Should I Worry About a Credit Score Drop?

Should I Worry About a Credit Score Drop? loading="lazy"

Through April 20, 2022, Experian, TransUnion and Equifax will offer all U.S. consumers free weekly credit reports through AnnualCreditReport.com to help you protect your financial health during the sudden and unprecedented hardship caused by COVID-19.

It's normal for credit scores to fluctuate somewhat, but a major score drop can be cause for concern. If you can't associate a steep score drop with actions you've taken in the past few months, it's possible criminals have taken out credit in your name, and their activity is causing problems with your credit score.

What Causes Credit Scores to Drop?

To know whether you should be concerned about a decrease in your credit score, it's important to understand the kinds of behaviors that can cause credit scores to drop. How much your credit score can drop varies depending on how severely the event or action affects your credit risk.

  • Missing a scheduled debt payment can cause a deep, longer-lasting score drop. That's because payment history is the most important factor in your credit scores.
  • Making large purchases on your credit cards can result in a credit score hit. Increasing your credit utilization—or the percentage of available credit you're using—beyond about 30% can significantly lower your credit scores. Scores typically recover after you reduce your balances—and can improve if you get your utilization percentage into single digits.
  • Severe negative events, including foreclosure and bankruptcy, can negatively affect your credit scores for many years.
  • Applying for new credit can cause a small drop in score that typically rebounds quickly as long as you keep up with your bills.

The exact number of points by which these events will lower your score depends in part on the score you had before these events. A missed payment, for example, will tend to deduct more points for someone with an exceptional credit score than it would for someone with a fair score.

When You Should Worry About a Credit Score Drop

To understand whether you should be worried about a decline in credit score, it's important to pay attention to your credit scores and reports so you'll notice if they drop significantly. You can get your credit reports from all three national consumer credit bureaus (Experian, TransUnion and Equifax) for free through AnnualCreditReport.com. You can also get free credit monitoring from Experian to see your FICO® Score at any time.

Whenever you receive a credit score from Experian, you'll also receive an explanation of the reasons, or risk factors, that led to that score. If that explanation doesn't track with your recent credit activity, check your credit reports and look for signs of unauthorized activity or inaccurate entries.

A large drop in credit score that you can't explain could be a sign of fraudulent activity. A criminal may have used your personal information to take out a loan or rack up purchases on a new credit card account, and then disappeared without making required payments.

If you're a victim of credit fraud, it's possible, with time and patience, to clean up your credit history. In the meantime, however, a major drop in credit score could cause your credit score range to slip, from very good to good, or from good to fair, for example. That, in turn, could affect your ability to qualify for loans and other types of credit, or could cause lenders to charge you higher interest rates than you deserve based on your actual credit behavior.

If you experience credit fraud, take action right away by filing an identity theft report and placing a fraud alert or credit freeze on your credit report.

When You Shouldn't Worry About a Credit Score Drop

There's no need to worry about a small drop in credit score, since scores regularly increase and decrease slightly from month to month, reflecting changes in your loan and credit card balances and other normal credit activity.

Score drops related to new credit applications are not cause for alarm either, as long as you understand what they're related to. (A credit application you did not make can be a sign of fraudulent activity.) When you apply for a loan or credit card, the lender will typically check your credit and what's known as a hard inquiry will show up on your credit report. The inquiry can dock your score by a few points, but its effect typically only lasts a few months.

Even if your score drops more than slightly, you needn't worry if you understand why it happened and can correct it—if an emergency expense drove up your credit card balance significantly, for instance. In that case, paying down your card balance can bring scores back up.

If your score dropped significantly due to a missed loan or credit card payment, however, you won't be able to quickly correct the problem. Late payments remain on your credit report for seven years, though their impact diminishes over time. Read on for ways to improve your credit score when you've experienced a score decrease.

