Why credit score drops

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Other product and company names mentioned herein are the property of their respective owners. Licenses and Disclosures. Advertiser Disclosure. By Brianna McGurran. Then space out applications every six months or so. Research the best credit card offerings for your needs, and apply only for things you're likely to be approved for — so you don't lose a few points for the application only to be turned down.

We get it. That can cost you some points. And if it was one of your older cards, you took another hit, because the age of your credit also affects your score. The fix: Think very carefully before closing old cards. If your credit card issuer offers a better card, see if you can switch. Paying off a loan is an achievement, but can also leave you with a lower credit score.

The fix: Keep your other accounts active, keep your credit usage low and pay on time. Your credit will continue to benefit as your track record with credit grows longer and is filled with positive information. You missed a payment. Keep up with your credit score. Your credit card balance is higher than usual. Frequently asked questions Why did my credit score drop 30 points for no reason? Why did my credit score randomly drop? Can a credit score drop for no reason?

Someone else used your credit card account. You might be using an unsupported or outdated browser. To get the best possible experience please use the latest version of Chrome, Firefox, Safari, or Microsoft Edge to view this website. However, if you see a large drop of at least 15 to 20 points, you should find out the cause. This can help you determine whether it fell based on your actions, a credit reporting error or possibly identity theft. Results may vary.

See site for more details. Since your credit score is calculated based on information in your credit reports, negative information can drag your score down. For example, if you have a bankruptcy listed on your reports, it can have a negative effect on your score for a long time. A Chapter 7 bankruptcy remains on your credit report for up to 10 years while a Chapter 13 bankruptcy remains on your report for up to seven years. Some other examples of derogatory remarks that can lower your credit score include collection accounts and foreclosures.

An original debt creditor usually sends your account to collections after failing to collect a debt from you. A foreclosure happens when you default on your mortgage. These negative remarks remain on your credit reports for up to seven years. Although a derogatory remark can stay on your credit report for up to ten years, its impact lessens over time. Also, practicing good credit habits can help you rebuild your credit faster. Sometimes creditors make credit reporting errors.

You can view all three of your reports for free weekly through April 20, by visiting AnnualCreditReport. While reviewing your reports, check to make sure your accounts and personal information are correct. If you spot an error, dispute it with each credit bureau that lists it online, by mail or phone. Also, keep in mind that if you see an account that you never opened, it could be a sign you are a victim of identity theft. If one of your bills becomes 30 days past due, a creditor can report it to one or more of the three major credit bureaus.

Credit utilization — the portion of your credit limits that you are currently using — is a significant factor in credit scores. It is one reason your credit score could drop a little after you pay off debt, particularly if you close the account. Other factors that credit-scoring formulas take into account could also be responsible for a drop:. The average age of all your open accounts.

If you paid off a car loan, mortgage or other loan and closed it out, that could reduce your age of accounts. That's also true if you paid off a credit card account and closed it. The types, or "mix," of credit you have. Scores reward you for having both installment accounts with set payments over a specific time, like a loan and revolving accounts with varying payments and no set end date, such as credit cards.

Let's say you just made the final payment on your car loan. Your payment history is perfect and you keep credit card balances low. But now you have one less account, and if all your remaining open accounts are credit cards, that hurts your credit mix. You may see a score dip — even though you did exactly what you agreed to do by paying off the loan.

The same is true of credit cards. Usually, paying off a credit card helps lower your credit utilization because your remaining balances are a smaller percentage of your overall credit limit. But if you close the account you just paid off, you lose that account's credit limit and now your other balances represent a greater percentage of your total limit. It's smart to keep on top of the factors that influence your credit score , and it's easy to automate.