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Why did my credit score drop?

Drops in credit score could mean high balances, closed accounts, late payments and more.

Building your credit score takes time, patience and discipline and sometimes the ebbs and flows can feel arbitrary. But if you’re wondering why your credit score dropped for no reason, it’s likely due to one of these top five causes.

5 reasons your credit score dropped

The reason your credit score dropped is tied to the factors that make up your overall credit score. Payment history has the biggest impact, but how much debt you owe, the length of your credit history, credit inquiries and more weigh into your overall score. Here are the main reasons why your credit score may have taken a hit.

Reason 1: You paid a bill late

One of the top reasons you’ll see your credit score dip is a late payment being reported on your credit file. Your payment history is one of the most important factors in calculating your credit score. So, the first step to recovering your credit score is to make sure that all outstanding balances are paid on time consistently.

Reason 2: You paid off a loan or closed a credit card

While paying off a loan feels like a real milestone, it can actually have a negative impact on your credit score. The same goes for closing a credit card. This happens for two reasons:

  1. You’re losing some of your available credit, which means you’re increasing your credit utilization.
  2. If you close an account with a long history of on-time payments, that history is no longer reflected on your credit profile.

If you can, avoid closing accounts, even if you aren’t using them any longer.

Reason 3: You’ve applied for too many lines of credit

Credit inquiries have a temporary negative impact on your credit. These hard inquiries happen when a lender is reviewing your case while you’re applying for new lines of credit or trying to take out a loan. New requests can stay on your credit report for up to two years, but generally only affect your credit score for a year. And, the effect is typically minimal — around five points, though in some cases it can be higher.

Reason 4: Your balances are too high

If you’ve been over using your credit card and coming up against your credit limit, you’re likely to see your score drop. As a general rule, you want to keep credit utilization below 30% of your available credit, so if you have a bunch of credit cards with a total limit of $10,000, you should keep your balance across all of your cards below $3,000.

Reason 5: There is inaccurate information on your credit file

While not common, sometimes there is incorrect information on your credit file. If you identify any inaccurate information that is negatively impacting your credit score one of the first things you should do is gather the facts and dispute the information, says Bruce McClary, spokesperson for the National Foundation for Credit Counseling (NFCC).

“The more frequently you’re exposed to the details of your credit report, the more likely you are to react more quickly if there is something that is reporting incorrectly and to dispute those items,” McClary says.

If you identify any mistakes on your credit report you can dispute the inaccuracies with each credit reporting company.

Could your credit score drop for no reason?

If you see a drop in your credit report, especially a significant drop, there is usually a reason. If you can’t pinpoint what went wrong, it could be that a credit card issuer closed an account due to inactivity, affecting your credit history, credit mix or overall credit utilization. Otherwise, you may be experiencing some sort of fraud.

How to check your credit score

As McClary said, being diligent and checking your credit score regularly is important. There are a range of free tools that can help you monitor your credit report including weekly reports from

Bottom line

While seeing a drop in your credit score can be cause for concern, don’t panic. The first step to getting your score back on the right track is to check your credit score regularly, identify any bad habits and try to correct them to move your score in the right direction.

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