Why Did My Credit Score Drop Off?

Reader Question: "Last year my credit score was around 720, and I recently checked it and was surprised to see it had dropped to 680. I haven't changed anything, financially speaking. What might have caused my credit score to drop off like that?"

This is a tough question to answer, because I don't know all of the details of your financial situation. There are many things that can cause a credit score to drop, and some of these factors are less obvious than others.

In a moment, I'll offer a list of actions that could have lowered the number. But for the benefit of all readers, I want to point out that you have more than one credit score. A mortgage lender, for example, can pull one score from each of the three reporting bureaus (TransUnion, Equifax and Experian). These bureaus don't always agree, so your TransUnion score could be different from your other two, and vice versa.

Credit Actions That Can Make a Score Drop

Let's move on to the factors that might cause a credit score to drop off. In reality, there are more factors than I can list within this response. So I've narrowed down this list to the most common causes of a score dropping.

You should keep this FICO scoring chart in mind as we talk about the items on this list. I'll refer back to it often.


Here are some possible causes to consider:

Credit Limit Lowered -- If your card company (or companies) have lowered your credit limit(s) recently, it could negatively affect your overall score. It would inflate your utilization ratio, which measures how much of your available credit limit your are currently using. In other words, a lowered limit makes it appear that you are using more of your total limit, which is a big factor in credit scoring models. See "amounts owed" in the chart above.

Credit Usage Increased -- This is another way you could increase your utilization ratio, thereby causing your score to drop off. If your credit limits have stayed the same, but you are using more of those limits, it can have the same negative effect on your score. A "double whammy" can occur when you are using more of your limit at the same time the limit is lowered by your card company. This will make it appear (to a scoring model) that you are maxing out your credit cards. Your score will drop even more as a result of this.

Unpaid Bills / Late Payments -- You can see by the scoring chart above that your payment history influences your FICO credit score more than any other factor. So if you've been missing payments on something, and the creditor has reported it to the credit bureaus, it can take a big toll on your score. Sometimes, this scenario is fairly obvious. People ignore their bills for whatever reason, and their score drops as a result. Other times, a person might not even know about the late or missed payment. I see this happen a lot with medical bills that were added on after a procedure, often without the patient's knowledge.

Applying for Credit -- If you have been applying for a lot of credit cards or store accounts recently, it could have a negative impact as well. Normally, this won't drop your score by much, but it is one of the influencing factors. See "new accounts" in the scoring chart above. When you make many inquiries and credit applications in a short period of time, it has an even greater affect. Still, this factor is not nearly as strong as the ones listed above. So I would consider it last.

Those are the primary reasons your score might have dropped over the last few months. But like I said, there is certainly more to the picture than this. If you need advice on improving your score, you'll find plenty of it here on this blog. I recommend using the search box at the top of the site to find more advice on this subject.