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Whether you’re getting your ducks in a row to buy a house, trying to secure a lower interest rate on a future auto loan, or simply monitoring your credit as a personal finance best practice (good on you!), even a small dip in your credit score can make your stomach drop.

The good news: In the big scheme of things, a credit score drop of 10 points isn’t a huge deal — or at least it doesn’t have to be. While it’s smart to keep an eye on what’s going on, a 10-point drop could be due to a new credit application or an increase in your credit utilization, both of which are often temporary and easily made up for with positive credit behavior over time.

Below, we’ll look into some of the most common reasons your credit score may have taken a quick dip.

Why Did Your Credit Score Drop 10 Points?

Credit scores usually run from 300 to 850, so 10 points really isn’t that significant of a drop. Of course, if you happen to be just a few points shy of having “good” or “exceptional” credit, that drop could feel like a more substantial loss. Fortunately, these fluctuations are normal and usually easily made up for with on-time payments, which have the largest effect on your credit score.

Some common reasons for a 10-point credit score drop include:

Hard Credit Inquiries

If you’ve recently applied for a new loan or line of credit, the credit check the lender makes to assess your creditworthiness can affect your score. This category, known as “new credit,” accounts for 10% of your FICO score. The effect can be compounded if you apply for many new loans or lines of credit in a short amount of time.

Balance Increases

Fully 30% of your FICO score is based on the total amount you owe versus the amount of credit you have available. So if you recently made a larger purchase on credit or took out a new personal loan, you could see a ding to your score.

Account Closures

While paying off a credit card or loan could help increase your score (by lowering your total balance), closing an account can affect the age of your overall credit history. This accounts for 15% of your FICO score. In the case of a credit card closure, it could also lower your total available credit, which could actually increase your credit utilization ratio even as your total balance decreases. So if you’ve recently closed an account, again, you may see your score take a small dive.

Errors or Identity Fraud

Scary but true: An unexpected dip could point to something fishy on your credit report, be it a payment misreported to the credit bureaus as late or a brand-new account you don’t recognize.

In any case, unexpected changes to your credit score are a great reminder to take a look at your in-depth credit history at least once per year. (A credit score update typically occurs every 45 days.) There are plenty of ways to check your credit score without paying, and you can pull your full reports annually at annualcreditreport.com. From there, you can file disputes with the credit bureaus — and the reporting lenders.

Recommended: Why Did My Credit Score Drop After Dispute?

Should You Be Worried About Your Credit Score Dropping?

As unsettling as a small credit score dip can be, if you’re carefully monitoring your credit and actively working on good financial habits, it’s usually not something to worry about. (Credit score monitoring lets you keep tabs on your score and earn rewards points when it increases.)

If, however, your credit score is dropping because you’re borrowing more than you can afford to pay back, taking out too many new loans or lines of credit at once, increasing your utilization ratio, or making late payments, it could be a wake-up call to start moving back toward healthier financial habits.

And, of course, if your dropping score alerts you to fraudulent or erroneous information on your credit report, it’s well worth the effort it takes to file a dispute and clear up that misinformation — before it wreaks even more financial havoc in your life.

Reasons Your Credit Score Went Down

As mentioned above, some of the most common reasons a credit score could drop include increased credit utilization (even if only temporarily), hard inquiries on your report, account closures, and errors or fraudulent information in your credit history.

Keep in mind, too, that the younger and less robust your credit history, the more weight each individual occurrence will have in your score. For example, if you’re a young adult who got their first credit card only a year ago, and still has only that single line of credit, a hard inquiry or balance increase could affect your score more profoundly than it would for someone with 15 years of credit history, thousands of dollars in available credit, and several different types of credit lines and loans.

What Can You Do If Your Credit Score Dropped by 10 Points?

If you notice your credit score has dropped by 10 points, you’re likely already monitoring your credit — which is a great habit to be in. Depending on why exactly it dropped, you may simply need to wait the fluctuation out. (For instance, if your score dropped due to multiple hard inquiries, there’s little else to do but wait — and stop applying for new lines of credit or loans.)

If you’ve recently increased your credit utilization or made a large purchase on a credit card, focusing on paying the balance back as soon as possible may also help. As always, making on-time payments in full on every account you have is one of the most important steps toward building and maintaining a healthy credit history and credit score.

Examples of Credit Score Dropping

Here are a few scenarios where you might notice a dip in your credit score.

