Five Reasons Your Score Might Have Dropped

If you’re carefully checking your credit report and score, you’re already ahead of many Americans. But what happens when you see a drop in your credit score? How can you understand more about why it happened?

There are several components that contribute to your credit score. Once you know the factors that are taken into account, you can also look at these things to see if you may have fallen down in one or more areas. Here are five questions to ask if your credit score has recently dropped:

Question #1: Did you max out a credit card or add a large balance to get close to the limit?
If you have been increasing your credit card balances or had to use them to cover an emergency purchase that put you at or near your limit, debt from your credit cards may be hurting your credit score. 

You may not be able to pay off your cards every month, but working to get as close to that goal will help you. In general, keeping your credit card balances at or below a third of their limits is a good rule of thumb.

Question #2: Have you applied for new credit cards, auto loans or a mortgage?
When you’re in the market for a new car or house or even if you’ve shopped around to refinance, you likely are showing some additional inquiries on your credit. One or two will likely not impact your score much, but having several over a short amount of time can cause your score to dip, even if it’s slightly. Be smart about what companies you have run your credit and when they do it.

Question #3: Is there something inaccurate on your credit report?
The three credit bureaus get information from lenders to build the information that makes up your credit report. If something inaccurate is showing up on your report, this could be an indicator that the lender incorrectly reported something, or worse, that you have been the victim of identity theft. Do your homework and if you need to dispute inaccurate information , do so immediately.

Question #4: Have you missed a late payment or had something sent to collections?
Missed payments can have a large and lasting impact. Not only can they possibly cause you to incur late fees or increased interest rates, but your credit can take a hit as well. If you are more than 30 days late on a payment, you may see a ding to your credit score. If items go 60, 90 or over 90 days late, you may see an even bigger hit. And if you have something sent to collections, the same can be true. 

By staying on top of your credit cards and keeping up to date on your payments, you can help avoid a ding because of this one. If you think you may be about to fall behind, contact your lender and see if you can discuss options ahead of time. They may have alternative payment plans available to fit your needs.

Question #5: Did you close a credit card you’ve had for a while?
If you have had a credit card for a while and closed the account, this could have caused a drop in your score. This is because the age of your accounts factors into your credit score. If you have proven a solid payment history and use of credit over time, lenders see you as a lower risk. You may be better off just paying off the card, but leaving the card open.

If you answered ‘yes’ to one or more of these questions, you may be closer to solving the case when it comes to your lower credit score. The good news is once you know what may be the cause, you can work on your own financial management and budgeting habits. There are resources such as Score PlannerTM by, which is free to everyone, that can help you understand more about how changes in your credit information may impact your credit score.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from, Inc.  © 2013, Inc.  All rights reserved.