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Employers can approach background checks in different ways. In some cases, credit reports are included. A job background check may include a credit check in certain industries, such as banking and security. The size of the company can be a factor, too: Large corporations are more likely to conduct a credit check than a small family business.

We’ll walk through the specifics of when an employment background check may include a credit check, why potential employers want this information, and what financial data they have access to.

What Are Credit Checks?

A credit check is a request to see your financial data as collected by one of the three major credit reporting bureaus: Equifax, Experian, and TransUnion. Credit reports contain information about past and existing credit accounts, payment patterns, and how much debt you’re carrying.

According to the Fair Credit Reporting Act (FCRA), only certain individuals and organizations have the right to check credit histories, such as lenders, insurance agents, and landlords. Potential employers can also conduct a credit check for employment purposes, with your permission.

Sometimes credit checks are conducted to confirm a consumer’s identity — and head off identity fraud — rather than to investigate your financial history. For instance, banks may run a limited credit check on customers looking to open a checking account.

Credit Check vs Background Check

A background check contains identification verification information along with data from criminal records, educational and employment backgrounds, civil records, driving history, and more. In some instances, a background check may also contain a credit check.

The Importance of Good Credit

A good credit history primarily makes it easier to get approved for a loan and to qualify for better interest rates and loan terms. The higher the score, the less someone will pay in interest over their lifetime, potentially saving them money in the long run.

Good credit can also help renters qualify for an apartment. In some cities, renters routinely provide a credit reference with their rental application. While there’s no minimum credit score needed to rent an apartment, a strong credit history shows landlords that you’re someone who pays their bills on time.

Employers may also check your credit if you’ve applied for a job. Having good credit without any red flags can make the hiring process go more smoothly. However, some cities and many states have banned this protocol or put limits on it.

Recommended: Should I Sell My House Now or Wait?

Why Employers Look at Your Credit Score

An employer may run a credit check on a job applicant whom they’re seriously considering hiring. Employer credit checks are more common in industries where employees handle money or have access to customers’ financial data.

By conducting credit checks, businesses hope to confirm that an applicant demonstrates financial responsibility and doesn’t pose a security risk to the company, other employees, or customers.

Responsibility

A credit report shows how responsibly an applicant has handled their own money. If there are any red flags, the employer may not want to hire that person to handle company funds or take on other important responsibilities.

Security

A credit report can be used to verify your identity along with other pieces of background information. If there are discrepancies that can’t be easily cleared up, that’s a red flag.

What a Credit Report May Tell an Employer

The information in a credit report can include employment history as well as red flags such as late payments, debts sent to collections, foreclosures, liens, lawsuits, and judgments.

Employment History

Your complete employment history is not included in a credit report. Past and current employers may appear on your credit report, but only if you listed them on a loan or credit card application. Typically, if a lender wants your employment history, they will ask you for it directly.

Late Payments

Credit reports contain information about current and historical credit accounts, including installment loans (mortgages, car loans, personal loans) and revolving credit (credit cards and lines of credit). The reports typically contain information from the past seven to ten years, including a person’s payment history and whether credit accounts are paid up to date or are past due.

Debt Collection

Once someone is behind on payments — at least 120 days — the lender may send the account to a collections agency. These agencies attempt to collect on the bill. This can have a significant impact on your credit score, since making payments on time is the biggest factor in the algorithm that determines your credit score.

Debt Charge-Off

If a company you owe money decides they can’t collect the funds, they can “charge off” the amount as uncollectible. This may stay on your credit report for seven years, starting with the delinquency date that ultimately led to the charge-off. A debt charge-off typically lowers the person’s credit score even more than going to collections.

Foreclosures

When a homeowner misses multiple mortgage payments, the lender may take possession of the home, or “foreclose” upon it. This remains on a credit report for seven years, starting with the first missed payment that ultimately led to the foreclosure. This can significantly reduce someone’s credit score — although the impact may diminish over time — and can be a red flag for employers.

Recommended: Does Net Worth Include Home Equity?

Liens

A tax lien is a claim that you owe money for taxes, usually federal, state, or property tax. Tax liens no longer appear on credit reports by the three major credit bureaus, and they can’t affect your credit. They are, however, available on public records. If an employer conducts a full background check, they can still receive this information.

Lawsuits and Judgments

Just like tax liens, judgments from lawsuits are not included in credit reports or factored into a credit score. An employer that conducts a background check, though, will likely receive this information because it’s part of public records.

How to Prepare for an Employer Credit Check

Every consumer should be aware of what information is available on their credit report. You can request your credit report and find out your credit score for free at AnnualCreditReport.com.

Review your report for errors. Even small typos — like misspelling your name — could present problems down the line. Report inaccuracies to the relevant credit bureaus via their online dispute process to have them corrected or removed.

You may also consider signing up for a credit monitoring service. What qualifies as credit monitoring varies from company to company. Look for a service or a money tracker app that sends customers alerts whenever their credit score changes, accounts are opened or closed, and red flags appear on their credit history.

If you’ve had financial problems in the past but have turned things around, be prepared to explain to your potential employer how you’ve accomplished that.