Say, for example, you just successfully applied for a new credit card and then decided to apply for an auto loan, too. Even if your credit score was healthy enough to handle both of those inquiries — and get you qualified for both the new card and the loan — you may see a temporary dip because of the multiple hard inquiries.

Or maybe you regularly use a credit card for everyday purchases and then pay it off in full each month to take advantage of cash-back rewards. But one day, your car breaks down, and you find yourself needing to quickly fork over $800 you weren’t expecting to spend — and you reach for your everyday credit card. Even if you pay the total off in full at the end of the month, the temporary increase in your balance could diminish your score for a while, depending on when the amount is reported to the bureaus.

How to Build Credit

If you’re paying close attention to your score because you’re figuring out how to build your credit, the good news is, you’re already on the right track. While it’s impossible to build great credit overnight, awareness of your score and the factors that contribute to it is a great first step toward excellent credit.

There are plenty of ways to build credit over time, but here are some of the most important tips:

•   Make your payments in full, on time, every time. Since payment history accounts for the largest chunk of your FICO score, being consistent with payments is a key to building credit. If you can, paying off your credit cards entirely each month can help you build your credit without paying interest or carrying a revolving balance.

•   Avoid taking out too many loans or lines of credit at once. Along with the negative impact of multiple hard inquiries, getting yourself into too much debt too fast can make it impossible to keep up with payments and keep your utilization ratio low.

•   Don’t unnecessarily close accounts. Even if you stop using one of your credit cards, consider leaving the account open so it can help lengthen your overall credit age. (Try to remember to use the card every once in a while and then immediately pay it back. The card issuer may automatically close the account if it’s inactive for too long.)

Allow Some Time Before Checking Your Score

Rome wasn’t built in a day, and neither was your credit score. While it can be tempting to constantly check in on your score to ensure it’s trending the right direction, it can take some time for the 10-point dip you noticed to pass — or for the changes you make in your daily habits to reflect in your score.

What is worth checking every day, however, is your spending. Knowing where every dollar you earn is going can give you insight into areas where you could afford to cut back and save more. Using a money tracker app can help.

Closing a Credit Card Account Can Hurt Your Score

As discussed above, closing a credit card account can hurt your score, even if you’ve paid off the card and no longer plan to regularly use it. That’s because having the account open can increase the length of your credit history and also provide you with more available credit, which can help keep your credit utilization low. In short, think twice before you close a credit card account once you pay it off!

What Factors Impact Credit Scores?

According to Experian, these are the factors that affect your credit score and how heavily they’re weighted in the calculation:

•   Payment history, which refers to your record of making on-time payments to all of your accounts: 35%

•   Amounts owed, which refers to the ratio of money you owe versus your available credit (aka credit utilization): 30%

•   Length of credit history, or the average age of your credit accounts: 15%

•   New credit, which takes into account the number of recent hard inquiries: 10%

•   Credit mix, which favors those who have different types of accounts (a mortgage, auto loan, and credit card rather than only credit cards, for example): 10%

Pros and Cons of Tracking Your Credit Score

Tracking your credit score is one of the best ways to ensure you’re fully informed about what’s going on with your report. It also gives you the biggest leg up on nipping potential fraudulent charges or errors in the bud before they can have a deeply negative impact on your file.

But there are cons, too. For instance, if you’re paying hyper-close attention to your credit score and checking every single day, small, normal fluctuations of 10 points or less could stress you out.

As with everything else in life, the key is balance. Keep track of your score, sure, but don’t obsess over it every single day. This is especially true if you’ve checked your report and ensured it’s free of errors or fraud. Just keep paying your bills on time and avoid overspending, and your score will eventually catch up with your good habits. (A spending app can help you manage budgeting and bill payment.)

How to Monitor Your Credit Score

These days, there are nearly endless ways to keep track of your credit score without having to pay for the privilege. Many credit card companies offer FICO score tracking as a free perk, and you may also be able to access your score via your online bank account.

Keep in mind, though, that your score is not the same as your report, and only viewing your full report gives you the comprehensive details about what factors are going into your score. Examples include payment history, how long your accounts have been open, and how many accounts you even have in the first place. Checking your credit report is the best way to get ahead of fraudulent or erroneous information, so make sure you give them a look at least once a year.

The Takeaway

While a credit score drop of 10 points can be unsettling, in many cases, it’s perfectly normal — and will normalize so long as you continue to maintain your good credit habits. If it’s an unexpected fluctuation, however, it’s worth looking over your credit report for errors or fraud.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

FAQ

Why did my credit score randomly go down 10 points?

