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Why Did My Credit Score Go Down For No Reason

You Applied For Additional Credit And Lenders Checked Your Credit Report

Why Did My Credit Score Drop for No Reason

It might seem unfair, but your credit score will take a hit if you’ve applied for new credit and a bank or lender checks your credit report to assess the risk you pose as a borrower. As previously mentioned, when a lender looks at your credit report because you’ve applied for new credit, this is considered a hard inquiry which can lower your credit score.

But not all inquiries will hurt your credit score it all depends on the type of inquiries they are! For example, if you check your own credit report or credit history, this is considered a soft inquiry, and soft inquiries have absolutely no impact on your credit score.

Hard inquiries can stay on your credit report for up to three years, but they only account for about 10 percent of your overall credit score.

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Ways To Improve Your Credit Score

The steps you need to take to improve your credit scores will depend on whats bringing down your scores. Each persons situation will be different.

When youre trying to improve your credit scores, a great place to start is by getting your credit reports from each of the major credit bureaus, Equifax, Experian and Transunion, and by getting a credit score for each.

Then review the top factors influencing your credit scores to help understand what may be bringing down your scores, and then look into ways to address them:

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You Recently Applied For A Mortgage Loan Or New Credit Card

Whenever you apply for a new line of credit, lenders will request a copy of your credit report to determine your creditworthiness. They decide whether to lend to you by viewing characteristics like your payment history, credit usage and the types of accounts you currently hold.

Each time you authorize someone other than yourself, such as a lender, to check your credit history, a hard inquiry is recorded on your credit report and could slightly affect your score for up to two years.

As your credit profile matures, it’s natural to accumulate hard inquiries. But if you apply for too much credit in a short period of time, it can negatively impact your scores and affect the likelihood that lenders will approve you for new credit.

Depending on how many inquiries you already have, a new hard inquiry could cause your score to drop, but potentially only for a short period of time. And any effect on your credit score should disappear in about one year.

Ask For A Credit Limit Increase

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Give your credit card issuers a call and ask them to increase your budget. You might have to provide updated income and personal information.

This might be difficult if youve missed payments or youve been over the limit within the past 6 months to a year, but if its possible the credit increase can give you some cushion in your credit utilization. Remember, if a credit increase is available to you, this doesnt mean you should push your spending to the limit. Be smart about the increase and your card each month to keep below 30% utilization. Its worth a try!

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Mistake On Your Credit Reports

So far weve assumed that your credit scores dropped because of accurate information on your credit reports. But what if thats not the case?

Lenders can make mistakes too. Thats why its important to check your credit reports to keep an eye out for errors. The CFPB says that credit report inaccuracies are one of the most common issues it deals with each day.

If you find a mistake on your credit reports, you have the right to dispute it with the credit bureaus and with the reporting lender. Companies are required to investigate the dispute free of charge and promptly correct errors that are confirmed.

Youve Checked Your Credit Score Too Many Times

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While Equifax and TransUnion are the two credit bureaus for Canadian consumers, the score that lenders typically check isnt from either of those, but rather from FICO, a US-based data provider.

When you apply for any kind of loan, the lender will pull your credit score with a hard check to find your FICO score . This could actually drop your credit score by up to 5 points according to FICO. So if youve been shopping for a mortgage or a car loan recently, this couldve caused a drop in your credit score.

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Why Did My Credit Score Drop 100 Points For No Reason

Asked by: Waldo Sipes III

If your score drastically drops 100 points, chances are there is simply an error on the report. According to the Federal Trade Commission , one in every five consumers have errors on at least one of their three credit reports. That means that there is a high chance you may have an error in your report.

Dispute Credit Report Errors

Why Your CREDIT SCORE Went Down!

Sometimes the reason you see a credit score drop on your report can be a simple one: human errors and technical glitches on your credit report.

If your credit score changes without any unusual activity on your part, a look at your report may help you find the cause. Often, credit reports can have information on your account that is either outdated or incorrect. A study of the credit reporting industry, conducted by the Federal Trade Commission , found 20% of consumers have at least one error across their credit reports.

