Okay, so you checked your credit score and saw a 70-point drop. That is a significant swing, so it makes perfect sense to be a little alarmed. But let’s take a deep breath and figure out what happened before you go into panic mode.
There are a few common reasons why your credit score might take a dive, even if you haven’t made any major changes to your credit habits. Let’s dive into the top suspects:
1. A Late or Missed Payment: This is the most common culprit for credit score drops. Even a single late payment can ding your score by 30-50 points. So, if you’ve recently forgotten to pay a bill or two that could be the reason for your score’s sudden decline.
2. New Credit Applications: Your credit report is subject to a hard inquiry each time you apply for a new credit card or loan. Every hard question can deduct a few points from your score; the more inquiries you have in a short amount of time, the greater the effect. Therefore, the reason for the decline in your score could be that you’ve been applying for credit cards a lot lately.
3. Modifications to Your Credit Limit or Usage: A significant component of your credit score is your credit utilization ratio, which measures how much of your available credit you are currently using. Your utilization ratio may have increased, which would have resulted in a lower score, if your credit limit was reduced or if you had been using more credit than usual.
4 Errors on Your Credit Report: Sometimes, mistakes happen An error on your credit report, such as a late payment that wasn’t actually late or an account that doesn’t belong to you, can seriously damage your score. So, it’s important to check your credit reports regularly for any errors and dispute them with the credit bureaus.
5. Identity Theft: This is a serious issue that can have a devastating impact on your credit score. If someone has stolen your identity and opened accounts in your name, your credit score will take a hit. So, if you suspect that you’ve been a victim of identity theft, it’s important to report it immediately to the authorities and take steps to protect your credit.
So, what can you do if your credit score has dropped 70 points?
1. Check Your Credit Reports: The first step is to figure out why your score dropped. You can get a free copy of your credit reports from each of the three major credit bureaus (Experian, Equifax, and TransUnion) at AnnualCreditReport.com. Review your reports carefully and look for any errors or suspicious activity.
2. Dispute Any Errors: If you find any errors on your credit reports, you can dispute them with the credit bureaus. You can do this online, by mail, or by phone. The credit bureaus are required to investigate your dispute and correct any errors within 30 days.
3. Enhance Your Credit Habits: After resolving any inaccuracies on your credit reports, you should begin enhancing your credit habits. This entails maintaining timely bill payment, minimizing credit utilization, and refraining from making excessive credit inquiries.
4. Be Patient: It takes time to rebuild your credit score. But with patience and effort, you can get your score back on track.
Here are some additional resources that you may find helpful:
- NerdWallet: https://www.nerdwallet.com/article/finance/why-did-my-credit-score-drop
- TransUnion: https://www.transunion.com/blog/credit-advice/my-credit-score-dropped-no-changes-on-my-report
- Experian: https://www.experian.com/blogs/ask-experian/
- Equifax: https://www.equifax.com/personal/education/credit-report-information/
Remember, a 70-point drop in your credit score is a significant setback, but it’s not the end of the world. By taking steps to understand the cause of the drop and improve your credit habits, you can get your score back on track.
You charged a large purchase onto your credit card
When making large purchases, credit cards are convenient because you don’t have to pay the full amount upfront. However, if you leave a high balance on your card, the credit bureaus will report a higher credit utilization rate (CUR).
Your debt-to-credit ratio, also known as your utilization rate, indicates how much of your available credit you actually use. A low utilization rate is what you want to strive for because using more than your credit limit indicates that you are a risk to issuers financially. Experts advise maintaining your credit utilization below 2030%, with some even recommending below 2010% to achieve the highest credit score.
Make sure you can pay off a large expense in full before the billing cycle ends before charging it to your credit card. Not only does having a large credit card balance negatively impact your credit utilization rate, but it will also result in exorbitant interest charges.
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There are general guidelines you can follow to build your credit score. However, often disregarded are the things you do that really lower your score, even if you were acting in a way you believed to be beneficial.
The good news is that many credit score dings are temporary and can be easily recovered. And once you get past the initial fluctuation, doing things like paying off a loan or applying for a new credit card will frequently benefit you in the long run.
Whether you know it or not, the five things listed below by CNBC Select could be the reason behind a sharp decline in your credit score.
Why Did My Credit Score Drop for No Reason
FAQ
Why would my credit score drop if nothing has changed?
Why did my credit score randomly drop 60 points?
Why did my credit score go down by 100 points?
Why is my credit score going down when I pay on time?
Why did my FICO score drop?
So, if you’ve recently been seeking new credit, this also may have caused your FICO score to drop. Inquiries only account for up to 10% of your FICO score and there are some exceptions so read this article to get the whole story on inquiries and their relationship to your FICO score.
Why is my credit score dropping so much?
Late payments can stay on your credit report for up to seven years. 2.**High credit card balances**: If you have high balances on your credit cards, your credit score could drop. Credit
When is a credit score decline a concern?
Yet there are times when a credit score decline could be more concerning than others, including when: There was a significant decline in your credit score: When your credit score drops by a meaningful amount, it could indicate that serious derogatory information has appeared on your credit report.
Can derogatory remarks lower your credit score?
Some other examples of derogatory remarks that can lower your credit score include collection accounts and foreclosures. An original debt creditor usually sends your account to collections after failing to collect a debt from you. A foreclosure happens when you default on your mortgage.