Question from John: Why did my credit score go down when nothing changed?
Hello,
Even if you believe nothing has changed, there could be several reasons why your credit score has decreased. Here are some possible explanations:
1. Changes in Credit Utilization
Your credit utilization ratio, which is the amount of credit you’re using compared to your total credit limit, can impact your credit score. According to Experian, one of the three major credit bureaus, it’s recommended to keep your credit utilization below 30%. If your credit utilization has increased, even if you haven’t exceeded your credit limit, it could negatively impact your credit score.
2. Updates or Errors in Your Credit Report
Sometimes, your credit score might decrease due to updates or errors in your credit report. For instance, a lender might have reported a late payment by mistake, or an old, positive account might have been removed from your credit report. It’s a good practice to regularly review your credit report to ensure all the information is accurate.
3. Changes in Credit Mix
The types of credit you have, also known as your credit mix, can affect your credit score. If you’ve paid off a loan, such as an installment loan, your credit mix might have changed, which could cause a slight drop in your credit score.
4. Hard Inquiries
When you apply for new credit, the lender performs a hard inquiry on your credit report, which can lower your credit score by a few points. If you’ve recently applied for a new credit card or loan, this could be the reason for the decrease in your credit score.
Steps to Improve Your Credit Score
If your credit score has decreased and you’re not sure why, here are some steps you can take to improve it:
- Pay your bills on time: Your payment history is the most significant factor in your credit score. Make sure to always pay your bills on time.
- Keep your credit utilization low: Try to use less than 30% of your total credit limit.
- Check your credit report for errors: You can get a free credit report from each of the three major credit bureaus once a year through AnnualCreditReport.com.
- Limit new credit applications: Applying for new credit can result in hard inquiries, which can lower your credit score.
Remember, improving your credit score takes time and consistency. By following these steps, you can gradually increase your credit score and maintain good credit health.
