Credit scores measure your financial health at a given point in time. Ideally, your score increases as you build your credit history, so a sudden decline can leave you wondering why.
Several things can cause a credit score to fall 100 points (or more), and late payments are often at the top of the list. Here’s a closer look at why credit scores decrease.
Why Did Your Credit Score Drop 100 Points?
A credit score can drop by 100 points or more when there’s a significant change to your credit reports. Possible reasons for a credit score drop of 100 points or more include:
• Late payments
• Missed payments
• High balances relative to your credit limits
• Reduced credit limits
• Delinquencies and collection accounts
• Foreclosure or repossession
• Judgments
• Multiple inquiries for new credit in a short timespan
• New credit accounts in your name1
These types of items can drag your score down. Paying off loans or closing credit card accounts can also cost you credit score points, even though you might consider them positive financial steps.
Identity theft and fraud can trigger a sizable drop in your credit score as well. If someone uses your identity to obtain loans or open lines of credit without your knowledge, that could leave you vulnerable to late or missed payments, delinquencies, and collection actions. A money tracker app can help you keep tabs on your credit score, and you’ll also get updates when it changes.
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Should You Be Worried About Your Credit Score Dropping?
A credit score drop can be worrisome, especially if you weren’t expecting it. You may have cause for concern if you:
• Plan to apply for a mortgage or another type of loan soon
• Would like to refinance an existing debt that you have at a lower interest rate
• Suspect that someone may be using your identity to obtain credit fraudulently
Fluctuating credit scores could make it more difficult to get approved for new loans. If you are approved, a lower score could result in a higher interest rate.
Identity theft is a more serious matter. You may not even be aware that someone is using your identity to obtain credit in your name until you’re denied credit, or worse, sued for an outstanding debt you didn’t create.
Reasons Your Credit Score Went Down
Why did my credit score drop by 100 points for no reason? The short answer is that it didn’t. There must be some change to your credit report to result in a score decline.
Changes that can show up on your credit reports include:
• New accounts opened in your name
• Account closures
• Changes to your balances or credit limits
• Payment activity, including late payments or missed payments
• Delinquencies and accounts that are sent to collections
• Paid off balances
• Debt settlements, in which your creditors agree to let you pay off less than what you owe
• New inquiries for credit1
Inaccurate information can also harm your credit. Between 2021 and 2023, consumer complaints about credit report errors increased by 168%, according to the Consumer Financial Protection Bureau (CFPB). Credit report errors can range from payments being incorrectly reported to accounts listed as belonging to you that are not yours.2
In some cases, a credit score drop might be caused by someone else. This can happen when you cosign a loan for someone. As the cosigner, you’re legally responsible for the debt. Any activity relating to the account, including late or missed payments, can show up on your credit report.3
What Can You Do If Your Credit Score Dropped by 100 Points?
If your credit score drops by 100 points or more, the first thing to do is determine why. Obtaining copies of your credit reports can shed some light on what may be causing the decline.
Here are some things to look for as you review your reports:
• Missing or incorrect payment history
• Incorrect balance information
• Accounts that don’t belong to you
• Collections for debts that don’t belong to you
• Loan accounts you’ve paid off that still show a balance
• Open accounts that are listed as closed or vice versa
• Duplicate debts, meaning the same account is listed multiple times
If you identify what you believe is an error or inaccuracy, you have the right to dispute it with the credit bureau that’s reporting the information. Equifax, Experian, and TransUnion — the three major credit bureaus — all allow you to initiate credit report disputes online.4
Why did my credit score drop over 100 points when there were no errors? That’s trickier to answer, as it depends on the information in your credit file. If there are no errors or inaccuracies, then you’ll need to consider things like payment history, credit limits, and debt balances to see if they’ve had any impact on your score.
Examples of Credit Score Dropping
Hopefully, you never have to deal with a major credit score drop. But it may help to have some examples of what can cause your score to go down.
• You’re ready to buy a home and are shopping for a mortgage lender. You find the one you want to work with and apply for a loan. You’re approved, but the new inquiry and associated debt on your credit reports lead to a score drop.
• You cosign a car loan for your niece, on the promise that she’ll make the payments on time. She loses her job but doesn’t tell you and the loan payments go unpaid for six months. The lender repossesses the vehicle, which lands on your credit report and costs you credit score points.
• You make the final payment to your student loans. The account is now listed as closed and paid in full on your credit reports, but it lowers your score.
Again, not all things that lead to a credit score drop are negative. Paying off debt, for example, is something to celebrate even though it can ding your credit to a degree.
How to Build Credit
How long does it take to build credit? There’s no simple answer, as it can depend on what you’re doing (or not doing) to recover lost credit score points.