Its important to note that the three major credit bureausEquifax, Experian, and TransUnioneach produce separate credit reports and credit scores for every consumer. And although they are accessing the same information about you, they each have their standards and practices. Considering the vast amount of data these companies compile for millions of people, errors are almost unavoidable.

There are a ton of errors that can show up on your . For example, accounts that are settled or closed can appear to be opened or have balances that can affect your credit utilization. Payments that are on time can be listed as late or even delinquent. There have even been cases where people sharing the same or similar names have had their information switched or misplaced.

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There Is Inaccurate Information On Your Credit Report

Regularly checking your credit reports is one of the best ways to ensure no inaccurate information shows up in your file. Although it’s rare, mistakes happen, and it is possible that incorrect information on your credit reportsuch as inaccurate personal data or payment historyis causing your scores to drop.

If something in your report is inaccurate, it could be a result of a lender accidentally reporting the wrong information. It could also be a sign that you have fallen victim to identity fraud. If you see something you believe is inaccurate, dispute the information with all three credit bureaus as soon as possible. But keep in mind, some pieces of data can’t be disputed, like credit inquiries, accurate birth dates and credit scores.

You May Be The Victim Of Identity Theft

The most problematic reason your credit score could drop is due to identity theft. Identity theft happens when someone uses your identity to open credit accounts in your name.

The easiest way to detect financial identity theft is to request a copy of your credit report from Equifax or TransUnion . Your credit report will list each credit account in your name, along with the account’s age and whether it is in good standing. If you notice any accounts or activity you don’t recognize, verify first that it isn’t misattributed information, and then report the fraud to the appropriate authorities.

Resolving identity theft can be a long process, but once the appropriate authorities handle it and the accounts have been removed from your credit report, your credit score should return to normal.

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Reasons Why Your Credit Score Might Have Dropped

So why exactly did your credit score drop? There are a few possible reasons for your recent credit reporting issues. Some will be fairly obvious, but others can be confusing if youre unfamiliar with how scores are calculated.

Either way, its important to pinpoint what couldve hurt your credit score so that you dont make the same mistake again.

Why Did My Credit Score Drop 6 Common Reasons

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I went to apply for a mortgage pre-approval before we went house hunting, but I was told that my credit score was much lower than I expected it to be.

I heard this from a friend who pulled their credit score at the bank to see what kind of interest rate they could get on a home mortgage before they purchased their first home. When it came to credit, they thought they had been doing everything right. But when they spoke with their mortgage broker, they found out otherwise based on their credit reporting. This person had a decent credit history in their opinion, but their credit score had recently dropped according to the credit bureaus.

They were naturally confused. How could someone who was generally good with their money and credit card usage end up with a noticeable drop in their score?

Its more common than you may think but, thankfully, its often not cause for concern or panic. Your credit score is not a static number and its impacted by much more than whether you pay your minimum balance each month.

Here are 6 common reasons why your credit score may have dropped, the significance of a credit score reduction, and what to do when your credit score drops so you can improve it immediately.

In This Article:

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Why Does My Credit Score Fluctuate

Credit scores are based on a variety of factors that can cause your score to fluctuate. Its important to distinguish which credit behaviors are high-impact offenders, and which ones are low-impact and might not have a significant effect on your credit score.

Knowing how your credit is scored, and what has caused your credit score to fluctuate can help you understand how to repair it and help you adopt better credit management practices.

Change To Average Age Of Credit

Your average age of credit shows how much experience you have in managing credit responsibly. Different scoring models calculate this in a variety of ways:

  • Finding the average age of your open accounts
  • Using the age of the oldest account
  • Taking into account closed accounts if theyre still featured on your credit report

If you have closed one of your older accounts, this will have lowered the average age of your credit. This may even have happened several years in the past, depending on which model your lender uses. Furthermore, under some models, opening a new line of credit could also lower the average age, with the same effect.

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Why Is My Credit Score Low After Getting A Credit Card

When you apply for a credit card, the issuer performs a hard credit check to determine whether you qualify. This can cause your credit score to temporarily drop by up to five points. If you make a large purchase after receiving your new card, it can increase your credit utilization ratio. As a result, your score could drop even further.

