Why Did My Credit Score Drop For No Reason? 14 Common Reasons and How To Fix Them!

Credit scores sometimes fluctuate by a couple of points. But if it is consistent with a downward trend, it shouldn’t be ignored. So, if you find yourself wondering, 'Why Did My Credit Score Drop For No Reason?' it's time to investigate.

Credit score fluctuations can occur due to a range of factors, such as late or missed payments, defaulting on credit card bills, etc., causing your scores to drop. However, sometimes it's due to errors, unfair charges, or even identity theft. Hence, any negative changes in your credit are highly concerning. 

If you notice any unusual dip in your scores, it's crucial to investigate and remedy it as soon as possible. In this blog, we’ll discuss the negative items in your credit report that result in credit score drop, how to identify the anomalies, and how to fix the issues, so let's dive in!

Most Common Factors That Result In Credit Score Drop

Here’s a list of items that often impact your credit score negatively and result in sudden credit score drop:

Let's discuss how these impact your credit scores.

1. Defaulting on Collections

It's one of the worst derogatory marks you can have on your credit report. If you recently defaulted on any payments, i.e., payments to collections, or loans, it can easily cause a 100-point drop in your credit score. 

2. Late Payments

Paying for bills or installments after the due date can impact your payment history, which in turn also affects your scores. A 30-day past due payment can knock off 100 points, while a 30–90 day past due payment means you can lose as much as 180 points. Hence, on-time payments are crucial to avoid such issues.

3. Hard Inquiries

If you have recently applied for a loan, whether it's for a car loan, mortgage, or any other reason, it usually involves a hard credit inquiry. It can usually cost you a few points, i.e., 5-10 points or more. However, a lot of hard inquiries within a short window can significantly impact the credit scores making your credit application seem risky to lenders.

4. Debt Settlement

Paying off a debt is certainly an achievement. However, it also means one of your credit accounts will be closed off so your credit score drop as a result. However, some may experience a score drop of up to 100 points if it's a big account, as after paying off such debt, the credit utilization to credit mix ratio changes significantly.

5. Foreclosure

Having a foreclosure on your credit report not only impacts your scores but also restricts your credit-obtaining abilities. A foreclosure can cause your scores to drop a whopping 100 to 160 points in one go. And, it can take you 3 to 7 years to recover your credit scores. 

6. Bankruptcy

It's the most influential factor that can significantly impact your credit scores. Hence, on average, people can lose anywhere from 130–150 points to 200–240 points. 

Additionally, a bankruptcy can stay on your credit report for up to 10 years, however, it may take 12-18 months to recover the score if you know what to do. 

For instance, an AI-assisted credit repair app like the CoolCredit can help analyze your credit standing and provide insights on how to raise your scores.

7. Charge Offs

A charge-off occurs when you haven’t fully satisfied a financial commitment. It can cause your credit score drop somewhere between 50 to 150 points. Moreover, if the original lender sold off the account to another debt collector, it can potentially appear twice on your credit report, badly affecting your scores.

8. Repossession

Repossession is an event that affects the payment history, which is a crucial factor when evaluating credit scores. It can lower your scores by 50–150 points or more. How much the score drops depends on how much was paid off before the repossession. 

9. Unpaid Medical Bills

As per the statistics, around 43 million Americans have unpaid medical bills. This won’t affect the credit scores as long as the debt is not handed over to a collection agency and they report it to the credit bureaus.

However, unfortunately, around 1 in 3 Americans has medical debt, out of which $88 billion is in collections, according to the Consumer Financial Protection Bureau (CFPB). Hence, not paying off the money to the collection can impact your credit standing.

10. Credit Card Debt

Maxing out your credit card, exceeding the credit utilization limit, or defaulting on paying the credit card debt can negatively affect your scores. It's the most common reason behind decreasing credit scores. Hence, your scores can drop anywhere from 40 points up to 200 points. In fact, a 30-day late payment can easily lower your scores by 100 points.

Additional Serious Causes That Impact Credit Scores:

11. Mistakes In The Credit Report 

Sometimes you may notice your scores drop, out of nowhere without any reason however, it could be due to an error in your credit report data. That’s why it's crucial to keep a close watch on your credit report to identify any mistakes early on.

Here are the common errors to look for:

• Incorrect personal data (i.e., wrong name, SSN, phone number or address)
• Unfamiliar accounts in the credit report (this may indicate foul play such as identity theft)
• Credit accounts that belong to someone else with the same name
• Wrong payment information
• Wrongly reported late payments for closed accounts

Pro Tip: Immediately draft a dispute letter and raise a dispute to get the mistake corrected. For this, you can use the AI credit repair platform like the CoolCredit App which provides ready-to-use dispute letter templates. All you need to do is fill in the required information, print the letter, and forward it to the relevant authorities for correction. Or you can submit the request through CoolCredit for convenience.