Some of the most effective strategies for building credit include:
• Paying bills on time to establish a positive payment history
• Keeping the balances on your credit cards low or paying in full each month
• Paying down debt that you already have
• Periodically requesting credit limit increases from your credit cards (but not running up new debt against them)
• Leaving older credit accounts open, even if you don’t use them
• Using different types of credit, such as loans and credit cards
• Limiting how often you apply for new credit
You can also build credit as an authorized user on someone else’s credit card. Authorized users have charging privileges on the card and account activity will show up on their credit reports, but they’re not legally responsible for the debt.5
Having a checking or savings account typically doesn’t affect credit scores. Banks can, however, report negative activity related to closed accounts to ChexSystems, a consumer credit reporting agency. A negative ChexSystems report could make it difficult to get approved for a new bank account.
Allow Some Time Before Checking Your Score
If you recently checked your credit following a score drop, you may want to wait a while before checking it again. Credit scores change when there’s new information added to your credit reports, whether it’s something positive or negative.
It may be helpful to check your credit monthly or quarterly if you’re working on rebuilding your score. That way, you can track your progress against any steps you’re taking to improve your score to see what’s working.
At a minimum, it’s a good idea to check your credit at least once annually. That can allow you to see what’s changed over the last year and look for any suspicious or potentially fraudulent activity.
Pro tip: Use a free credit monitoring service to get regular credit score updates.
Recommended: How to Check Your Credit Score Without Paying
Closing a Credit Card Account Can Hurt Your Score
Closing credit cards can hurt your score if you still owe a balance at the time you close the account. Your credit utilization ratio measures how much of your available credit you’re using. When you close a credit card with a balance due, you automatically increase your credit utilization ratio.6
For example, let’s say you have a combined credit limit of $20,000 across five credit cards. You owe $6,000 in total debt to your cards, which makes your credit utilization ratio 30% ($6,000 / $20,000 = 0.3).
Now, assume that you owe $5,000 to one card alone. That card has a credit limit of $10,000. You close it, cutting your total credit limit in half. Now you have a credit utilization ratio of 60% ($6,000 / $10,000 = 0.6).
Some experts say that 30% or less is an ideal credit utilization ratio to aim for, while others target 10% instead. The main thing to remember is that the lower your credit utilization is, the less harmful changes can be to your score.
In terms of how to lower credit utilization, you can do so by paying down credit card balances and/or increasing your credit limits.
What Factors Impact Credit Scores?
If you’re wondering what affects your credit score, it’s not just one thing. FICO credit scores, which are the most commonly used among top lenders, are determined by five factors.
• Payment history: 35% of your score
• Credit utilization: 30% of your score
• Credit age: 15% of your score
• Credit mix: 10% of your score
• Credit inquiries: 10% of your score7
VantageScores are based on some of the same factors, though they’re calculated differently. The VantageScore model was developed by the credit bureaus as an alternative to FICO scores.
Pros and Cons of Tracking Your Credit Score
Tracking your credit score can be beneficial but there are some potential downsides. Here’s a quick look at the advantages and disadvantages.
thumb_upPros:
• Monitor your progress over time
• Get to know which factors are helping or hurting your score the most
• Easier to spot suspicious activity or potential fraud
thumb_downCons:
• You may feel frustrated if your score isn’t climbing as quickly as you’d like
• Checking your score too often could cause you to obsess over even minor changes
• Keeping up with multiple credit scores could get confusing
Recommended: Why Did My Credit Score Drop After a Dispute?
How to Monitor Your Credit Score
Credit score monitoring services make it easy to track your credit scores and get notifications when there’s a change to your credit report. SoFi, for instance, offers free weekly credit score updates and access to a certified financial planner if you have questions about credit score changes.
Regardless of which service you use to monitor your credit, keep track of changes as they’re reported. Specifically, look at which changes are positive and which are negative. That can guide you toward what you might need to do to improve your score.
The Takeaway
Seeing your credit score drop by 100 points or more can be disheartening, but it’s not the end of the world. There are things you can do to get your score back on track.
Tracking your money is a good place to start. Tools like a spending app connect all of your accounts in a single dashboard so you can understand the factors that are influencing your credit scores. You can also check your scores for free. It’s a simple way to take charge of your financial health while you work on building good credit.
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.
See exactly how your money comes and goes at a glance.
FAQ
Why did my credit score drop 100 points when nothing changed?
It may seem as if nothing has changed on your credit reports, but there must be some type of change for your score to be affected. If your score dropped, take time to review your credit reports thoroughly. Even a seemingly minor change, such as a new credit inquiry, could make a dent in your score.
Why is my credit score going down if I pay everything on time?
Paying bills on time can help add points to your score, but it might still go down if you have a high credit utilization or apply for new credit frequently. Closing accounts could also hurt your score, even if you pay on time. Using a spending app to track bills and expenses can help you stay on top of your due dates.
How to dispute a credit score drop?
You can’t dispute a credit score drop, but you can dispute the information on your credit reports that you believed caused the drop. Keep in mind, however, that disputing credit report information isn’t guaranteed to improve your score.
Photo credit: iStock/kate_sept2004
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