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.
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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
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