While some fluctuations in your credit score are normal, that may not be much comfort if yours drops by 30 points. Take a deep breath, and remember that there are several possible reasons for a dip. Perhaps a few of your loan payments have been late, or you’ve recently had to charge a lot on your credit card. Or maybe it’s because of factors outside of your control, like an error on your credit report or identity theft.
In any case, it’s a good idea to investigate why your credit score dropped 30 points so you can help get your finances back on track. Here’s what to know.
Why Did Your Credit Score Drop 30 Points?
You may be thinking, Why did my credit score drop 30 points when nothing changed? The truth is, something triggered the dip, so it’s time to start digging. The first step is to review your credit report from each of the three national credit reporting agencies: TransUnion, Equifax, and Experian. You can check your credit report for free once a week; visit AnnualCreditReport.com to get started.
Review each report carefully, starting with the most recent activity and working your way back. There may be discrepancies between reports, so give each one a thorough read. If you spot inaccuracies, you can take steps to dispute them.
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Should You Be Worried About Your Credit Score Dropping?
An occasional, slight drop in your credit score is probably not worth losing sleep over. After all, small dips tend to be temporary. However, a 30-point drop could be enough to bump you to a different credit score range, such as going from “fair” to “poor.” And that could affect whether you’re able to get approved or receive favorable terms for a loan or credit card.
Reasons Your Credit Score Went Down
Here are some of the most common reasons why credit scores fall.
Increased Credit Utilization Ratio
If you’ve been racking up purchases on your credit cards lately, you may have increased your credit utilization ratio — or the amount of available credit you’re using. Fortunately, there are a few ways to lower your credit utilization, such as paying down your debts.
Missed Monthly Payment
Go 30 or more days without making a payment, and the lender may report your delinquency to the credit bureaus.
Disputed Credit Report
Formal credit disputes can cause your report to be under dispute, which can cause a temporary drop.
Multiple Credit Applications
Each time you apply for credit, the lender performs a hard inquiry, which can knock a few points off your score. To help protect your score from getting dinged, avoid applying for multiple credit cards within a short time frame.
Credit Report Error
Mistakes happen, and sometimes another person’s late payment gets logged on your account. If you do find any errors, dispute them.
Identity Theft
Someone else may have opened a credit account in your name and run up charges. The more debt you have to your name, the lower your score may be.
Closed Credit Card Account
When you close out an account you’ve had for a long time, you run the risk of lowering the average age of your accounts. And that accounts for 15% of your credit score.
Bankruptcy or Foreclosure
Bankruptcy and foreclosures can deliver a major blow to your credit score and stay on your credit report for seven to 10 years.
What Can You Do If Your Credit Score Dropped by 30 Points?
If your credit score fell by 30 points, there are steps you can take to start building it back. One of the most important things you can do is ensure you’re paying your bills on time, every time. A spending app can help you manage bills. Other strategies include paying down debts, managing how much available credit you use, and maintaining a diverse credit mix.
Recommended: Why Do I Have Different Credit Scores?
Examples of Credit Score Dropping
Let’s take a look at some scenarios when you may see your credit score fall.
One example is sending in a payment 30 days after the due date. Even if you have an otherwise perfect track record, a late payment could shave as many as 100 points off your credit score, depending on your score.
Another situation when your score might drop is when you apply for a loan or new credit card and the lender performs a hard inquiry. Each inquiry could cause your score to fall by five points or more, and it may stay on your credit report for up to two years. However, when FICO™ calculates your score, it considers only credit inquiries made within the last 12 months.
How to Build Credit
As we mentioned, paying bills on time, diversifying your credit mix, whittling down debt, and managing your credit utilization ratio are all ways to help build your credit score. But there are other steps you can take to boost your numbers.
One strategy is to be added as an authorized user on someone else’s credit card. Just be sure that person is someone you trust, has a good credit score, and responsibly manages the account.
Another option is to open a secured credit card. With secured credit cards, you put down a certain amount of money that acts as a security deposit. You get that same amount to spend as a line of credit. You can rebuild credit by making on-time payments each month.
You may also be able to help improve your credit score when you take out an installment loan, such as a personal loan or car loan. Besides giving you the opportunity to make regular, on-time payments, a loan can diversify your credit mix and lower your overall credit utilization.
Recommended: How Long Does It Take to Build Credit?
Allow Some Time Before Checking Your Score
It’s understandable to expect your credit score to tick upward right after you start taking positive actions. But change won’t happen overnight. In fact, it can take 30 days or more for your credit score to update and reflect payments you’ve made.
Closing a Credit Card Account Can Hurt Your Score
Sometimes the reason why your credit score drops by 30 points is because you closed a credit card you’ve had for a long time. After you’ve consistently paid your bills on time and knocked out the balance, consider keeping the card open. The length of your credit history impacts your score, and closing a card can bring down the average age of your accounts.
What Factors Impact Credit Scores?
What affects your credit score? Many factors, but let’s take a look at the five biggest ones and how much they impact your FICO score. (It’s used in 90% of lending decisions.)
• Payment history (35%)
• Amounts owed (30%)
• Length of credit history (15%)
• New credit (10%)
• Credit mix (10%)
Pros and Cons of Tracking Your Credit Score
Except for the time it takes to get your credit report, there aren’t many reasons why you wouldn’t want to keep tabs on your credit score. The benefits, however, are many. You can spot errors or issues early on and start taking the appropriate steps to remedy the situation. You’ll also have a better idea of your current credit status and what potential lenders will see on your credit report.
How to Monitor Your Credit Score
One of the easiest ways to get credit score updates is to sign up for a service online. There are numerous companies offering safe, reliable credit score monitoring.
It’s also worth noting that you can check your report without paying. Banks, credit unions, and credit cards often offer free credit score updates to customers.
The Takeaway
If your credit score dropped 30 points, it’s a good idea to investigate why. Changes in your credit utilization or credit mix, applying for multiple lines of credit at once, late payments, errors, and identity theft could all cause a dip.
A good first step is to check your credit report and dispute any errors. At the same time, you can practice sound financial habits, like paying bills on time, monitoring how much of your available credit you’re using, and keeping older accounts open.
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 is my credit score going down if I pay everything on time?
There are multiple reasons your credit score could go down even if you’ve paid your bills on time. For example, has your credit utilization ratio gone up? If you just used your cards for some big transactions and increased the amount of debt you carry, that may be the reason your score dropped.
Why did my credit score drop 30 points when nothing changed?
Your credit score can drop 30 points for a variety of reasons. A good first move is to check your credit reports; you can receive them for free each week. Look for any unfamiliar activity, and dispute errors with the credit bureau.
Why did my FICO score go down for no reason?
Any change to the factors that go into your FICO score could prompt a drop. That said, one common reason is a change in your credit utilization ratio. Even if you pay your bills on time, a rise in debt could cause your score to fall.
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