Recommended: What Is a Tri-Merge Credit Report?

Credit Check Limitations

Credit reports contain a lot of private financial information. However, you can feel secure knowing that there are strict limits to what can be included. The following information cannot appear on your credit report:

•   Account balances for checking, savings, and investments

•   Records of purchases made

•   Income information

•   Judgments and tax liens

•   Medical information (physical and mental), although money owed to a doctor or hospital can appear

•   Marital status

•   Disabilities

•   Race and ethnicity

•   Religious affiliations

•   Political affiliations

Does an Employer Credit Check Hurt Your Credit Score?

No. Employers conduct what is known as a “soft credit inquiry” or soft pull. Because the credit check isn’t the result of applying for a new loan or credit card, the request probably won’t appear on your credit report and it won’t affect your score.

What Are Your Legal Rights as a Job Applicant?

According to federal law, job applicants have the right to:

•   know what is in their file

•   ask for a credit score

•   dispute incorrect or incomplete information

•   be told if information in the file is used against them

An employer or potential employer must get written consent before they can request credit report information (the trucking industry is an exception). Some cities and many states have banned or put limits on an employer’s ability to check your credit report.

The Takeaway

Employers may run credit checks on applicants as part of the hiring process. By conducting credit checks, businesses hope to confirm that an applicant demonstrates financial responsibility and doesn’t pose a security risk to the company, other employees, and customers. Credit checks are more common at large corporations and in industries where employees handle money or have access to customers’ financial data. You can prepare for an employer credit check by requesting your report and correcting any errors. You may also want to use a credit score monitoring service to keep tabs on any changes.

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 do background checks include credit reports?

Information found in a credit report can give the employer a sense of the job applicant’s financial stability. This may be especially important if the job involves handling money, financial data, or pharmaceuticals. Some industries that routinely pull credit checks on applicants include banking, retail, insurance, public safety, and security.

Does a background check include a hard credit check?

No. A background check with a credit check involves a soft inquiry, so it won’t affect your credit score.

What causes a red flag on a background check?

Criminal records, suspicious credit histories, inconsistencies in information provided, and gaps in employment history can be considered red flags in a background check.

Photo credit: iStock/serggn

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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-Q324-035

Seeing a significant dip in your credit score can be disheartening, especially if it’s taken a 60-point plunge. But keep in mind there are many explanations for a drop, including changes to your mix of credit, the age of your accounts, credit utilization, or payment history. Or it could be due to an error in your credit report or even a case of identity theft.

Understanding why your credit score fell by 60 points is an important first step as you work to boost your numbers.

Should You Be Worried About Your Credit Score Dropping?

It depends. It’s not uncommon for credit scores to fluctuate by several points, and a slight drop in is usually nothing to stress about. However, if your score dropped suddenly or has been decreasing over time, it’s a good idea to investigate what might be behind the change.

A lower credit score can have far-reaching effects. It could impact your ability to rent an apartment or secure a home, car, or personal loan with favorable interest rates. And if you’re applying for a job, potential employers may run a credit check.

Why Did My Credit Score Drop 60 Points?

It’s fairly normal for your credit score to change by a few points here and there over time. That’s because credit scores are based on the most recent available credit information reported by lenders and collection agencies — and that information may be received at different times throughout the month. The score you see today may be different a few weeks later.

But if your score dropped 60 points, chances are it happened for a reason. Late payments, an increase in your credit utilization, signing up for multiple new credit cards in a short time frame, or closing an old account could all help explain a dip.

Recommended: Why Do I Have Different Credit Scores?

7 Reasons Why Your Credit Score Went Down

Here are some common scenarios that could negatively affect your credit score.

There’s a Missing or Late Payment

A consistent, on time payment history is one of the biggest factors that determine your credit score. It makes up 35% of your FICO® Score, which is used in 90% of lending decisions.

While missing a credit card or loan payment can happen to anyone, a payment that’s 30 days past due can dramatically lower your credit score, particularly if it’s high. For instance, someone who has a credit score that falls within the good to excellent credit score ranges may see their score drop by 63 to 83 points with one missed payment. Meanwhile, someone with a fair credit score could see a drop between 17 to 37 points, according to FICO.

Your Credit Utilization Is Too High

Credit utilization, or the amount of credit you’re using versus the amount of credit you have available, is also important, as it accounts for 30% of your FICO score.

If you use too much of your available credit, it could signal to lenders you’re overextended and may not be able to keep up with your debts. On the flip side, the lower your credit utilization, the higher your credit score can be. A good rule of thumb is to aim to keep your credit utilization below 30%.

Whether you use a spending app or go the DIY route, creating a budget can help you keep your finances in order and your credit utilization low.

There’s a Mistake in Your Credit Report

Mistakes happen, but they could cause your credit score to fall. Common credit report errors to be on the lookout for include a false late payment, incorrect account balances, a closed account that’s still showing up as open, and a misreported current balance or credit limit.

One way to help spot issues early on? Check your credit report regularly and dispute any errors. You can now check your credit report for free on a weekly basis from each of the three major credit bureaus: TransUnion, Equifax, and Experian.

