How to See Why My Credit Score Dropped

A credit score represents your financial reliability, influencing various aspects of your economic life. Understanding why it drops is fundamental to maintaining financial health. A decrease can impact your ability to secure loans, obtain favorable interest rates, or even rent an apartment. This guide explains how to investigate and understand the reasons behind a credit score reduction.

Obtaining Your Credit Reports

The first step to understanding a credit score drop is accessing your comprehensive credit reports. Federal law grants you the right to obtain free copies from each of the three major nationwide credit bureaus: Equifax, Experian, and TransUnion. AnnualCreditReport.com is the official source, allowing you to request reports from all three.

Consumers are entitled to a free report from each bureau weekly. To request your reports, you will need to provide personal identifying information such as your full name, current and previous addresses, Social Security Number, and date of birth.

Identifying Credit Score Changes

Once you have your credit reports, review them thoroughly to pinpoint entries that may have led to a score decrease. Each report contains several key sections for examination.

• Accounts or Trade Lines: Look for new accounts you didn’t open, unexpectedly closed accounts, changes in credit limits, or significant increases in reported balances.
• Payment History: Check for any payments reported as 30, 60, or 90 days late, as these significantly affect your score.
• Inquiries: Look for recent “hard inquiries” from new credit applications, which can temporarily lower your score.
• Public Records and Collections: Review for new derogatory marks like bankruptcies, foreclosures, or collection accounts, which severely damage credit standing.

Comparing recent reports with older ones, if available, can help highlight changes.

Understanding Common Score Impacts

Several financial activities and events commonly lead to a decrease in credit scores. Payment history is a significant factor in credit scoring models, with late or missed payments having a substantial negative impact. Even being just 30 days past due on a payment can result in a score reduction, and more severe delinquencies like 60 or 90 days late, or accounts sent to collections, can cause even greater damage.

Credit utilization, which is the amount of credit you are using compared to your total available credit, also heavily influences scores. A high utilization rate, particularly exceeding 30% of your available credit, indicates higher risk to lenders and can lead to a score drop. Applying for new credit results in a “hard inquiry” on your report, which can cause a slight, temporary dip in your score. Closing older credit accounts can negatively affect your score by reducing your overall available credit and shortening the average age of your credit history. Derogatory public records, such as bankruptcies or foreclosures, represent severe financial distress and remain on your report for an extended period, significantly impacting your score.

Addressing Credit Report Inaccuracies

If your credit reports reveal an error or inaccuracy contributing to a score drop, you have the right to dispute it. First, gather supporting documentation, such as payment confirmations or account statements, that proves the information is incorrect. Then, contact the credit bureau (Equifax, Experian, or TransUnion) reporting the error.

Disputes can be filed online, by mail, or over the phone. When submitting a dispute, clearly identify the specific item and explain why you believe it is inaccurate, providing copies of your supporting documents. The Fair Credit Reporting Act (FCRA) requires credit bureaus to investigate your dispute within 30 days, or up to 45 days in certain circumstances, after receiving it. The credit bureau will contact the original creditor to verify the information. If found inaccurate or unverifiable, it must be corrected or removed from your report.