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.
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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.
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