Why Did My Credit Score Go Down 10 Points?

Credit scores often experience slight shifts, sometimes by as little as 10 points. Minor fluctuations are a normal part of how credit scores are calculated and updated. These small changes typically do not indicate a serious financial issue.

Common Triggers for Minor Score Changes

An increase in credit utilization is a frequent reason for a slight credit score dip. This ratio compares the amount of revolving credit you are using to your total available credit. It accounts for a significant portion of your credit score. If you make a larger purchase before your statement closing date, the reported balance to credit bureaus might be higher than usual.

Applying for new credit can also lead to a minor score reduction due to a hard inquiry. When you apply for a credit card, loan, or some rental applications, lenders perform a hard inquiry to assess your creditworthiness. Each hard inquiry can temporarily lower your score by a few points. They remain on your credit report for up to two years.

Opening a new credit account can also slightly impact your score. This action can reduce the average age of your credit accounts, which is a factor in credit scoring models. A newer account can bring down the overall average, especially if you have a limited number of existing accounts.

The timing of when lenders report your account activity to the credit bureaus can also cause minor, temporary score changes. Credit card companies report your account balance and activity around your statement closing date. If your balance is reported just before you make a payment, it can temporarily show a higher utilization.

Other Potential Factors

Closing an old credit account, particularly one with a long history and good payment record, can sometimes result in a minor score adjustment. This action can reduce your total available credit, thereby increasing your credit utilization ratio if you carry balances on other cards. It may also shorten the average age of your credit history, which is a factor in credit scoring models. Closed accounts with positive histories can remain on your credit report for up to 10 years and continue to contribute to your credit age.

Minor inaccuracies on your credit report can also contribute to small score fluctuations. These could include a slightly incorrect balance, a misreported credit limit, or an account status error. Errors do occur and can affect your score. It is prudent to review your credit reports regularly for such discrepancies.

A change in your credit mix, though a less significant factor, can sometimes lead to a minor, temporary adjustment. Credit mix refers to the variety of credit accounts you manage, such as revolving credit and installment loans. Demonstrating the ability to manage different types of credit is favorable. Credit mix accounts for a smaller portion of your credit score.

Navigating Credit Score Fluctuations

It is important to understand that credit scores are dynamic and naturally fluctuate as a part of ongoing financial activity. A 10-point change is generally considered within the normal range of these routine adjustments and is usually not a cause for alarm. These minor shifts reflect the continuous updating of your credit profile by the three nationwide credit bureaus: Experian, Equifax, and TransUnion.

To stay informed about your credit information, it is advisable to regularly review your full credit reports. Federal law grants you the right to a free copy of your credit report every 12 months from each of these three major bureaus through AnnualCreditReport.com. Checking your report allows you to ensure accuracy and understand the underlying data that influences your score.

Focusing on consistent positive credit habits is more impactful than dwelling on minor score dips. Paying bills on time and keeping credit utilization low are the most significant factors in maintaining a healthy credit score over time. These practices build a strong credit history, which is ultimately what lenders evaluate.

A 10-point drop is distinctly different from a significant score decrease, such as 50 points or more. Larger drops typically signal more substantial negative events, like missed payments, accounts sent to collections, or bankruptcy filings, which warrant immediate investigation. Minor fluctuations, however, are often a natural ebb and flow of your credit profile.