7 reasons for a drop in your credit score

Find out what may have caused a drop in your credit score

Drop in your credit score

Are you surprised that your credit score has dropped since you last checked it? If yes, don’t worry because the credit score calculation is rather complex. It is not easy pinpointing the exact reason for a drop in your credit score. However, here are the common reasons for a drop in your credit score:

1. A 30 day late credit card or loan payment

Remember that your payment history has an important impact on your credit score. Payments made more than 30 days late are reported to the credit bureau. Once it shows up in your credit report, it is reflected in your credit score.

2. Unpaid account sent to collections

It’s important you not only pay your credit cards and loans to protect your credit score, but you also have to make non-credit payments in case they are sent to a collection agency and included in your credit report.

3. Expensive credit card purchases

The amount of available credit is also an important factor in your credit score. If you make a large purchase using your credit card in one month, your credit score drops even if you pay the full balance by the end of the month. This is because your balance is reported to the credit bureau before your payment.

4. Lowered credit limits

Your credit score is affected the same way by a lowered credit limit by charging an expensive item. If you have a balance on your credit card, and you use up you credit, it only leads to your credit score going down.

5. New credit application

10% of your credit score is affected by new credit report inquiries. Each time you apply for new credit, your credit score is at risk. However, as inquiries affect your credit score only for a year, if you had made only one inquiry, your credit score rebounds in 12 months.

6. Closing or cancelling a credit card

Your credit score will get greatly affected if you or your credit card issuer closes a credit card, especially if it has a balance.

7. Bankruptcy falling off your credit report

If bankruptcy falls off your credit report after a decade, you are most likely to move to a new credit scorecard. You find a drop in your credit score if your credit performance is compared with other people who have not filed for bankruptcy.

Need Help?

If you still need help with controlling your debt and/or improving your credit, fill out the form below and get a free credit consultation from a credit expert at Better Qualified.