Recommended: Why Did My Credit Score Drop After a Dispute?

You’ve Closed a Credit Card Account

If you’ve paid off a credit card balance, you may consider getting rid of that card altogether. But that can lower your credit score. That’s because when you close out an account, your overall available credit is lower.

And if that account is older, the length of your credit history decreases, too. Lenders like to see borrowers who have active accounts and a history of making regular on-time payments.

You’ve Recently Applied for Credit

There’s nothing wrong with applying for a new credit card. But keep in mind that every time you apply for a new line of credit or a loan, the lender may perform a hard credit check. (That’s when the lender pulls your credit report to assess your credit history.)

A single hard inquiry will result in a slight dent in your credit score. But multiple hard inquiries could cause your score to drop by as much as 10 points each time they occur.

You Paid off a Loan

When you pay off an installment loan, like a personal or auto loan, the account shows up as closed on your credit report. As a result, your credit mix — which composes 10% of your credit score — may change.

You’re a Victim of Identity Theft

If your identity has been stolen — and thieves open up a line of credit or max out your current credit cards — you may see a significant drop in your credit score.

If you suspect you’re the victim of identity theft, you’ll want to report fraudulent transactions ASAP to your creditor or financial institution. If you think your Social Security number or other important personal information has been stolen, you should report it to the Federal Trade Commission (FTC).

You might also want to contact one of the three major consumer bureaus and ask them to place a fraud alert on your credit report. This lets lenders know they need to take extra measures to verify your identity if they get a credit application in your name.

What Can You Do If Your Credit Score Dropped by 60 Points?

There are several things you can do to get your score back up if it falls by 60 points.

The first thing you’ll want to do is review your current credit report to make sure there aren’t any glaring errors. As noted previously, you can obtain a free credit report from TransUnion, Equifax, or Experian via AnnualCreditReport.com.

Another thing to do is to pay your bills on time, every time. One way to ensure you won’t miss a payment, or pay late, is to set up automatic payments so the money is automatically deducted from your bank account on the due date. Tools like a money tracker app can help you spot upcoming bills and manage payments.

How to Build Credit

Building credit can take time, but here are some strategies to consider:

•   Become an authorized user on someone else’s credit card account. This allows you to reap the benefits of the cardholder’s good credit. Just be sure the person who authorizes you is trustworthy and uses their card responsibly.

•   Get credit for other bills you pay, such as rent or utilities, by having them added to your credit report. Experian Boost, for example, adds on-time payments from other accounts to its credit reports. There are also existing rent-reporting services that can report your on-time rent payments to the credit bureaus.

•   Ask the lender to increase your credit limit. Having access to more available credit without increasing your balance can lower your credit utilization — and potentially increase your credit score. When you make the request, ask the creditor if it’s possible to avoid a hard inquiry, which could cause your score to dip a few points.

Allow Some Time Before Checking Your Score

It can help to think of your higher credit score journey as a marathon, not a sprint. Credit reports are updated when credit issuers send new information to the credit reporting agencies. Typically, this occurs every 30 to 45 days. So if you’re working to correct or dispute errors, or taking other steps to improve your credit score, you may not see an improvement right away.

Similarly, if you open a new credit card, it can take a few months before you see any credit score updates.

Recommended: How Long Does It Take to Build Credit?

Pros and Cons of Tracking Your Credit Score

There are several benefits to tracking your credit score — and some drawbacks to consider, too.

Pros:

•   You can spot mistakes early on.

•   Checking your score won’t hurt your credit because it’s a soft credit inquiry.

•   You can see where you stand financially and how you can improve your score.

Cons:

•   You may be charged monthly or annual fees.

•   You may be frustrated or discouraged with your current score.

•   You could still become a victim of identity theft or fraud.

How to Monitor Your Credit Score

There are a few different ways to check your credit score without paying, although you could pay for the service.

Some companies, including SoFi, Experian, and Capital One, offer a complimentary credit monitoring service. Certain credit card companies and banks also provide customers with their credit score. Another option is to track your FICO score for free at myFICO.com.

The Takeaway

Seeing a 60-point drop in your credit score out of nowhere can be upsetting. But take heart: There are steps you can take to help reverse that decline. By staying on top of your monthly payments, monitoring your credit reports, and keeping credit utilization low, you can help put yourself — and your credit score — back on firm footing.

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 has my credit score dropped 60 points out of nowhere?

Your credit score could have taken a dip of 60 points for a number of reasons, including missing one or more payments, having a high credit utilization, paying off a loan, incorrect information on your credit report, or being the victim of identity theft.

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

Although making timely payments makes up the biggest part of your score, it’s not the only factor. You could be great about paying your credit cards or loans on time, but other issues could be responsible for your score going down. For example, if you’ve closed out a credit card account, that can affect your credit history and credit mix — both of which can impact your credit score.

How to dispute a credit score drop?

Contact the credit reporting company that’s showing inaccurate information on your credit report. Let them know about the error and be prepared to show documentation to back up your claim.

