Why Did My Credit Score Drop 10 Points?
Understand why your credit score had a minor dip. Explore common, subtle factors that cause small fluctuations, even with good habits.
A slight dip in your credit score, around 10 points, is common and indicates minor shifts in your financial profile. Credit scores are dynamic, constantly adjusting to reflect recent credit activity and financial behaviors.
Everyday Activities Impacting Scores
An increase in your credit utilization ratio is a frequent cause for a minor credit score decrease. This ratio measures the amount of revolving credit you are currently using compared to your total available revolving credit. If your credit card balance increases, even if you pay on time, your utilization percentage could rise, leading to a small dip. Maintaining a credit utilization ratio below 30% is recommended, with lower percentages, ideally under 10%, often correlating with higher scores.
A single late payment, if reported to credit bureaus, can impact your score. Creditors report payments as late after 30 days past their due date. While a severe late payment causes a significant score drop, a minor 10-point change might indicate a less impactful or isolated occurrence, especially if your overall payment history remains strong.
The average age of your credit accounts plays a role in your score. Opening a new credit account can reduce the average age of all your existing accounts. Since the length of your credit history contributes to your overall score, this reduction in average age can result in a slight, temporary decrease.
Your credit mix, including revolving credit like credit cards and installment loans like mortgages, influences your score. While not as impactful as payment history or credit utilization, changes in this mix, such as shifting balances between different credit types, can contribute to minor score adjustments.
Credit Report Inquiries and New Accounts
Applying for new credit, such as a loan or credit card, results in a “hard inquiry” on your credit report. Each hard inquiry can cause a small, temporary reduction in your credit score. These inquiries remain on your credit report for up to two years, though their impact usually diminishes after 12 months.
Opening a new credit line can lead to an initial score dip by lowering the average age of your credit accounts. Managing the new account responsibly, with on-time payments and low utilization, can contribute positively to your score over time.
Closing an old, established credit account can sometimes negatively affect your score. This action reduces your total available credit, which can inadvertently increase your credit utilization ratio on remaining accounts. Closing an account, especially an older one, can shorten the average age of your active accounts, potentially impacting your score.
Monitoring Your Credit Information
Reviewing your credit reports is a practical first step to understand score changes. You are entitled to a free copy of your credit report annually from each of the three major credit bureaus: Equifax, Experian, and TransUnion. These reports can be accessed through AnnualCreditReport.com. Many consumers can now access these reports weekly for free.
When examining your credit reports, look for recent account activity, reported balances, and payment history. Pay close attention to any new inquiries, changes in credit limits, or unexpected balances on your accounts.
If you discover inaccuracies on your credit report, you have the right to dispute them. You can initiate a dispute directly with the credit bureau (Equifax, Experian, or TransUnion) online, by mail, or by phone. Provide clear explanations of what you believe is incorrect and include any supporting documentation. The credit bureau investigates the dispute within 30 days. Maintaining good credit health involves consistently paying bills on time, keeping credit utilization low, and avoiding unnecessary applications for new credit.