Why Credit Score Goes Down: Common Causes and Solutions

A credit score is a three-digit number that represents a person’s creditworthiness. It’s a key factor in determining whether someone can get approved for a loan or credit card, and what interest rate they’ll receive. A good credit score can open many doors for a person, such as access to better credit products with more favorable terms. However, a person’s credit score can fluctuate over time, and sometimes it can go down, even if they haven’t done anything wrong. If a person notices that their credit score has gone down, they may feel helpless or confused as to why it happened. In this article, we’ll explore the main reasons why a credit score could decrease and what steps someone can take to improve it.

Late or Missed Payments

One of the most common reasons why someone’s credit score could go down is because of late or missed payments. Late payments can have a significant impact on a credit score since payment history is the most significant factor in determining a credit score. Some additional information about late or missed payments include:

  • Payments that are more than 30 days late can have a negative impact on a credit score.
  • Payments that are 60 or 90 days late can cause even more damage to a credit score.
  • If a person’s account becomes delinquent, it may be reported on their credit report for up to seven years.
  • To avoid late payments, a person can enroll in autopay or set up reminders so they don’t forget to make a payment.

If someone is struggling to make their payments on time, they can contact their lenders to explore other options, such as a payment plan or deferment. Additionally, credit counseling services like Credit Karma can offer advice on how to manage credit card debt and make payments on time.

Why Does My Credit Score Go Down with No Late Payments?

There are several reasons why your credit score may go down despite making no late payments. Some of these reasons include:

  • High credit utilization ratio
  • New credit applications
  • Closing old credit accounts
  • Errors on credit report
  • Change in credit mix

It is important to regularly monitor your credit report and address any errors or issues that may be negatively impacting your score. Using a credit monitoring service like Credit Karma or MyFICO can help you stay on top of your credit health.

High Credit Utilization

Another reason why a credit score may have gone down is due to high credit utilization. Credit utilization is the amount of credit someone has used in comparison to their credit limit. If someone is using a high percentage of their available credit, it can be a sign of financial stress and may lead to a decrease in their credit score. Some additional facts about credit utilization include:

Credit Score Impact Credit Utilization Ratio
No Impact 0%
Small Impact 1-20%
High Impact Over 30%
  • It’s recommended to keep credit utilization below 30% to avoid penalties on credit score.
  • If someone has a high credit utilization ratio, they can try to pay off a portion of the balance to lower their utilization ratio.
  • Opening a new credit account could also help lower overall credit utilization.

Many websites offer free tools to help people monitor their credit utilization and credit score, such as Credit Karma or Mint. These tools can help someone see how their credit utilization is affecting their credit score and provide advice on how to improve their score. Some credit card companies also offer free credit score monitoring services to their customers.

How much does credit utilization affect credit score?

Credit utilization is one of the most important factors that influence your credit score. The rate at which you use your credit card affects the amount of available credit, which, in turn, determines your score. Here are few key points explaining how much credit utilization can impact your score:

  • High credit utilization ratio can hurt your credit score, even if you make all payments on time.
  • It’s recommended to keep your credit utilization below 30%. For example, if you have a credit limit of $10,000, try to keep your balance below $3,000.
  • Lowering your credit utilization by paying off outstanding balances can lead to a quick improvement in your score.
  • You can monitor your credit utilization and score for free with websites like Credit Karma or products like Identity Guard’s Total Protection plan.

New Credit Inquiries

Applying for new credit or loans can lead to a decrease in credit score, as a lender will generally perform a hard inquiry before lending the money. While a single hard inquiry may not significantly lower a credit score, multiple inquiries within a short period can have a greater impact. Here are some further details:

  • Hard inquiries can remain on a credit report for up to two years, though the impact on credit score can lessen over time.
  • Some lenders may perform soft inquiries that do not affect credit score, such as checking eligibility for a pre-approved offer.
  • If someone must apply for multiple types of credit or loans, it’s best to space out applications over several months to minimize the impact on their credit score.

Many credit monitoring services allow users to track their inquiries and see how they are affecting their credit score over time. Some credit card issuers also offer pre-qualified or pre-approved credit card offers that don’t require a hard inquiry. It’s important to carefully read the terms and conditions of any credit offers to understand any potential effects on credit score.

Do credit inquiries hurt your credit?

