Why Did My Credit Score Drop For No Reason?

(April 2024)

Why Did My Credit Score Drop For No Reason

In This Article

Did you experience a recent drop in your credit score? If yes, you’re on a journey of discovery. This article reveals some major reasons why your credit score suddenly dropped.

To Know Why Your Credit Score Dropped

  1. Understand What a Good Credit Score Is
  2. Review Your Credit Report in Detail
  3. Check if You Have a Late or Missing Payment
  4. Check if You Recently Applied For Credit
  5. See Why Your Credit Utilization Has Increased
  6. See if One of Your Credit Limit Decreased
  7. Check if You Recently Closed a Credit Card
  8. Check if There’s Incorrect Data on Your Credit Report and Fix it.
  9. See if Your Credit Reports Feature a Foreclosure and Bankruptcy
  10. Check to See if There is a Fraudulent Transaction Stemming from Identity Theft

Are you ready? Let’s move on.

1. Understand What a Good Credit Score Is

To know why your credit score dropped, understand the meaning of a good credit score. A credit score is a numerical representation that depends on the information in your credit report with a value that ranges from 300 to 850. Understand that credit score reveals the kind of borrower you are—whether or not you use credit responsibly.

Having a good credit score grants you access to varieties of loan offers. A good credit score ranges between 700-850 which can qualify you for a loan with favorable terms.

Remember having a good credit score does not guarantee that your loan will get approval because the lender considers other factors—the amount requested, the purpose of the loan, and so on—before considering you for a loan.

2. Review Your Credit Report in Details

To understand why your credit score dropped, review every detail of your credit report. Your credit report reveals personal information, inquiries, account details, and public record data. Monitor your credit report frequently to track your credit and protect yourself from fraudulent activities.

Understand that your credit report also reveals how you manage your credit, which guides your lender on the decision to lend you credit. Request your credit report from any of the three major credit reporting services: Experian, Equifax, and TransUnion.

When reviewing your report, check for changes in your personal information, account details, and your public record data. If you observe an error, dispute the error. To dispute your error with the credit bureau, explain in writing what went wrong, include documents that support your claim, and send your dispute by mail to the credit bureau.

3. Check Your Personal Credit Score

To understand why your credit score decreased, check if you have a late or missing payment. Your credit score reveals to your lender how reliable you are with credit. When you want to borrow, your lender calculates your score to see if you meet up with the standard. Know that the credit you refuse to pay may deny you another credit.

Aren’t you tired of payments? Pay off your debts within 30 days of missing your payment to prevent your account from going into default. If you delay your payment, you pay an extra late fee, and your interest rate increases—which ultimately reduces your credit score.

4. Check if You Recently Apply For Credit

To verify why your credit score went down, see if you applied for credit recently. When you apply for credit, your lender examines your credit information before approving your request, this act is hard inquiry.

Making a hard inquiry on your account brings down your credit score. Avoid requesting new credit because inquiries remain on your credit report for two years and harm your credit score.

5. See Why Your Credit Utilization Has Increased

To understand why your credit score dropped, check if your credit utilization has increased. Understand that credit card utilization is simply how much credit is available for your use at a given time.

There’s a direct relationship between your credit score and credit utilization—how much you owe divided by your credit limit times 100 percent. Consider your spending because high utilization leads to lower credit scores and vice versa.

For example, if your credit limit is $2,000 and your balance is $1,000, your credit utilization ratio, expressed as a percentage, is 50%.

6. See if One of Your Credit Limit Decreased

To know why your credit score reduced, observe if there’s a decrease in your credit limit. Note that a decrease in your credit limit harms your credit score. Credit limit reduces when your card is inactive or when card usage seems risky. Understand that a decrease in your credit limit increases your utilization rate and this limit what you can spend.

7. Check if You Recently Closed an Account

To grasp why your credit score dropped, examine if you close an account lately. Closing your account can damage your credit score, especially older accounts. Realize that when you close an account, there is a decrease in your credit limit and this leads to an increase in the credit utilization ratio.

Keep in mind that you are using a higher amount of your available credit which leads to a drop in your credit score.

8. Check if There's Incorrect Data on Your Credit Report And Fix it

To know why your credit score experience a decline, check regularly for a change in your personal information on your credit report. Review your credit report to check for errors and report to the credit bureau immediately if there’s error in your personal information, account details and inquiry.

Contact the credit bureau to remove any incorrect information on your credit report. Ensure your credit report is up to date and accurate because wrong information impacts your credit score negatively.

9. See if Your Credit Reports Features a Foreclosure And Bankruptcy

To discover why your credit score dropped, check the features on your credit report that drastically reduce your credit score. Understand that features like foreclosure and bankruptcy have a negative impact on your credit report.

Other serious payment issues that brings down the credit score include lien, charge off, public judgement against you. lawsuit.

10. Check to See if There is a Fraudulent Transaction Stemming From Identity Theft

To know why your credit score dropped, check if there is a fraudulent act on your credit report. Guard your account against theft. Your credit score can drop if someone steals your card and make purchases with it. In that case, your credit utilization increases which affects your credit score.

Tips to boost your credit score

  1. Never miss a payment or pay your bills late.
  2. Don’t spend more than 30% of your available credit
  3. Get a higher Credit limit.
  4. Pay down your debt
  5. Dispute any error
  6. Keep Your credit open
  7. Don’t borrow unless you need it

Recap

To know why your credit score drop, understand what a good credit score is and constantly review your credit report in details. Check if you have late or missed payments also check if you recently applied for credit.

See why your credit utilization has increased, and if one of your credit limits decreased. Check if you recently closed a credit card, or if there are incorrect data on your credit report you need fix. See if your credit reports feature a foreclosure and bankruptcy, and check to see if there is a fraudulent transaction stemming from identity theft.

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