You Applied For A Loan Or Credit Card

Why did my credit score go down? | Rebucketing

Each time you apply for a loan or new credit card, the lender will pull your credit history from one of the major credit bureaus before deciding whether to approve your application or not. This is called a hard inquiry, and it can decrease your credit score by several points.

The good news is that a dip in your score from a hard inquiry is usually temporary, and it should go back up again soon.

What to do:

Unfortunately, hard inquiries are just a part of life when you apply for new credit. Continue to keep an eye on your score, and avoid applying for any new loans or credit cards until you see that it has returned to normal.

Stacking up hard inquiries in a short amount of time can cause extra damage to your credit score, so its a good idea to space out your applications, and only apply for loans or credit cards that youre confident youll be approved for.

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Your Credit Utilization Ratio Is Too High

Your credit utilization rate is the balance on your credit card relative to your overall limit. For example, if you have a $500 balance on a credit card with a $1,000 limit, your credit utilization ratio is 50%. Credit scoring models prefer that you keep your credit utilization ratio under 30%, so it’s essential to be mindful not to let your balance creep up over that limit, even temporarily. Credit scoring models take your credit utilization rate very seriously, and it makes up about 30% of your overall credit score.

There are two common ways that your credit utilization ratio can accidentally become too high, resulting in a temporary drop in your credit score. First, if you make a large purchase on your credit card and don’t pay it off immediately, that will push your credit utilization ratio over the recommended 30%. To avoid this penalty, pay off your credit card purchases promptly.

The second most common reason for your credit utilization ratio to rise is if your credit limit is lowered. If your total available credit is lowered, your credit utilization ratio will increase. Your lender may lower your limit without warning, bringing you dangerously close to your credit limit and reducing your credit score. If this happens, call your lender and ask them to raise it again.

You’ve Submitted Too Many Credit Applications

When you apply for new credit and a lender checks your credit reports, it triggers what’s known as a hard inquiry.

A couple of hard inquiries as you’re routinely applying for a loan or credit card might have little, if any, effect on your credit score. But a slew of recent hard inquiries that appear on your credit reports could make you a riskier borrower in the eyes of lenders and credit scoring models. Several hard inquiries over a short period could be a factor preventing your credit score from going up.

To help lift your credit score, try keeping the number of hard inquiries to a minimum. Hard inquiries might remain on your credit report for two years, yet the effect on your credit score decreases as time goes by.

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You Made A New Application For Credit

Any time you put in a new application for credit, an inquiry is added to your credit report. Because inquiries make up 10 percent of your credit score, applying for new credit can affect your credit score.

Though inquiries stay on your credit report for two years, they’re only factored into your credit score for one year. After just a single inquiry, your credit score should steadily increase and recover in 12 months, provided you make no other credit mistakes.

How Can I Raise My Credit Score 20 Points Fast

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4 tips to boost your credit score fast

  • Pay down your revolving credit balances. If you have the funds to pay more than your minimum payment each month, you should do so. …
  • Increase your credit limit. …
  • Check your credit report for errors. …
  • Ask to have negative entries that are paid off removed from your credit report.
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    What To Consider When Your Credit Score Changes

    The next time your credit score changes, ask yourself the following questions:

    • Have you spent more or less money this month compared to previous months?If so, your credit utilization ratio may have changed.
    • Did you miss a payment in the past few months?If so, you could have a delinquent payment thats hurting your score.
    • Did a missed payment or derogatory mark from several years ago fall off your credit report?If so, your credit score may be going up.
    • Have you applied for credit?An inquiry may have been placed on your report, which can negatively impact it.
    • Have you recently paid off a loan or closed a credit card?If so, your credit history may have been impacted.

    After looking closer, you may find something has changed that could influence your credit score that you werent initially aware of. The best way to monitor changes in your score is to check your credit report monthly, so youre up to date on all the changes that impact your score.

    How Often Is My Credit Score Updated

    Your credit score is updated monthly based off the data in your credit report.

    Its important to note that if a credit provider requests your credit report or credit score from a credit reporting agency, it will be calculated at the time of the request. So if a lender orders your credit score, it mayve moved up or down from the last score you saw depending on your recent borrowing behavior.

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