Photo credit: iStock/Neustockimages

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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

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-Q324-013

Seeing your credit score fall by 70 points without warning can be alarming. But there are a number of reasons for a dip, including late or missed payments or changes in your credit mix.

Keep reading to learn about what causes a credit score to drop and what you can do to help boost your numbers.

Why Did Your Credit Score Drop 70 Points?

Some changes in your credit score over time are to be expected. The three-digit number reflects the most recent available credit information reported by lenders and collections agencies.

However, if your score has dropped by 70 points, there’s likely a good reason why. And it’s a smart idea to investigate what prompted the dip.

Reasons Your Credit Score Went Down

It’s not always easy to uncover why your credit score fell by 70 points, but there are some common scenarios that could be to blame.

•   Your credit utilization has increased. Your credit utilization ratio is the percentage of credit you’ve used, based on your total available credit. It makes up 30% of your FICO® Score, which most lenders rely on. If you’ve maxed out the credit limit on one or more credit cards, your credit utilization ratio will likely increase. And your credit score may take a hit as a result.

•   You’re late with a payment. How well you stay on top of payments accounts for 35% of your FICO Score, and a payment that’s more than 30 days late can put a noticeable dent in your score. If you have trouble keeping up with due dates, consider enlisting the help of a money tracker app.

•   Your account has been sent to collections. Typically, accounts that are more than 180 days past due are sent to collections. This will impact your credit score, but just how much depends on your history. For instance, if you have an otherwise clean credit record, you might see a steeper drop than someone who already has a poor credit score and a spotty payment history.

•   You’ve closed a credit card. There are a couple of reasons why canceling a credit card can hurt your credit score. First, you no longer have access to the card’s credit line amount, which could increase your credit utilization rate. And second, if you close a card you’ve had for a long time, the length of your credit history goes down. The good news is, there are ways to cancel a credit card without negatively impacting your credit score.

•   There’s an error on your credit report. Mistakes happen — and if one ends up on your credit report, it could negatively impact your score.

•   You’re a victim of identity theft. Whether someone opened up a line of credit in your name or racked up charges on your credit card, identity theft can wreak havoc on your credit score.

Examples of Credit Score Dropping

Sometimes, a simple action can cause your credit score to drop without you even realizing it.

Let’s say you have a new credit card that offers a temporary 0% APR for 12 months and a credit limit of $4,000. You’re moving into your first apartment on your own and need to buy new furniture and essential home goods. You spend $3,000 on the card, and plan on repaying the debt in installments over the promotional APR period.

Financially, this might be a smart strategy. After all, you might’ve put your other savings toward the first-month’s rent and security deposit. And paying $250 each month for the next year might be more manageable than repaying $3,000 at once.

However, the move also puts your credit utilization rate at 75%, which is substantially higher than the recommended 30% or below. It can also take some time before you’re able to pay down enough of the balance so the rate drops.

Another example is if you pay off a personal loan. Once you make your final payment, the account is considered closed on your credit report. As a result, your credit mix, which accounts for 10% of your credit score, may also change.

What Can You Do If Your Credit Score Dropped by 70 Points?

Your credit score isn’t a fixed figure. If yours has fallen, there are ways to help it bounce back.

A good first step is to regularly review your credit report and look for errors. You can check your credit report for free each week from the three main credit bureaus: TransUnion, Equifax, and Experian. Visit AnnualCreditReport.com to get started.

Paying your bills on time is another smart strategy. If you need help managing bill paying, consider setting up automatic payments so the money is automatically deducted from your bank account on time each month. Creating a budget, either on your own or with the help of a spending app, can also help ensure you have enough each month to cover your bills.

Recommended: How Long Does It Take to Build Credit?

Should You Be Worried About Your Credit Score Dropping?

While a 70-point drop in your credit score can sting, its impact depends largely on where your score stood before the fall. For example, if your FICO Score was 669, dropping 70 points would still keep you under a “fair” credit rating. However, if you have good to exceptional credit, a 70-point dip could cause your score rating to slip down a rung.

What Factors Impact Credit Scores?

If you want to course-correct a 70-point drop and build your credit, it helps to pay attention to all of the factors that make up your score:

•   Payment activity. Accounting for 35% of your score, this factor looks at your repayment habits across all debt types, such as credit cards, home loans, installment loans, and retail cards. Derogatory marks like bankruptcies and collections are also factored in here.

•   Debt owed. Thirty percent of your score looks at the balances you owe on your accounts, how many accounts have a balance, and your credit utilization.

•   Account age. How long you’ve had your oldest and newest accounts and the average combined age of all your accounts are considered in your score.

•   Credit diversity. A healthy credit mix shows you can be responsible for managing different types of credit. This factor accounts for 10% of your score.

•   New accounts. The details of new accounts under your credit file make up the last 10% of your credit score calculation. Here, credit scoring models evaluate hard credit inquiries and when you last opened a new account.

Recommended: What Affects Your Credit Score?

How to Build Credit

While you can’t build credit overnight, there are steps you can take to help boost your credit score. Here are a few to consider:

•   Pay your bills on time. As we mentioned, payment history can have a major impact on your credit score. Even if it’s just the minimum amount, be sure to send in your payments on time each month.