There are many reasons why a credit score might drop 10 points, including temporarily increased credit utilization, one or multiple hard inquiries on your file, or a recent account closure. To understand why your score is dropping, it’s a good idea to access your full credit report, which will help you ensure there’s no fraudulent activity or erroneously reported information in your file.

Is it normal for your credit score to fluctuate 10 points?

A credit score fluctuation of 10 points is fairly minimal and often normal, especially for those whose credit histories are younger and slimmer. If you only have a few accounts and they’re all relatively new, even small changes can have a relatively large impact on your score. However, as long as you keep making your on-time payments and avoid running up a large revolving credit card balance, these should automatically neutralize over time.

Why is my credit score going down if I pay everything on time?

Although payment history is one of the largest factors impacting credit score, it’s not the only one. Other reasons you might see your score decrease include a recent account closure, a change in your credit utilization ratio (caused by an account closure or taking out more debt), or a recent spate of hard inquiries on your file.

Photo credit: iStock/Tempura

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SORL-Q324-010

A money order is a valid form of payment, but the average American is likely to be more accustomed to receiving cash, a check, or a peer-to-peer payment through a popular third-party app.

You may wonder what to do if you receive a money order. You can cash it at various locations, such as your bank or a post office. Typically, you’ll need a valid ID to do so, and, depending on where you cash it, you may have to pay a fee. Learn more about the process here.

What Is a Money Order?

A money order is a secure way to pay another person or a business that offers a guarantee beyond what a paper check offers.

While paper checks can bounce if there’s not enough money in the check writer’s bank account, a money order has already been paid for. The funds exist in a secure account, and thus they cannot bounce when the recipient goes to cash the money order.

Advantages of Using Money Orders

Money orders offer several advantages for both the payer and the recipient:

•   No bank account needed: Those without bank accounts can’t send checks, and they may have difficulties using peer-to-peer payment apps, which typically require a checking account or debit card. This can make it challenging to send someone money without stuffing cash in an envelope, which is inherently risky.

An alternative? A money order. Because you can purchase and fund a money order with cash, you don’t need to open a checking account to complete the transaction.

•   No risk of bouncing: Because money orders are prepaid, you don’t have to worry about it bouncing. This makes it a safer way of accepting payment, particularly from a stranger.

•   No sensitive info: Checks contain personal information, including your name, address, phone number, and bank account and routing number. In the wrong hands, this can be risky and could leave you vulnerable to fraud. A money order shares much fewer details — typically, just the payer’s and recipient’s names.

Recommended: How to Transfer Money From One Bank to Another

Disadvantages of Using Money Orders

Money orders do have drawbacks to consider before purchasing:

•   Fees: The person purchasing the money order will need to pay a small fee (usually less than $5) to issue the money payment form. The recipient may need to pay a cashing fee as well, depending on where they go to cash the money order.

•   Limitations: Money orders are ideal for small transactions. Usually, they’re capped at $1,000. If you need to pay more, consider a cashier’s check.

•   Scam and loss risks: There are some risks involved with money orders. For instance, it’s difficult to cancel a money order; if the recipient has already cashed it, you’re out of luck. If not, you’ll likely have to pay a fee to have the money order canceled. Another major risk? Money orders are at the heart of many common bank scams.

Where to Purchase Money Orders

A huge benefit of money orders is how easily you can purchase them at common locations all around town. You can even purchase digital money orders without leaving the couch.

If you’re looking for a traditional paper money order, however, here are your main options:

Banks and Credit Unions

You can purchase a money order from most banks and credit unions. Often, you don’t even need to be a member of that financial institution, though you can inquire about discounts if purchasing from a bank or credit union where you’re already a customer.

Recommended: Can You Buy a Money Order With a Credit Card?

Post Office

The United States Postal Service (USPS) also sells both domestic and international money orders at many locations. You’ll want to visit its website to find a location near you that offers money orders; use the filter function to find offices that sell domestic and/or international money orders.

Grocery Stores and Retail Outlets

Many grocery stores, convenience stores, and other retail outlets (such as Walmart) also sell money orders, often through financial transfer services such as Western Union or MoneyGram. It’s a good idea to call a specific location in advance before driving there, just to be sure.

Step-by-Step Guide for Cashing a Money Order

Here’s how to cash a money order in four simple steps.

1. Verify the Money Order

Look over the money you received to ensure it appears valid. The USPS offers several tips to verify that your Postal Service money order isn’t a fake:

•   Check the limit: Domestic money orders are capped at $1,000. A money order for more than that might not be legitimate.

