Keeping on top of your credit score is an important responsibility for every adult. Whether you’re receiving notifications on your phone, in your inbox or just diligently checking every month or so, knowing your score is critical to maintaining (and hopefully improving) it. But of course, life happens, and sometimes your credit score hasn’t improved — or even stayed the same. Sometimes it goes down, and when it does you’ll need to understand why!
Credit monitoring websites are often best for deciphering what the factors are that are affecting your unique personal credit score, but if your score has dropped, it’s almost always due to at least one of the following reasons.
5 Possible Reasons Your Credit Score Has Gone Down
- You have late or missed payments.
- Your credit utilization is too high.
- You recently applied for a loan or credit.
- Your credit limit was lowered or you closed a credit card.
- Your credit report contains inaccurate information.
How Do Late Payments Affect My Credit Score?
Since payment history typically accounts for 35% of your credit score,1 making on-time payments is one of the most important factors to keep it from dropping. A missing payment can also continue to damage a person’s credit the longer it goes unpaid. If you’ve recently missed a scheduled payment for a credit card or loan, it’s within your best interest to make that payment as soon as possible.
Does a High Balance Hurt My Credit Score?
Another major factor in your credit score is credit utilization — that is, the ratio between the total balance you owe and the total credit limit on all of your revolving accounts (credit cards and lines of credit). You’ll want to keep your credit utilization to less than 30% of your credit limit at the time your statement is generated each month. When it goes higher than that, your credit score may drop.
Can Closing a Credit Card Lower My Credit Score?
If the credit limit for one of your credit cards or lines of credit has been reduced, or you recently closed a credit card, that will affect the ratio of your utilization to available credit. For this reason, you should always pay down your balance as much as possible before closing a card, and make sure your utilization doesn’t go above that 30% threshold.
Can Applying for Credit Hurt My Credit Score?
A much less significant factor in your credit score is whether you’ve recently applied for credit. When you apply for credit, a creditor will often review your credit reports and scores. They’ll do this via either a “soft” inquiry — which doesn’t affect your credit score — or a “hard” inquiry, which may temporarily decrease your credit score. The effect the hard inquiry has may be greater if you don’t have a very extensive credit history.
How Do I Correct My Credit Report?
Although it’s rare, mistakes do happen and incorrect information sometimes shows up on your credit report. Perhaps a lender reported inaccurate information. Perhaps (but hopefully not) you may have become a victim of identity theft or fraud. To prevent either situation from taking an impactful toll on your credit, be diligent about monitoring your credit reports and be sure to dispute any inaccurate information with all three credit bureaus as soon as you recognize it. Review these next steps to see how to dispute any inaccuracies.
1CreditKarma. (2016). How late payments can affect your credit.