of the three major credit bureaus and consider placing a fraud alert on your credit reports. You may also want to put a lock or freeze on your credit. If identity theft is suspected, report the fraud to the police or visit ​​ReportFraud.ftc.gov to report it.  

The bottom line 

Credit scores frequently fluctuate. To avoid being blindsided, get to know all the factors that impact your credit scores, manage your credit responsibly, and monitor your credit reports regularly for fraud and inaccuracies. You can request a free copy of your credit reports from Equifax, Experian, and TransUnion once a year through AnnualCreditReport.com.    

1. Consumer Financial Protection Bureau. “What is a credit score?” 

2. myFICO. “FICO Score Remains the Most Widely Used Credit Score in the Securitization Market, Keeping Lender Confidence.”  

3. myFICO. “What's in my FICO Scores?”  

4. VantageScore. “The Complete Guide to Your VantageScore.” 

5. Consumer Financial Protection Bureau. “Why would I need a co-signer for an auto loan?” 

6. Consumer Financial Protection Bureau. “What do I do if I’ve been a victim of identity theft?”