•   Ask to become an authorized user on someone else’s credit card account. This allows you to benefit from the primary cardholder’s good credit and, if the account was managed responsibly, could bolster your credit score.

•   Request a credit limit increase. You may lower your credit card utilization by increasing your available credit — and keeping your balance in check. Contact your creditor about an increase, and ask if it’s possible to avoid a hard inquiry. That could ding your credit score.

•   See if you can add rent and utility bills to your credit report. Rent-reporting services will report on-time rent payments to the credit bureaus. Similarly, Experian Boost will add on-time payments from other accounts to its credit reports.

Allow Some Time Before Checking Your Score

It can be tempting to see how a small tweak in your repayment and borrowing habits might have changed your credit score. However, checking in too soon might not provide enough time for the impact of the change to take effect.

Instead, let the changes you make take root over a few months before checking your score. And consider checking your credit before a major purchase or if you think you’ve been exposed to a high fraud risk, such as using your credit card or ATM card abroad.

At a minimum, check your score annually to see how much it’s changed.

How to Monitor Your Credit Score

You can pay to access your latest credit score directly from the credit scoring model that you’re interested in. However, many banks, card issuers, and lenders provide complimentary access to your credit score.

For example, Chase lets you see your VantageScore for free,, while Wells Fargo customers can access their FICO score at no additional cost. Log in to your account online to see if your lender or card issuer provides credit score monitoring through its portal, or contact them directly.

Credit score monitoring tools also keep you informed about changes to your score.

The Takeaway

Seeing your credit score drop 70 points can understandably put you on edge. But keep in mind there’s an underlying reason for the decrease, even if it’s not obvious. A change in your credit utilization, a shift in your credit mix, or a string of late payments can all take their toll on your score. Fortunately, over time you can take meaningful steps to recover from the 70-point drop, including checking your credit report and disputing any errors, paying bills on time, and managing how much available credit you use.

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 drop 70 points?

There are many reasons your score might unexpectedly drop 70 points, including an increased credit utilization ratio, late or missed payments, or a closed credit card or loan accoun.

Why did my credit score go down when nothing changed?

Credit scores can fluctuate even if it seems like you didn’t do anything out of the ordinary with your credit accounts. If you recently applied for a new loan or credit card, for example, a hard inquiry might temporarily knock your score down a few points.

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

Paying your credit cards and loans on time positively impacts your credit score, so keep this habit going! However, if you’re making on-time minimum payments and not repaying each statement balance in full, your credit utilization might be increasing. To prevent the negative effect on your credit, keep your utilization under 30% — and ideally lower than 10%.

Photo credit: iStock/svetikd

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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A drop of 50 points in your credit score can be alarming, especially if you haven’t changed your financial behavior. While it’s not always clear what causes a drop, several factors could cause a decrease, including your history of debt payments, mix of credit, and age of your accounts. It’s also possible that your scores dropped as a result of a credit reporting error or identity theft.

Getting to the bottom of why your credit score dropped 50 points can help you address the situation and take steps to improve your score.

Why Did Your Credit Score Drop 50 Points?

You checked your credit scores and noticed a big decline. Now you’re wondering, “Why did my credit score drop 50 points when nothing changed?”

Credit scores often fluctuate as the credit bureaus receive new data from creditors. A drop of 50 points is significant, though, and there’s a reason behind the change. Some common explanations include late payments on loans, an increase in your credit utilization, or the closure of an old credit card or other account.

Reasons Your Credit Score Went Down

If your credit score dropped seemingly out of nowhere, one or more of these reasons might explain why.

•   You were late on a loan or credit card payment: If you’re 30 or more days late on a payment, your creditor will likely report it to the credit bureaus. And late payments can hurt your score. If you need help managing bills, consider using a tool like a money tracker app.

•   Your credit utilization went up: Your credit utilization is the amount of credit you’re using compared to what’s available to you. Using more than 30% of your available credit can cause your score to drop. Creating a budget with a spending app can help you keep tabs on where your money is going.

•   Your credit limit went down: Even if you’re not charging more to your credit cards, your credit utilization could increase if your credit limit goes down. For instance, a credit card company could decrease your credit limit from $10,000 to $5,000, which would increase your credit utilization rate even if your balance stayed the same.

•   You closed an old account: The age of your credit accounts influences 15% of your credit score. Closing an old account in good standing could cause your score to drop.

•   You paid off a loan in full: Paying off a loan is healthy for your finances, but it could ding your credit score, as it reduces your “credit mix.”

•   There’s a mistake on your credit report: If none of the above reasons applies to you, the drop in 50 points could be due to an error on your credit report.

•   Your identity was stolen: In the worst-case scenario, your credit score could be dropping because you were the victim of identity theft.

Should You Be Worried About Your Credit Score Dropping?

Seeing a big drop in your credit score is worrisome, and it’s important to get to the bottom of what happened. A low credit score can make it difficult to qualify for a loan or rent an apartment. Even if you can get a loan, you could get stuck with a higher interest rate and fees.

