Why Did My Credit Score Drop 10 Points?

Let’s say that you check your credit score every month. And because you’ve been working hard to establish a good credit score, you’re disappointed when you see that your number appears to have dropped over the last 30 days. If it’s a small drop, there’s probably no reason to worry. But if you’re teetering between poor and fair credit, and your credit score dropped 10 points, it can make a difference. Find out why your credit score might change and what you need to know.

Why Did My Credit Score Drop 10 Points When Nothing Changed?

Your score can drop—either by 10 points or more—even if you haven’t missed any payments because credit scores are dynamic. They change as the information on your credit report gets added and/or updated. Most lenders report to the major credit reporting agencies in 30-day increments, so it’s fairly common to see slightly different numbers from month to month.

Or you might be looking at a different credit score. Remember, you have more than one. All scores are generally based on the same building blocks, but each specific algorithm may be crunching numbers a bit differently. If you checked your FICO score last month but your VantageScore this month, you’ll likely see different numbers even if nothing changed.

5 Reasons You Might See a Small Credit Drop

It’s important to remember that your credit is based on more than just payment history, so a small drop could be caused by a change in your credit that you’re just not aware of. Below are five of the most common things that can cause a small drop in your credit score.

1. Changes in Your Credit Card Balances

A major culprit behind small dips is credit card balances. Credit utilization—how much debt you’re carrying vs your total available credit limit(s)—plays a big factor in credit scores, so if you charged a bit more to your plastic this month than last, there’s a chance your score is being affected by those extra purchases. Keep an extra eye out for annual fees that may up your balance on empty cards as well.

2. New Applications for Credit

Whenever you apply for a new line of credit, whether that’s a car loan or a credit card, the lender needs to pull a hard inquiry on your credit to see if they can approve you and what the terms will be. These inquiries make up 10% of your score, which is why the change is usually small. Keep in mind that the inquiry stays on and affects your credit report and score even if you decide not to go through with the loan.

3. You Closed an Account

If you’ve been working on your credit and paying off debt, you may have had an installment account closed or decided to cancel a credit card with a $0 balance. Both of these can affect your credit history age and/or credit utilization, which can cause your score to dip.

4. Errors on Your Credit Report

If an account was added to your credit report in error or a payment was marked late by mistake, this could be the cause of your drop. However, these usually cause larger drops in your score—especially late payments—but if your score is already not great, the drop won’t be as large as it would be for someone with a high score.

5. The Score Algorithm Was Adjusted

The credit score models are constantly being tweaked and adjusted, and while most of these changes are minor, some can have a small effect on your score.

How Can You Improve Your Credit Score?

So, now you know why your score may have changed, but this doesn’t mean you should simply ignore any changes you see. Here are four ways that may help rebuild your credit after a drop.

1. Keep an Eye on Your Credit Report

A dramatic drop in score could be a sign identity theft is occurring. Or there could be an error on one of your credit reports that’s affecting your score. If you do see a decrease, some digging might be required to see what’s behind it. You can start by pulling your credit reports for free each year at AnnualCreditReport.com—a good idea if you’re seeing really big discrepancies in your scores.

You can also view your free credit report card, updated every 14 days, on Credit.com. It tells you how you’re doing in the five key areas of your credit scores: payment history, debt usage, credit age, account mix and inquiries. Plus, it can help you pinpoint what may have gone wrong or what area you can work on to help you improve your score.

2. Pay Down Debts

Lowering your overall debt amount is one of the best things you can do for your score. This is because your credit utilization ratio is one of the highest-weighted categories of your credit score. Making just a few extra payments can help bump your score back up.

3. Keep Your Accounts in Good Standing

Whether you pay your accounts on time is a full 35% of your score, so it’s vital to avoid late payments. If you see a small drop and get discouraged, you may think missing one payment this month won’t have that much bigger of an effect. However, even one late payment can drop your score by dozens of points.

4. Don’t Apply for Credit You Don’t Need

It’s normal to be tempted by 0% loan offers or a credit card with a better interest rate, but if you don’t actually need that new line of credit, it’s best to say no. Applying for new credit will cause your score to go down even more.

You Can Improve Your Score

Remember, you can build good credit in the long term by making all loan payments on time, keeping debt levels low, limiting new credit inquiries and only adding a mix of credit accounts as your wallet and score can afford them. Signing up for a service like ExtraCredit® can help you keep an eye on your credit report and see 28 of your credit scores in one place.