Why Did Your Credit Score Drop? 7 Culprits That Could Be Behind the Plunge

Your credit score is one of the most important numbers in your financial life. Lenders, landlords, and even potential employers look at it to gauge your financial trustworthiness. Credit scores range from 300 to 850, with 700 considered good and 800-plus viewed as excellent. So when your credit score suddenly dips, it’s worth investigating.

A few-point fluctuation is normal, but a dramatic credit score drop demands immediate attention. Here’s what might be causing your score to take a nosedive.

The Usual Suspect: Payment Problems

Your payment history is the heavyweight champion of credit scoring, accounting for 35% of your FICO Score — the model used by 90% of major lenders. Even a single late or missed payment can damage your creditworthiness significantly.

Credit issuers typically report delinquencies once you’re 30 or more days behind. The worse the timing — 60, 90, or beyond — the steeper your score’s decline. If you continue to ignore the debt, it eventually lands with a collection agency, creating a black mark that persists for years on your credit report.

Excessive Credit Card Balances Are Working Against You

Maxing out your credit cards is a quick way to crater your credit score. Here’s why: your credit utilization ratio comprises 30% of your FICO Score. The industry standard is keeping your usage below 30% of available credit. When you exceed this threshold, lenders view you as riskier, and your score reflects that penalty.

A Reduced Credit Limit Just Made Things Worse

Sometimes issuers slash credit limits without warning. Your $5,000 available balance becomes $4,000 overnight. While this sounds like an issuer problem, it becomes your score’s problem because it automatically increases your utilization ratio — pushing you closer to or over that critical 30% threshold.

You Closed an Old Credit Account

It might seem smart to close unused credit cards, but this strategy often backfires. Why? Your account age represents 15% of your credit score. Long payment histories work in your favor, and closing old accounts — especially those with years of positive history — removes that advantage. The impact is even more severe if that account was your oldest.

A Hard Inquiry From a New Credit Application

Applied for a mortgage, auto loan, or new credit card? Each application triggers a hard inquiry, which temporarily dents your score. The damage is typically modest and fades within a year, but it’s noticeable enough to alarm those tracking their credit closely.

Errors on Your Credit Report Are Dragging You Down

Inaccurate data on your credit report is more common than you’d think — and it directly damages your score. This could be a simple clerical error or, worse, a sign of identity theft.

To fight back, pull your credit reports from all three bureaus and dispute any errors in writing with supporting documentation. If the bureaus don’t correct the mistakes, escalate to the Consumer Financial Protection Bureau.

Major Financial Setbacks: Foreclosure and Bankruptcy

The most serious hits to your credit score come from foreclosure or bankruptcy. A foreclosure or Chapter 13 bankruptcy stays on your report for seven years, while Chapter 7 bankruptcy lingers for a decade. These events trigger massive score reductions that take years to recover from.

What to Do Next

If your credit score drop was unexpected, start with these steps: review your payment history, check your credit card balances, scan your credit report for errors, and verify you haven’t forgotten about any recent hard inquiries. Understanding the root cause is the first step toward rebuilding your creditworthiness and getting back on track.