A sudden drop of 50 points or more also indicates a potential issue with your finances. Maybe you forgot about a balance on an old credit card that’s now racking up interest and fees. Or perhaps you’re late on loan payments and need to address the situation before the debt goes into collections.

As mentioned, a decline in your credit score could also suggest a mistake on your credit report or identity theft. Whatever the case may be, you’ll want to take action to fix the situation.

What Can You Do If Your Credit Score Dropped by 50 Points?

If your credit score dropped by 50 points, your first order of business is to find out why. Check your loan and credit card statements to see if you’ve missed any payments.

Review your credit card balances and limits to estimate your credit utilization. Reducing your credit utilization by paying down balances or requesting a credit limit increase could help improve your score.

Review a free copy of your credit report from AnnualCreditReport.com for derogatory marks or reporting errors. If you spot an error, submit an official dispute with the credit reporting company.

If you discover that someone stole your identity, place a fraud alert on your credit profile. You can freeze your credit as well to prevent scammers from opening new accounts in your name.

Finally, file an identity theft report with the Federal Trade Commission, and dispute any inquiries on your credit report that someone else made in your name.

Recommended: Why Did My Credit Score Drop After a Dispute?

How to Build Credit

There are several steps you can take to improve your credit score after a drop. Here’s how to build credit:

•   Make on-time payments on your loans: Your payment history makes up 35% of your score, so making on-time payments on all your loans and credit cards can help build your score back up over time.

•   Pay down credit card balances: If you’re carrying a high balance on your credit cards, pay it down as much as possible to decrease your credit utilization and improve your credit score.

•   Request a credit limit increase: Asking your creditors for an increase to your credit limit could also reduce your credit utilization without much extra effort on your part. It’s still important to pay down balances, though, to avoid hefty interest charges.

•   Avoid several hard inquiries at once: Try not to apply for lots of new credit at once, as all those hard credit checks could ding your score and be a red flag to lenders.

•   Considered a secured credit card or credit-builder loan: If your credit score is poor, consider opening a secured credit card or taking out a credit-builder loan to improve it. Both of these products are designed to help you build credit over time with on-time payments.

Allow Some Time Before Checking Your Score

Fixing a damaged credit score doesn’t happen overnight. You might see some improvement in about a month at the earliest. However, it can take several months to a year to see a significant change. While a credit score monitoring service can help you track your progress, it will take some time to see your credit-building efforts pay off.

Recommended: How Long Does It Take to Build Credit?

What Factors Impact Credit Scores?

Your credit score is based on the following factors:

•   Payment history (35%): How you pay off your loans is the most important factor in your credit score. On-time payments help build a score, while late payments drag it down.

•   Amounts owed (30%): The amount you owe also impacts your score. Try to keep your credit utilization below 30%.

•   Length of credit history (15%): Having a longer credit history generally has a positive impact on your credit score.

•   Credit mix (10%): Having a mix of credit, such as credit cards and installment loans, can help your credit — as long as you keep your credit utilization low and pay your bills on time.

•   New credit (10%): Opening several new accounts at once can harm your score, especially if you don’t have a well-established credit history.

Closing a Credit Card Account Can Hurt Your Score

Your length of credit history makes up 15% of your score, and the more established your history, the better. That’s why closing an old credit card account can harm your credit score, as it could reduce the age of your accounts.

If your old credit card is charging you an annual fee, consider asking the credit card company to downgrade you to a card without a fee. Switching to a different card with the same company shouldn’t impact your credit score.

How to Monitor Your Credit Score

There are several ways to check your credit score without paying, though buying a service is also an option. Here are some ways to keep tabs on your credit score:

•   Use a free credit monitoring service: You can monitor your credit score with a free service, such as SoFi’s Relay, Experian’s free credit monitoring, or CreditWise from Capital One.

•   Pay for a credit monitoring service: There are also paid credit monitoring services out there, which may come with additional identity theft tracking features.

•   Check with your credit card company: Some credit card companies also offer free credit scores when you sign into your account.

•   Order scores from myFICO.com: You can track your FICO® scores for free or with a paid plan directly from the source at myFICO.com.

Along with getting credit score updates, review your credit report periodically. Although your credit report won’t reveal your credit score, it will give you a bird’s-eye view of your accounts and payment history.

Pros and Cons of Tracking Your Credit Score

Credit monitoring can help you preserve your financial health, but it can also have some downsides. Here are some pros and cons of tracking your credit score.

Pros

•   Instant notifications for changes to your credit score and report

•   Updates on new inquiries and potential fraud

•   Features to protect you from identity theft, such as Social Security number tracking

•   Analysis of factors that are affecting your credit score

•   Potential assistance with disputing errors on your credit report

Cons

•   May charge monthly or annual fees

•   Could cause stress or frustration with too many real-time notifications

•   May not track your reports from all the major credit bureaus

•   Will not guarantee that you don’t become a victim of identity theft or fraud

•   May show you different types of scores (for instance, some services track your VantageScore, which could be different than the FICO Score that most lenders rely on)

The Takeaway

Seeing your credit score drop by 50 points overnight is stressful, but there are steps you can take to figure out what happened. Understanding what affects your credit score can help you root out what the issue is and take steps to fix the situation. If someone has opened accounts in your name, you’ll also want to act ASAP to place a fraud alert and freeze your credit. As you take steps to build your credit back up, consider using a credit-tracking service.

