Why would my credit score drop for no reason?
If your score has dropped inexplicably, you're not alone. Many people have reported this issue and don’t know why their credit scores have dropped for no apparent reason. At the same time, several possible explanations exist for why your credit score might have decreased.
This blog post discusses some common causes of why your credit score drops for no reason. So continue reading to learn more about the matter.
Why Did My Credit Score Change For No Reason?
Often your credit score varies due to several factors, but your expenses and behavior often impact your credit score in unobvious ways.
Below are some factors that can cause a reduction in your score even if you have not changed your behavior.
Check your Credit Utilization.
Credit utilization is the ratio that you owe. This ratio also impacts your credit score. So any change in this ratio means there will be some changes in your score.
Generally, your credit score will shine if you have a credit utilization under 30% (i.e., expenses $300 or less and the overall credit limit is $1,000).
Furthermore, a reduction in your credit limit will adversely affect your utilization ratio, and in turn lowering your credit score.
Changes In Your Payment History
If your credit score drops suddenly, check out your previous payment history. Try to determine whether you have missed any credit card payments in recent months? Or have you missed any of your bills?
Furthermore, missed payments are not reported to bureaus until 30 days; hence you will not see any change in your score, but it will impact your score after 30-days. Some factors like charge-offs, collections, and bankruptcies can damage your credit but not instantly. Such things can affect your credit after some weeks or even months.
Your Report is under Inquiry
This usually happens when you apply for any car loan or new credit card, as your lenders can pull your credit report. This is classified as a hard inquiry, and it occurs when a creditor reviews your credit to research creditworthiness. This review or inquiry can temporarily reduce your score.
An Account Has Closed
When you pay off any debt, your score will be affected negatively. Apart from it, your credit history will be shortened, and approximately 10% of your credit score relies on how old your accounts are. So, if you have paid off any debt or loan in recent months, you might see a drop in your credit score.
For example, you might see a negative impact on your score if you close a credit card. Plus, this will shorten your history, and your credit utilization ratio will change as well.
Should I Concern About a Sudden Drop in My Credit Score?
Most people don't realize this, but your credit score acts like your body weight, and it will often fluctuate. Thus if you gain or drop a few pounds, it might not concern you. But seeing significant changes in your body weight can be alarming.
The same applies to your credit score, it's normal to see changes in your credit score, but if you see dramatic changes, then you need to consult the matter with your advisor or credit counselor.
Similarly, you must review your credit report on a frequent basis and keep an eye on any sudden changes. That way, you can tackle these sudden changes timely and adequately.
