How to Check Why Your Credit Score Went Down

Credit scores fluctuate based on activities reported to credit bureaus. This article guides you through reviewing your credit reports to identify factors that may have caused a score reduction. The process begins with accessing your credit information.

Accessing Your Credit Reports

To investigate a credit score decline, obtain copies of your credit reports from Equifax, Experian, and TransUnion. Federal law grants you the right to receive a free copy of your credit report from each agency once every 12 months. The most straightforward way to access these reports is through AnnualCreditReport.com, which is the only authorized website for free reports.

While AnnualCreditReport.com provides free reports, other avenues exist for obtaining credit information. Many credit card issuers and financial institutions offer free credit scores and sometimes full credit reports as a benefit to their customers. Additionally, various credit monitoring services, some free and some subscription-based, can provide regular updates and access to your reports. For a comprehensive annual review, the official website remains the primary resource.

It is advisable to obtain reports from all three bureaus because the information they hold may not be identical. Creditors and lenders do not necessarily report to all three agencies, meaning a negative item appearing on one report might not be present on another. By reviewing all three, you ensure a complete picture of your reported credit activity and can identify any discrepancies across them.

Understanding Key Credit Report Sections

Credit reports are typically organized into distinct sections, each detailing different aspects of your financial history. Understanding these sections helps interpret the data and identify reasons for a score change. The personal information section usually includes your name, addresses, Social Security number, and employment history, which helps verify your identity.

The account history section, often the most extensive, provides a detailed record of your credit accounts. This includes revolving accounts like credit cards, installment loans such as mortgages and auto loans, and other forms of credit. For each account, you will find details such as the account type, date opened, credit limit or original loan amount, current balance, and payment status. This overview of your payment behavior is a primary factor in credit scoring.

Another section is public records, which lists information from public sources that can affect your creditworthiness. This may include bankruptcies, foreclosures, or civil judgments. These entries carry significant weight in credit scoring models. The inquiries section documents instances when a lender or creditor has requested your credit report, typically categorized as “hard inquiries” or “soft inquiries.” Hard inquiries occur when you apply for new credit, such as a loan or credit card, and they can have a temporary, minor impact on your score. Soft inquiries do not affect your credit score and occur when you check your own credit or when a lender pre-screens you for an offer.

Identifying Potential Reasons for a Score Drop

Once you have your credit reports, scrutinize them for changes or new entries correlating with your score decrease. A direct comparison between a recent report and a previous one, if available, can quickly highlight new derogatory marks or significant account changes. If a previous report is unavailable, review the current report, focusing on recent activity.

One of the most impactful reasons for a credit score decline is a late or missed payment. Your credit report will clearly indicate payment statuses, often showing markers like “30 days late,” “60 days late,” or “90+ days late” next to the relevant account. Even a single payment 30 days past its due date can substantially lower your score, as payment history is a primary component of credit scoring. Subsequent late payments amplify this negative effect.

An increase in your credit utilization ratio also frequently leads to a score drop. This ratio measures the amount of revolving credit used compared to your total available revolving credit. For example, if your credit card balance increases significantly while your credit limit remains the same, your utilization ratio rises. High utilization (generally above 30% on any card or across all cards) signals increased risk to lenders and can negatively affect your score.

Opening new credit accounts can temporarily lower your score due to the associated hard inquiry and the reduction in your average age of accounts. Each hard inquiry remains on your report for two years, though its impact typically diminishes after a few months. A new account also lowers the average age of your accounts, a factor in credit scoring, especially with an established credit history.

Public records, such as newly filed bankruptcies or civil judgments, can drastically reduce a credit score. These events signify significant financial distress. A collection account or a charge-off (when a creditor closes an account due to non-payment and sells the debt or writes it off as a loss) will severely impact your score. These items indicate a failure to repay a debt as agreed.

Suspicious activity, such as identity theft or fraud, can also cause a score to plummet. This might manifest as new accounts opened in your name that you do not recognize, unauthorized charges on existing accounts, or unfamiliar inquiries. Reviewing your reports for unfamiliar accounts or activity is important for identifying fraudulent activity, which directly affects your financial standing.

Addressing Inaccuracies

If your credit reports contain inaccurate or incomplete information, you have the right to dispute these errors with the credit bureaus. The Fair Credit Reporting Act (FCRA) outlines the process for challenging incorrect information. To initiate a dispute, contact the credit bureau (Equifax, Experian, or TransUnion) reporting the erroneous item.

Provide details about the disputed item, such as the account number, creditor’s name, and reason for the dispute. Providing supporting documentation, like payment records or statements, can strengthen your dispute. Once a dispute is filed, the credit bureau must investigate the item, generally within 30 days, by contacting the data furnisher (the creditor or lender that provided the information).

After investigation, the credit bureau must inform you of the results and, if an error is confirmed, remove or correct the inaccurate information. Obtain an updated copy of your credit report after the investigation concludes to ensure the correction has been made. If the credit bureau does not resolve the issue to your satisfaction, consider disputing the information directly with the data furnisher.