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 drop 50 points out of nowhere?

There are several reasons why your credit score may have dropped 50 points out of nowhere. Some common culprits include a late loan payment, increased credit utilization, or closure of an old account. A mistake on your credit report or identity theft could also cause your credit score to drop.

Why has my credit score gone down when nothing has changed?

Even if you haven’t changed your financial behavior, your credit score could go down if your creditors decreased your credit limit. That would cause your credit utilization to go up. It’s also possible that you forgot about a loan payment or have been charging more than usual to your credit cards. Some consumers may also see their credit score go down due to identity theft or a reporting error on their credit report.

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

While paying your loans on time makes up a big portion of your credit score, it’s not the only factor. Some other factors that can influence your score include your credit utilization, credit mix, and age of your accounts. Applying for new credit can also impact your score if the creditor runs a hard inquiry to check your credit.

Photo credit: iStock/SrdjanPav

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Your credit score is unlikely to drop for no reason, but it might drop for reasons you do not expect. Simply applying for a new credit card, closing out an old one, or being late with a payment can affect your score. A drop in your credit score of 80 points may be enough to reduce your credit score from “good” to “fair,” which can mean you will pay significantly more to borrow money.

Here’s a look at the reasons your credit score might drop, how to monitor your score, and what to do if your credit score drops suddenly.

Why Did My Credit Score Drop 80 Points?

Your credit score is based on factors related to how you manage your debt. Specifically, whether you pay your bills on time, how much you owe creditors versus how much credit you have available, the length of your credit history, the types of debt you have, and how often you apply for a new loan or credit card. Bankruptcy and foreclosures are additional threats to your credit score.

Any one or a combination of these factors could cause your credit score to drop.

Should You Be Worried About Your Credit Score Dropping?

Credit score changes are fairly common and not always a cause for concern. However, an 80-point drop is worth looking into, as it could impact whether you get approved and receive favorable terms for a loan or line of credit.

For instance, if your score drops from 700 to 620, it’s no longer considered “good.” That means that you will not qualify for the best mortgage or credit card rates because a lender will consider you a riskier borrower and could charge you more for financing.

It’s important to first understand why the drop happened so you can correct any issues and begin getting your credit back on track. Monitoring your credit score can be a good place to start, as it allows you to track changes to your score and get insights into your financial health.

Reasons Your Credit Score Went Down

There are a few reasons why your credit score might go down. But bear in mind that it can take over a month for your credit score to update and reflect any changes in your credit situation.

You Applied for a New Loan or Credit Card

If you apply for a new loan or a credit card, your credit score may go down because card issuers will perform a “hard pull,” or hard credit inquiry, when they look at your credit information. According to FICO™, a hard pull typically takes five points or less off your FICO Score. However, if you apply for several credit cards within a short period of time, it could have a greater impact on your score.

Your Credit Card Balance Went Up

If you carry a balance on your credit card, you won’t just rack up interest charges — your credit score might drop, too. Thirty percent of your FICO Score is based on the amount of money you owe. A significant balance on a credit card could cause your score to fall and your credit utilization rate — or how much of your credit limit you’re using on your revolving credit accounts — to rise.

You Missed Payments

Around 35% of your FICO credit score is based on your payment history. Therefore, if you fail to make your monthly payments — or are late making a payment — your score could fall.2 Tools like a money tracker app can help you identify upcoming bills, create a budget, and more.

You Closed a Credit Card Account

When you close a credit card account, especially one you’ve had for a long time, the average age of your accounts falls. That, in turn, could cause your credit score to dip, as the length of your credit history accounts for 15% of your FICO Score.

What Can You Do If Your Credit Score Dropped by 80 Points?

If your credit score drops by 80 points, there are some steps you can take to find out why and to rebuild your credit score.

Ensure Your Payment History Is Correct

Creditors can make mistakes and report inaccurate information to the credit bureaus. Fraudsters can steal your identity and use your accounts. So it’s worthwhile to check your credit report, including your payment history, and dispute any inaccurate information.

You can check your credit report for free from each credit bureau on AnnualCreditReport.com. You can also check your credit report for free with Experian and sign up for monthly updates.

Don’t Miss Payments

A payment that’s over 30 days past due may be reported to the three major credit bureaus. If you fail to make a payment for 90 days, your creditor may refer your account to a collection agency. These records will remain on your account for seven years.

Keep Your Credit Utilization Rate Low

As you use more of your available credit, your credit utilization rate will increase. The higher your credit utilization rate, the more of a risk you are to a lender, and the more your credit score may decrease. Aim for a rate below 30%. For example, if your credit card has a credit limit of $12,000, don’t use more than $3,600, and ideally use $1,200 or less.