Yes, credit inquiries can hurt your credit score, but only by a few points. There are two types of credit inquiries: hard inquiries and soft inquiries. Hard inquiries, which occur when a lender or creditor checks your credit report to make a lending decision, can lower your score by a few points. Soft inquiries, on the other hand, occur when you check your own credit report or when a lender checks your credit report for promotional purposes, and do not affect your credit score at all.

It’s important to note that not all hard inquiries are created equal. Multiple inquiries for the same type of credit within a short period of time, such as when you’re shopping for a mortgage or auto loan, will generally count as a single inquiry and have a smaller impact on your score.

If you’re concerned about the impact of credit inquiries on your score, be mindful of how often you apply for credit and try to limit the number of inquiries you generate. Additionally, monitoring your credit score regularly can help you stay aware of any changes and take action to improve it.

For more information about credit inquiries and how they affect your credit score, visit myFICO.

Closing Accounts

Closing a credit card account can also lead to a decrease in credit score, as it affects the credit utilization ratio and average credit age. Here are some key factors to keep in mind:

  • Closing an account can raise the overall credit utilization ratio, which can lower the credit score. If possible, leave accounts open even if they’re no longer being used or have a high-interest rate.
  • Closing a long-standing account can lower the average credit age, which can also lower the credit score. Consider keeping older accounts open to maintain a high average credit age.
  • If an account must be closed, consider calling the credit card issuer to ask if they can downgrade the account to a no-annual-fee version rather than fully closing it.

These types of decisions require careful consideration, and it’s a good idea to consult with a financial advisor or credit counselor if unsure of the best course of action. Some credit monitoring services also offer advice on how to optimize credit utilization and credit mix to maximize credit score.

Why does credit utilization affect credit score?

Credit utilization refers to the percentage of credit you use out of your credit limit. It is one of the factors that affect your credit score. Here are some reasons why:

  • High credit utilization signals to lenders that you may be relying too much on credit, leading to a higher risk of defaulting on your loans.
  • Lower credit utilization percentage gives a good impression to lenders and boosts your credit score.
  • Credit scoring models prefer to see a credit utilization rate of 30% or lower. Exceeding this limit may result in a lowered credit score.

It’s important to monitor your credit utilization rate and aim to keep it low to maintain a healthy credit score. Consider using credit monitoring services offered by companies such as Credit Karma or Experian to keep track of your credit score and credit utilization percentage.

Errors on Credit Report

Inaccuracies on credit reports can also lead to a lower credit score. Some common errors and issues include:

  • Accounts that don’t belong to the individual
  • Closed accounts reported as open
  • Inaccurate credit limits or balances
  • Missed payments that were actually made on time
  • Duplicate accounts with different names or numbers

To check for errors on a credit report, individuals can request free copies of their credit report from the three major credit bureaus – Equifax, Experian, and TransUnion – once a year. These reports can be accessed via AnnualCreditReport.com. Once the report is received, check for errors and report any issues to the credit bureau in writing. The bureau has 30 days to investigate and respond to the dispute.

There are also several credit monitoring services that can alert individuals to changes in their credit score or report. Some services may even offer assistance with disputing errors on credit reports.

What are the 3 most common credit report errors?

  • Inaccurate personal information such as incorrect name, address, or social security number
  • Wrong account information or debts mistakenly attributed to the wrong person
  • Outdated information such as closed accounts or incorrect payment history

If you suspect errors in your credit report, it’s important to dispute them to ensure they don’t negatively impact your credit score. You can request a free credit report annually from each of the major credit bureaus (Equifax, Experian, and TransUnion) through AnnualCreditReport.com. You can also use credit monitoring services such as Credit Karma or myFICO to regularly check for errors or changes in your credit report.


There are many different factors that can contribute to a decrease in your credit score, but it’s important not to panic. By taking proactive steps to address the issue, you can get your score back on track and continue to work towards your financial goals. Remember:

  • Always make payments on time to avoid late fees and negative marks on your credit report
  • Keep credit utilization low and consider increasing credit limits if necessary
  • Be mindful of new credit inquiries and only apply for credit when you need it
  • Avoid closing credit accounts if possible, but downgrade to no-fee accounts to avoid unnecessary costs
  • Regularly review your credit report to ensure that it’s accurate, and dispute inaccuracies as soon as possible

By following these tips and staying on top of your credit management, you can enjoy the benefits of a strong credit score and financial stability.

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