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Why Did My Credit Score Drop?

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    A decline in your credit score can be extremely disheartening. You rely on it to help you get the best possible rates on loans when buying a car, trying to finance a home, or seeking a personal loan to help you take care of important tasks. 

    Many people spend years building their credit scores to reach their financial or personal goals, especially as they move toward retirement. It can thus be frustrating or unnerving when yours takes a hit. Why does your credit score drop? Should you be concerned? Here’s what you need to know. 

    Credit Scores: Defined

    Your credit score is a number between 300 and 850 that defines your ability to receive credit. A high credit score indicates you have a solid income and credit history, because you’ve regularly paid back your loans on time, kept up with your bills, and avoided taking out too much credit at one time. A low credit score, on the other hand, could indicate that you defaulted on a past loan or did not make payments as you should have. 

    Credit scores are calculated based on a variety of factors. Most notably, they include:

    • How much credit you have taken out (that is, how much money you owe)
    • Any missed payments or defaulted loans
    • How many payments you missed and how much they’re worth
    • What payment history, including of paying on time
    • Your length of credit history


    Each credit bureau calculates your credit score a little differently. Four of the main credit bureaus are Equifax, Experian, FICO, and TransUnion, and you will have a different credit score from each. You’ll commonly hear reference to your “FICO score,” but any of the main credit bureaus could be used to determine your credit ranking.

    Why Should You Monitor Your Credit?

    People choose to monitor their credit profile for several reasons. These include, but are not limited to:

    • Catching identity theft or preventing it in its early stages
    • Keeping an eye on your overall financial health
    • Ensuring you’re capable of applying for new credit to get the loans you need when the time comes,  such as to buy a house or open a new credit card account
    • Catching potential inaccuracies before they impact your ability to get a loan
    • Seeing how recent positive decisions impact your credit score


    Check your credit score closely means you can often catch potential problems before they become more serious. You may see it go up and down over time, however, and that can induce some anxiety — especially if you aren’t sure why your credit score may have dropped. 

    Reasons Credit Scores Drop

    Your credit score can decrease for a number of reasons, some of which have little to do with your current financial transactions or utilization rate. You may sometimes find that your score has dropped when you check credit reports, then see it go back up just as easily without any changes to your habits. Other times that number will be significantly altered by some act in your credit history.

    Here are just a few of the things that can impact your credit score: 

    1. You have a missed payment or made a payment late.

    Late or missed payments can have an immediate impact on your credit score and cause your credit rating to decline, depending on how long it takes your creditor to report the change. Even later making up the payment can  impact your score — and take several months or years to remedy.

    2. You made a major purchase.

    When you make a major purchase using your credit card, it can cause your credit score to go down. Part of determining whether a lender can trust you to make repayments is looking at your debt-to-income or credit utilization ratio. If you have a great deal of debt, you may conceivably have a harder time paying off future purchases made on credit cards or using other loans. Those who have recently purchased a home, taken out an auto loan, or made a large purchase on their credit cards could see a hit to their credit scores. 

    3. You recently changed a credit limit on a credit card or loan. 

    The goal is to not use all the credit you have available, so you may have experienced a drop due to decreased available credit. Lenders like to see that you have available credit at your disposal, so maxing out your credit limit and using every potential loan dollar available could impact your score. Likewise, closing a credit card could mean your credit score takes a temporary hit, as you no longer have that credit available to use.

    4. You recently applied for new credit.

    Any type of large purchase — including an application for a home loan, a line of credit, or a new credit card — can cause a shift in your credit score. Proper credit utilization can help your credit score rise over time, however, because you gradually prove to lenders that you care about protecting your credit limit and have no problem paying back the funds that were loaned to you. Student loan debt can also strongly influence your credit score, but paying it down over time has the same positive effect.

    5. You no longer have a bankruptcy on your credit report.

    Bankruptcy falls off your credit report after seven years, giving you the ability to move to a new credit scorecard. This scorecard reflects your credit score in comparison to people who have not filed for bankruptcy, so it can change the way your score is calculated. It takes a long time to recover from bankruptcy and develop a positive credit score that will make lenders excited to extend additional credit to you, so be patient if you’ve experienced one. You will see positive results as you build a new credit history.

    Any major changes in your credit or purchase history can have an impact on your credit. Most of those impacts are short-term: that is, they won’t have a long-term impact on your credit, and there’s no reason to worry. However, there are times when you should worry about changes to your credit score. 

    gauge measuring credit score drop

    When to Worry About A Drop in Your Credit Score

    A decline of a few credit points on credit reports is perfectly normal, and you shouldn’t worry too much about it if you see slight changes in yours. Keep taking out reasonable amounts of credit and making your payments on time, and you will find that your credit score settles back to normal fairly quickly. However, you should worry about your credit score if:

    • The drop includes a charge you do not remember making. This could be a sign of identity theft. 
    • Your credit report claims that you missed a payment you know you made. Getting that report removed from your credit report could prove very difficult, so you want to begin that process as soon as possible. 
    • You see credit cards on your report that you do not remember applying to use.
    • You haven’t recently made any large purchases.
    • Your credit score drops a great deal in a short span of time.


    Continue to monitor your credit report over time. When in doubt, contact an experienced financial advisor to learn more about the reasons your credit score could drop and what you can do to improve it. Do you have questions about your financial management tactics or keeping track of your credit score — your FICO score or from another bureau — especially after a drop? Contact Bogart Wealth today to speak with an expert about any questions you might have. Our experts will work with you to create the best plan for your situation and help you get your credit on track to meet all your financial goals

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