12. Identity Theft

If you notice any unexplained expenses on your credit report, especially for large purchases, or in locations far from where you live, it most likely signifies that you’ve been a victim of identity theft.

Here’s What To Do: Visit www.identitytheft.gov/ which is a website by the Federal Trade Commission, and report the situation, get a recovery plan, and put it into action.  Additional tip: Make sure to monitor your credit report every 30 days to ensure there’s no more unauthorized activity in your credit report. For this, the CoolCredit app can come in handy as it lets you instantly access your credit reports from all 3 major credit bureaus including Experian, Equifax, and TransUnion.

13. Misuse Of Credit Card By An Unauthorized User 

Unauthorized use of credit cards by family members can lead to unexpected expenses and potential credit score issues. 

For instance, if a child accesses a saved card on a shared device and makes a significant purchase from, let's say, Amazon, it can drive up the credit card bill. Failure to promptly pay off this bill can lead to a decrease in the parents' credit scores.

To safeguard against this, it’s best not to share the credit card details with others and make sure that it is not saved on multiple shared devices.

14. Obtaining Back-To-Back Loans

Applying for a new credit card or credit line shortly after obtaining another loan can lead to back-to-back hard inquiries and also impact the debt-to-income ratio within a short period. As a result, your credit scores may drop. So it's a good idea to keep a reasonable distance in timelines between applying for different credit accounts.

How To Find Out Why Your Credit Score Dropped?

There’s only one way, and that’s to regularly monitor your credit report without fail. As a standard, it is recommended to check your report at least once, per 30 days. It's also helpful if you have decided to build or improve your credit standing. 

However, manually checking and analyzing the credit report might feel like a hassle. Instead, you can consider using an AI-assisted app i.e. CoolCredit, which not only fetches your credit report in an instant but also comes with additional functionalities, such as AI-powered credit report analysis, ready-made dispute letter templates, and the expert assist feature. 

How To Fix My Credit?

To fix your credit, you first need to identify the issues. For this, you can use the CoolCredit app to analyze your credit report. The AI will create a list of negative items that are lowering your credit score as well as provide suggestions with step-by-step instructions related to how to fix each issue. Hence, it makes improving your credit scores a breeze. 

Conclusion

A declining credit score is a grave concern that should not be ignored. It's crucial to analyze your credit report and find the cause to fix it as soon as possible before it declines your credit standing and starts affecting other aspects of your life.

So, if you are worried about your credit score dropping for no reason, sign up for CoolCredit and start taking steps in the right direction towards credit prosperity.

FAQs

Q: Why Is My Credit Score Going Down?

A: Credit scores can decrease due to various factors, such as missed payments, late payments, hard inquiries, foreclosure, high credit card balances, or even identity theft and inaccuracies in the credit report. To accurately identify why your credit score is decreasing, it's essential to carefully review your credit report either manually or by using AI-powered tools like CoolCredit.

Q: How Much Does A Derogatory Mark Affect Credit?

A: It depends on the type of derogatory mark, i.e., if it’s due to bankruptcy, the scores can drop from a minimum of 130 to over 240 points. Late payments and defaulting on credit card debt can cause the scores to drop 100–200 points, while foreclosure can cause a drop of 100–160 points or more. 

Q: How Much Does One Late Payment Affect Your Credit Score?

A: Even if this is the first and only time you make a late payment, if it’s 30 days past due, it can impact your score by about 100 points or more, depending on the scoring model.

Q: Does Your Credit Score Drop When You Check It?

A: Checking your credit score by yourself is considered as a soft inquiry, hence, may not impact your scores. Only hard inquiries requested by third-party lenders impact scores by 5-10 points each time. 

Q: Why Did My FICO Score Drop For No Reason?

A: Credit score fluctuations by a few points are natural, so if it's not a significant drop, then it may not be too concerning. However, if your scores drop more than 50 points, it's best to monitor your credit report, look for the anomaly/error that’s causing a decline in your score, and fix it as soon as possible. 

Q: How Do I Identify Why My Credit Score Dropped 30 Points?

A: The easiest way to find out why your scores dropped is to analyze your report with the AI-assisted CoolCredit app. It can highlight the problem items to make it easier to identify the cause. You may also consult with a professional credit expert if needed.

Q: What Should You Do If Your Credit Score Drops?

A: In that case, depending on the cause of the drop, you can take the relevant actions. For instance, if the score drops due to late payments, make sure to pay future installments on time without any delays. If it is because of an error in the report, then raise a dispute using a dispute letter template. 

If you need free assistance with DIY credit repair, simply download the CoolCredit app and let the AI assistant help you analyze and improve your scores. 

Q: Why Is My Experian Score So Much Lower?

A: Different credit bureaus may use different methods, i.e. FICO 8, VantageScore 3.0, or other scoring models, for their calculations; hence, your credit score may not be universally the same for Experian, Equifax, and TransUnion. However, you can make efforts to improve your scores to maintain them in a similar category (fair, good, or average) across bureaus.