•   Look for security features: You should see a Benjamin Franklin watermark and a dark line (vertical) repeating USPS when holding the money order to the light.

•   Check the dollar amount for discoloration: If the money order looks odd, specifically where the dollar amount appears, it’s possible the payer changed the dollar amount after purchasing.

•   Make sure your name is correct: The name on the money order needs to match the name on your ID.

Other money order providers like banks and Western Union recommend such methods of verification as:

•   Double-check any watermarks that should be present for authenticity. Western Union and other providers may have watermarks or holograms to ensure their validity.

•   Verify the accuracy of the name and the dollar amount.

•   For Western Union money orders, you can phone For Western Union money orders, you can call 800-999-9660 to verify the funds.

•   For bank-issued money orders, you can visit a branch of the bank for authentication.

These steps can help ensure that your money order is legitimate and avoid issues down the line.

2. Endorse the Money Order

Assuming the money order is legitimate, take it to a bank or credit union, post office, qualifying retailer, or check-cashing location to cash it. You can cash it wherever it was issued (this should be evident on the money order), but you may be able to avoid fees by taking it to your own financial institution.

Once you’re there and at the counter, sign the money order to endorse it.

3. Present Valid Identification

Present your ID to the person behind the counter. They’ll compare your name to the name on the money order.

4. Pay Any Applicable Fees

Depending on where you are cashing the money order, you may have to pay a fee. Walmart, for instance, says it won’t charge more than $4 to cash a money order. However, fees can be particularly high at check-cashing services and retailers. To avoid these charges, you can take the money order to your own bank or credit union — or make sure the payer proactively sends extra funds with the money order to cover the cost of cashing it.

In addition to cashing a money order in this way, it’s worth noting that you can often cash a money by depositing it in an ATM. You can deposit an endorsed money order at an ATM at many bank once you’ve endorsed it, like a check.

Important Tips and Precautions

If you’ve received a money order, here are some tips to keep in mind:

Expiration Dates and Time Limits

While money orders don’t expire, it’s a good idea to cash or deposit yours as soon as possible. The longer you wait, the more you risk losing the money order or having it stolen. In addition, the value of the money order could decline due to fees being deducted if it sits for over one to three years.

Recommended: Tips for Tracking a Money Order

Fees and Charges

Where you choose to cash a money order can impact how much you pay in fees, if any. Your best bet for avoiding fees is taking it to your own bank or credit union. Go elsewhere, and the fees can cost a few dollars or more to cash a money order.

Handling Lost or Stolen Money Orders

If you’ve lost a money order you received or had it stolen, you’ll need to reach out to the money order’s issuer. That typically allows you to track the status of the money order or fill out a search request if the receipt is missing (which can involve a higher fee) if you don’t have the necessary details to quickly track it. Depending on what you learn, you might request a replacement and/or request a replacement if it’s been cashed fraudulently.

Avoiding Fraud and Scams

Fraudsters frequently use money orders to scam people out of money. If you’re selling goods online, don’t ship the items until you’ve received the money order and verified that it’s legitimate. Sometimes scammers will use the “overpayment” ruse in which they send you a money order for more than you were expecting and ask you to refund the difference. This should always be a red flag. The money order could prove to be fraudulent and, if you “paid back” the overpayment, you’ll be out some money.

The Takeaway

Cashing a money order is fairly easy, involving just a few steps, including bringing it to a cashing location with valid ID. Always thoroughly review the money order to ensure it is legitimate before endorsing it and attempting to cash it. Also, to avoid potential fees, try cashing it at your own bank or credit union.

Speaking of banks, see what SoFi offers.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is the difference between a money order and a cashier’s check?

While both a money order and a cashier’s check offer secure ways of sending money to another person, there are several key differences between the two. Cashier’s checks are available in larger sums than money orders, which are typically capped at $1,000 each. However, you can purchase money orders at more locations (making them accessible to those who are unbanked) — and usually at a lower fee.

How long is a money order valid for?

Money orders do not expire. The funds that are attached to the money order remain in an account until they are claimed by the recipient. However, if a money order stays uncashed for more than one or three years, a service fee could be assessed and could eat away at its face value.

Can I cash a money order at any bank or credit union?

You may be able to cash a money order at any bank or credit union, but you could also be charged a fee to do so. You can typically avoid this kind of fee by taking it to your own bank or credit union or the issuing institution.

Photo credit: iStock/Sergey Dementyev

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As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.20% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/31/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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