Your credit scores are calculated using information in your credit reports, so it’s normal to see your score change as lenders provide updates to the information. A slight drop in your score may not be cause for worry, especially if you’re consistently practicing good credit health habits. Sometimes, you may not notice changes on your credit report that lead to a score drop. Your credit score can drop for many reasons, including some of the common reasons below.

Late or missed payment

Your payment history is one of the most important factors in your credit score. Missing even a single payment can have a significant impact on your score. That said, there’s no exact answer to how much a particular missed payment will affect your score. This depends on your credit history.

Payment history is built month-by-month as lenders report your account status to one or more of the three national credit reporting agencies. Credit card, car loan, mortgage and retail account (like store credit cards) payments will appear in your payment history.

If you missed a payment by accident, set up automatic payments if you can. This is an easy way to keep this important credit score factor in check. If you see a big credit score drop and aren’t sure if you missed a payment, review the payment history on each account in your credit report. You’ll be able to find potential missed payments there. If you see a missed payment listed but don’t think it’s accurate, you can contact your lender for more information.

Credit utilization rate change

If you’ve made a big purchase and haven’t paid it off yet, or you keep high balances on your credit cards, your score could be affected too. Ideally, you want to keep your credit utilization rate lower than 30%. This means if you have a $10,000 credit limit, it’s a good idea to try keeping a balance of less than $3,000 each month. Because there are different scoring models, 30% isn’t a magic number. It’s more of a recommended goal as you work to decrease your balances. Paying off your balances on time and in full each month is key to maintaining good credit health.

Some people like to use a balance transfer credit card to help lower their credit utilization rate and buy some time to pay down credit card debt. This isn’t necessarily a bad strategy. But applying for a new card can drop your credit score temporarily because of the resulting hard inquiry. Inquiries tend to have less of an impact than missed payments and credit utilization.

Using a balance transfer card or other approach can help ease debt burden in the short-term, but you should always focus on developing good credit habits. If habits don’t change, it’s easy to continue to add more debt, turning short-term fixes into a long-term problem.

Applied for multiple lines of credit

Frequently applying for credit card or loan offers can certainly cause a drop in your credit score. Both hard and soft inquiries appear on your credit report, but it’s the hard inquires, those related to applying for credit cards and loans, which affect your score. Inquiries stay on your credit report for two years and the impact to your credit score by hard inquiries tends to lessen over time.

Closed an account or paid off a loan

An active, longstanding and diverse credit history can show lenders you’re a responsible borrower and ultimately be beneficial to your score. If you close a credit card or pay off a loan, it may lower the average age of your active accounts and drop your score. Paying off a loan or closing a credit card can be a responsible achievement which may save you money and can, financially speaking, outweigh the effects of a drop in your score.


Declaring bankruptcy is a significant financial decision and can have a substantial, negative impact to your credit score. A bankruptcy will appear in the public records section of your credit report. How long a bankruptcy stays on your credit report depends on the type of bankruptcy you’ve filed. Even though bankruptcies can be a serious stumbling block on your path to healthy credit, over time, you can rebuild your credit to a healthy state.

What to do about a drop in credit score

As you continue on your path to healthy credit, your credit score sometimes may go down for one reason or another. Often, you may expect it, like when you apply for a new car loan or mortgage. Sometimes there are unexpected mistakes, like missing a payment. Either way, it’s normal for dips to happen.

Time and consistent good habits are the keys to long-term credit health. If you’re looking to rebuild your credit after a setback, make sure you understand the credit score factors and monitor your credit report regularly. If you keep building your credit knowledge and develop good habits, you can achieve your credit score goals.