How to Diagnose Credit Score Drops

Written By Cathy Lovering
Last updated May 18, 2021

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May 18, 2021

Simple. Thrifty. Living.

Your credit score can indicate sound financial health, but what if it drops unexpectedly? Don’t let it worry you too much. Things that you control, like debt payments and recent credit applications, play a role. That means they are fixable. You can take steps to get back on track.

But how do you know what steps to take? You can find out why your score went down by looking at your credit history. Then you can start to build your score back up, or, in the event of wrong information, get it repaired.

Reporting agencies look at a few factors to arrive at your credit score. One example is the FICO score, which measures the following types of activity. Note each of these is weighted differently. The percentage next to the factor shows the proportion of that factor in your score:

  • History of payments (35 percent). This is a record of your missed and on-time payments to creditors.
  • Amount you owe (30 percent). This is the total owing across all debt types, including credit cards, car loans, mortgage, and others.
  • Length of credit history (15 percent). This is how long you have had a credit file. The longer your history, the better it is for your score.
  • New credit or recent applications (10 percent). This is any new credit you have requested or received, such as a new loan or credit card.
  • Credit mix (10 percent). This shows the mix of different types of credit. A person with only credit card debt may fare worse in the credit score calculation than someone who has both credit card and mortgage debt.

Although these figures are for FICO, you can rest assured most credit agencies use a similar calculation.

A decline in your credit score usually means there’s been some negative activity on your account. But there may be several reasons. Here are a few examples:

Missed Payment or Late Payment 

Remember payment history weighs heavily on your number. If you miss a credit card payment, or take a few days past the due date to put money against your student loans, your score may go down.

Using More Credit

The ideal credit utilization ratio is 30 percent or less. That means if you have one credit card with a $10,000 limit, you don’t want to owe any more than $3,000 at the time of your statement. If you use more credit overall—even going from a low utilization rate of 0 to 5 percent to 10 percent—your score can take a hit.

Closed Credit Account 

If you get rid of a credit card, it takes away the temptation to spend beyond your means. But this harms your credit score in two ways. First, because you no longer have this available credit, your overall utilization rate goes up. Also, closing an account shortens the length of your credit history—if it’s your first (and oldest) credit card, for example.

If you want to take away the urge to spend, chop up the card and delete the number from online apps. But keep the account open.

New Credit Applications 

Whether it’s a loan, mortgage, or credit card, applying for new credit results in a hard inquiry onto your report. This causes a small reduction in your score, as it can signal you have financial problems.

Collections, Bankruptcies, or Foreclosure

Major financial events, such as an unpaid bill that goes to collections, a bankruptcy declaration, or home foreclosure all cause a hit to your credit report.

As you can see, little actions—like letting that department store bill slip your mind—can have a real impact on your credit score.

So these are the possible reasons why your credit score can dip. How do you find out exactly what happened? You can take a look at your credit history.

If you know your score has gone down, you probably already have access to your credit report through Experian, Equifax, TransUnion, or a website like CreditKarma. Look at this information closely. Some things to note are:

  • Recent missed payments. Each of your credit accounts should list an indicator of payment history, such as a checkmark for every month payment came in on time, and an X for every missing payment.
  • Recent credit inquiries. These are signs a creditor, like a bank, credit card company, mortgage broker, or auto lender viewed your credit history to assess an application.
  • Accounts sent to collections. These are often listed in a separate section from your current accounts.
  • Newly closed accounts. These may stay on your credit history, but may no longer be a factor in your score.

Your bank may also give you access to your credit score. Often your bank has a section called “factors affecting your score,” so you can see why your score is lower than it used to be.

Sometimes your credit score drops for one of these reasons—but none of it is your fault. Mistakes do happen, and you can take steps to correct them.

The FTC recommends writing to the credit reporting agency and the creditor that posted the error. For example, if you paid your Visa on time last month, but your Experian report shows a missing Visa payment during the last cycle, contact Experian and Visa. The FTC has sample letters you can send to both.


An easier way is to visit the website of the reporting agency. Each one should have a “dispute” section on its website. For example, Experian’s dispute page is here.

You may have to provide supporting documentation to prove the error. For example, you may have a record of your Visa payment leaving your bank.

Monitoring your credit score is one of the best ways to keep up-to-date with your financial health. If you see your score start on a downswing, don’t panic—take a closer look at your report. If there are errors, ask that they be fixed. Otherwise, maintain good financial habits to get your score back up again.

About the Author

Cathy Lovering

Catherine Lovering has written about personal finance and health for over 10 years, with bylines on and She holds an LL.B. (J.D.) from the University of Victoria.

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