Hold Off on Applying for a Credit Card, Loan, or Mortgage

If you apply for a new loan or credit card, the lender will conduct a hard inquiry to check your credit score. As we mentioned, this type of check will only temporarily lower your score by a few points. But many hard inquiries over a short period can have a compounding effect on your credit score. This might occur if you apply for several credit cards at once. The impact of a hard inquiry will typically last a few months to a year.

Avoid Bankruptcy or Foreclosure

Declaring bankruptcy and experiencing foreclosure on a property both cause a significant drop in your credit score. And both stay on your credit report for a long time: seven years for Chapter 13 bankruptcy, 10 years for Chapter 7 bankruptcy, and seven years for a foreclosure.

How to Build Your Credit Score

Building your credit score comes down to sensible fiscal management over time.

Whether your credit score dropped or not, there are steps you can take to help boost your numbers. Examples include:

•   Paying bills on time

•   Checking your credit report regularly for errors

•   Lowering your credit utilization rate

•   Keep spending in check — a spending app can help

Scenarios Where Your Credit Score Might Drop

Here are some scenarios where you might be surprised to find that your credit score has dropped.

You Pay Off Credit Cards

Let’s say you have three credit cards: one with $5,000 in available credit, one with $8,000 in available credit, and one with $500 in available credit. That’s $13,250 of total available credit.

You have a total balance of $3,975 over all three cards, which gives you a credit utilization ratio of 30%.

Let’s also say you take out a debt consolidation loan to pay off all debt except for $250 on the card with a $500 limit. You then close out the two cards with no debt — taking with it $13,000 in available credit. You’ve kept open the card that has a $500 credit limit and a $250 balance.

This might seem like a good move because you’ve paid off over $3,000 in debt and eliminated two credit cards. However, you now have a 50% credit utilization rate, significantly higher than the recommended 30%. This may increase your credit score.

You Close an Old Credit Card Account That You Don’t Use

Another reason to think twice before closing credit card accounts? It could impact the length of your credit history, which accounts for 15% of your credit score. If you close old accounts, it could lower the average age of your credit history, and your score could take a dip as a result.

You Took Out New Loans to Pay Off Debt

Every time you apply for a loan or a credit card, the lender performs a hard pull. If you apply for multiple new loans or credit cards within a short stretch of time, it could temporarily lower your credit score.

Allow Some Time Before Checking Your Score

Credit scores continually fluctuate as information on your credit report gets updated. According to Equifax, your credit score can take 30 days or more to reflect payments you’ve made.

What Factors Impact Credit Scores?

As we discussed, your credit score is calculated based on the following, according to the FICO scoring model:

•   35% of your score is based on your payment history.

•   30% is based on the amount you owe creditors and your credit utilization rate. Ideally, your rate should be around 10% and not higher than 30%.

•   15% is based on the length of your credit history.

•   10% is based on the types of debt you have. A mix of installment debt (such as student loans, mortgage, car loan, personal loan) and credit card debt (or lines of credit) is preferable.

•   10% is based on new credit.

Pros and Cons of Tracking Your Credit Score

There are no drawbacks to tracking your credit score, except for the time it takes to obtain your report.

On the other hand, there are plenty of pros to monitoring your credit score. You’ll know where you stand regarding future loans and what potential lenders will see on your credit report. You’ll also be able to spot inaccurate or incomplete information that you can have removed, which can help boost your credit score.

How to Monitor Your Credit Score

Federal law allows you to view a free copy of your credit report from each of the three national credit bureaus (Experian, TransUnion, and Equifax) at AnnualCreditReport.com. Check the reports carefully, and if you find something you don’t agree with, file a dispute to try to have the information removed.

You can also enroll in a credit score monitoring service. These automated services notify you of changes to your credit report that might occur if you qualify for a new credit card or loan, or fall behind on loan payments.

The Takeaway

Your credit score might fluctuate without you realizing it. But a drop of 80 points may be worth investigating, as it could mean you pay significantly more to borrow money. You might be surprised to learn that if you apply for a new credit card, pay off the balance on a card, or close an old account, your credit score could be adversely affected.

It’s a good idea to obtain a copy of your credit report — it’s free — and check that the information given to the credit agencies is accurate. You can also help maintain a good credit score by not missing credit card and loan payments and by keeping your credit utilization ratio below 30%.

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 go down 80 points?

Your credit score is based on factors related to how you manage your debt. Bankruptcy or foreclosure will have an obvious effect on your score, but if you have not paid your bills on time, your credit utilization rate is higher than 30%, or you close old credit card accounts and reduce your credit history, you may see a dip. Also, your credit score may be affected if you apply for a number of credit cards or loans in a short space of time.

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

Your payment history accounts for only 35% of your credit score. Other factors include your credit utilization rate, the length of your credit history, and the types of debt you have.

Why has my credit score gone down when nothing has changed?

Even if nothing has changed for you fiscally, you may still see fluctuations in your credit score. There are various reasons why, such as a higher-than-normal credit utilization ratio, inaccurate information in your credit report, or identity theft.

Photo credit: iStock/katleho Seisa

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.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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