How to See Why Your Credit Score Went Down

A credit score represents an individual’s creditworthiness, influencing access to financial products and services. Understanding this score is important for financial health, as it impacts loan approvals and interest rates. When a credit score declines, identifying the underlying cause becomes important for managing personal finances effectively. This guide helps uncover reasons for a credit score drop.

Accessing Your Credit Score and Credit Report

A credit score differs from a credit report; the score is a numerical snapshot, while the report provides a detailed history of your credit activities. The credit report lists accounts, payment history, and public records, forming the basis from which credit scores are calculated. Regularly reviewing both is important for financial awareness.

Consumers can obtain a free copy of their credit report once every 12 months from each of the three major nationwide credit reporting agencies: Equifax, Experian, and TransUnion. The official, federally authorized website for these reports is AnnualCreditReport.com. While typically annual, weekly access to these reports has been available, offering more frequent monitoring. Reports can be requested online, by phone, or through mail.

Credit scores are commonly provided by credit card companies, banks, and various financial institutions. Many offer free access to your score as part of their online banking or statement services. Free credit score services also exist, often providing scores based on models like VantageScore. Credit reports from AnnualCreditReport.com do not include your credit score.

Common Factors That Impact Credit Scores Negatively

Several factors can lead to a decrease in credit scores, often reflecting changes in financial behavior or circumstances. Missed or late payments, especially those over 30 days past due, are a factor. Such delinquencies signal an increased risk to potential lenders.

Payment history is a key part of credit scoring, and even one late payment can negatively affect your score. High credit utilization, the amount of credit used relative to total available credit, can also reduce a score.

Using a large portion of available credit on revolving accounts, like credit cards, can indicate financial strain. Maintaining a low credit utilization ratio, generally below 30%, supports a healthy score. New credit inquiries can also impact scores, especially if multiple applications are made within a short period.

Each time a lender pulls a credit report for a credit application, it results in a “hard inquiry,” which can temporarily lower a score. Opening several new credit accounts simultaneously can further amplify this negative effect, suggesting a higher risk of overextension. Closing older credit accounts might inadvertently affect a score by reducing the total available credit and potentially shortening the average age of credit accounts. Both of these aspects contribute to the overall credit profile.

Public records like bankruptcies, foreclosures, or tax liens can severely depress a credit score due to their long-lasting negative impact. Identity theft, where fraudulent accounts are opened or existing accounts are misused, can also lead to unexpected score drops.

Analyzing Your Credit Report for Specific Changes

After accessing your credit reports from each of the three major bureaus, review them to pinpoint specific changes. Begin by examining the “Payment History” section, as late or missed payments are frequent culprits behind score drops. Look for any recent notations indicating a payment that was 30, 60, or 90 days past due on any of your accounts. These entries are clearly marked and can directly correlate with a score decrease.

Review the “Accounts” section, which details all your credit lines, including credit cards, loans, and mortgages. Here, look for newly opened accounts you do not recognize, which could signal identity theft. Also, check for accounts that have been recently closed, as this action can impact your credit utilization ratio and the average age of your credit history.

Pay close attention to the credit limit and current balance on each revolving account to assess your credit utilization. Investigate the “Public Records” section for new entries such as bankruptcies, civil judgments, or tax liens. These items heavily impact credit scoring and can cause a large drop. Review the “Inquiries” section for any recent “hard inquiries” you did not authorize or recall initiating.

Multiple hard inquiries within a short timeframe can collectively reduce your score. Review all three credit bureau reports, as information may vary between them.

Disputing Errors on Your Credit Report

If, upon reviewing your credit reports, you discover inaccurate or erroneous information, you have the right to dispute these entries. The process involves contacting both the credit reporting agency and the company that furnished the incorrect information. You can submit a dispute online, by phone, or by mail directly to Equifax, Experian, or TransUnion.

When initiating a dispute, clearly explain what information you believe is incorrect and why. Include copies of any documents that support your claim, such as payment confirmations or identity verification documents, but never send original records. Providing your complete name, address, and any relevant account or credit report confirmation numbers can help expedite the process. Keep detailed records of all correspondence, including dates, names of individuals you speak with, and copies of everything sent.

Credit bureaus are required to investigate disputes within 30 to 45 days of receiving your submission. They will contact the data furnisher to verify the information. Once the investigation is complete, the credit bureau must notify you of the outcome and any actions taken within five business days. If the information is found to be inaccurate, it must be corrected or removed from your credit report.