How Can I See Why My Credit Score Dropped?

A credit score is a numerical summary of an individual’s creditworthiness, reflecting their financial behavior to potential lenders. This three-digit number, typically ranging from 300 to 850, assesses how reliably a person manages financial obligations. A sudden decline can indicate a change in the underlying factors contributing to its calculation. Understanding the root cause is a diagnosable process.

Accessing Your Credit Information

Investigating a credit score decline begins with obtaining your credit reports, which contain the detailed information used to calculate your scores. The official source for free credit reports from the three major nationwide credit bureaus—Equifax, Experian, and TransUnion—is AnnualCreditReport.com. This website allows consumers to request a free copy of their credit report from each bureau weekly.

Credit reports typically do not include your credit score itself. Credit scores are proprietary calculations, with the two most widely used being FICO Scores and VantageScores. Both models use information from your credit reports to assess risk, applying different weighting to factors and having distinct minimum credit history requirements. For instance, FICO generally requires at least six months of credit history, whereas VantageScore can generate a score with as little as one month.

Many financial institutions, including banks and credit card companies, now offer free access to one of your credit scores. These scores are often VantageScores, though some providers offer FICO Scores. While these provided scores are useful for general monitoring, it is beneficial to check reports from all three bureaus because not all creditors report information to every bureau, leading to potential variations in your data across reports.

Common Reasons for Credit Score Declines

Several factors can contribute to a decrease in your credit score, each reflecting different aspects of financial behavior and risk. Payment history is the most influential factor in both FICO and VantageScore models, making late or missed payments a significant cause for score drops. Even a single payment more than 30 days past its due date can have a substantial negative impact on your score, as it signals increased risk to lenders.

Increased credit utilization is another common reason for a score decline. This is the amount of revolving credit you are using compared to your total available credit. For example, using more than 30% of your available credit limit on a credit card can negatively affect your score.

Opening new credit accounts can also cause a temporary dip in your score. Each application for new credit results in a “hard inquiry” on your credit report, which can slightly lower your score for a short period. Additionally, new accounts reduce the average age of your credit accounts, a factor that contributes to your credit history length.

Conversely, closing older credit accounts might inadvertently affect your score. Closing an account reduces your total available credit, which can increase your credit utilization ratio if your balances on other accounts remain the same. It also shortens your overall credit history, particularly if the closed account was one of your oldest. Public records such as bankruptcies, foreclosures, or accounts sent to collections can severely impact credit scores, remaining on your report for several years and signaling significant financial distress.

Analyzing Your Credit Report for Changes

Once you have obtained your credit reports from each of the three major bureaus, a thorough review is necessary to identify the specific reason for a score drop. Begin by examining the payment history section for any recently reported late payments. Look for accounts marked as 30, 60, or 90 days past due, noting the date they were reported, as this often correlates with the timing of your score decline.

Next, review the accounts section, paying close attention to your revolving credit accounts, such as credit cards. Check the reported balances and credit limits to determine if your credit utilization has increased significantly. This section also reveals if any new accounts have been opened recently, indicated by a new account entry and a corresponding hard inquiry.

It is important to check the inquiries section of your report for any hard inquiries you do not recognize. While a single inquiry may have a minimal effect, multiple inquiries in a short period can be a red flag. Finally, scan the public records and collections sections for any new entries, such as bankruptcies, foreclosures, or collection accounts, which can severely impact your score. Comparing the current report to a previous version or cross-referencing with your personal financial records can help pinpoint discrepancies or changes that led to the score reduction.

Addressing Inaccuracies and Discrepancies

If your review of credit reports reveals inaccurate or incomplete information that may have caused your score to drop, you have the right to dispute these items. The process involves contacting the credit bureau(s) where the error appears, which can be done online, by mail, or over the phone. When filing a dispute, clearly explain what information you believe is incorrect and why, providing copies of any supporting documentation you have.

After receiving your dispute, the credit bureau is required by federal law to investigate the matter within 30 days. The bureau will then forward your dispute and any relevant information to the data furnisher, the original creditor or lender that reported the information. This furnisher is also obligated to conduct a reasonable investigation into the disputed information.

In addition to disputing with the credit bureaus, you can contact the data furnisher directly to report the inaccuracy. Providing them with evidence that their records are incorrect can prompt them to update the information and notify the credit bureaus of the correction. Once an investigation is complete, the credit bureau must inform you of the results, and if an error is found, the inaccurate information will be updated or removed from your report.