How to Improve Your Credit Score

If your credit scores have dropped because of your credit activity, you can always take steps to improve them, including:

  • Reduce balances on your credit card accounts. The lower your credit utilization, the better. Individuals with the best credit scores tend to keep their credit utilization below 10%. If possible, try to pay off credit card balances in full each month.
  • Get current on any past-due accounts. If you have any accounts that are past due, such as collection accounts or charge-off accounts, bringing them current is essential to rebuilding your credit scores.
  • Apply for credit only when you need it. Although inquiries have minimal impact on credit scores, multiple credit applications for different types of credit within a short time can do cumulative harm to your credit and may cause lenders to view you as a riskier borrower.
  • Sign up for Experian Boost . When you share your history of paying utility, cellphone and streaming-service bills, Experian Boost gives you credit for on-time payments that can increase FICO® Scores based on your Experian credit reports. After you sign up, you will receive an updated credit score so you can see how your score was affected. Experian Boost users see an average score increase of 13 points.

Drops in credit score can be unnerving, and you're right to pay attention to significant score drops in case they indicate unauthorized credit activity. But score drops you can trace to your normal credit behavior aren't cause for undue alarm.

How Good Is Your Credit Score?

300 credit score301 credit score302 credit score303 credit score304 credit score305 credit score306 credit score307 credit score308 credit score309 credit score310 credit score311 credit score312 credit score313 credit score314 credit score315 credit score316 credit score317 credit score318 credit score319 credit score320 credit score321 credit score322 credit score323 credit score324 credit score325 credit score326 credit score327 credit score328 credit score329 credit score330 credit score331 credit score332 credit score333 credit score334 credit score335 credit score336 credit score337 credit score338 credit score339 credit score340 credit score341 credit score342 credit score343 credit score344 credit score345 credit score346 credit score347 credit score348 credit score349 credit score350 credit score351 credit score352 credit score353 credit score354 credit score355 credit score356 credit score357 credit score358 credit score359 credit score360 credit score361 credit score362 credit score363 credit score364 credit score365 credit score366 credit score367 credit score368 credit score369 credit score370 credit score371 credit score372 credit score373 credit score374 credit score375 credit score376 credit score377 credit score378 credit score379 credit score380 credit score381 credit score382 credit score383 credit score384 credit score385 credit score386 credit score387 credit score388 credit score389 credit score390 credit score391 credit score392 credit score393 credit score394 credit score395 credit score396 credit score397 credit score398 credit score399 credit score400 credit score401 credit score402 credit score403 credit score404 credit score405 credit score406 credit score407 credit score408 credit score409 credit score410 credit score411 credit score412 credit score413 credit score414 credit score415 credit score416 credit score417 credit score418 credit score419 credit score420 credit score421 credit score422 credit score423 credit score424 credit score425 credit score426 credit score427 credit score428 credit score429 credit score430 credit score431 credit score432 credit score433 credit score434 credit score435 credit score436 credit score437 credit score438 credit score439 credit score440 credit score441 credit score442 credit score443 credit score444 credit score445 credit score446 credit score447 credit score448 credit score449 credit score450 credit score451 credit score452 credit score453 credit score454 credit score455 credit score456 credit score457 credit score458 credit score459 credit score460 credit score461 credit score462 credit score463 credit score464 credit score465 credit score466 credit score467 credit score468 credit score469 credit score470 credit score471 credit score472 credit score473 credit score474 credit score475 credit score476 credit score477 credit score478 credit score479 credit score480 credit score481 credit score482 credit score483 credit score484 credit score485 credit score486 credit score487 credit score488 credit score489 credit score490 credit score491 credit score492 credit score493 credit score494 credit score495 credit score496 credit score497 credit score498 credit score499 credit score500 credit score501 credit score502 credit score503 credit score504 credit score505 credit score506 credit score507 credit score508 credit score509 credit score510 credit score511 credit score512 credit score513 credit score514 credit score515 credit score516 credit score517 credit score518 credit score519 credit score520 credit score521 credit score522 credit score523 credit score524 credit score525 credit score526 credit score527 credit score528 credit score529 credit score530 credit score531 credit score532 credit score533 credit score534 credit score535 credit score536 credit score537 credit score538 credit score539 credit score540 credit score541 credit score542 credit score543 credit score544 credit score545 credit score546 credit score547 credit score548 credit score549 credit score550 credit score551 credit score552 credit score553 credit score554 credit score555 credit score556 credit score557 credit score558 credit score559 credit score560 credit score561 credit score562 credit score563 credit score564 credit score565 credit score566 credit score567 credit score568 credit score569 credit score570 credit score571 credit score572 credit score573 credit score574 credit score575 credit score576 credit score577 credit score578 credit score579 credit score