Your credit score is a vital piece of information that can impact your ability to secure loans, buy a home, and even rent an apartment. But what happens when you wake up one day to see that your score has dropped?
Why did my credit score drop? It’s a question many people ask, and in this post, we’ll explore the top 5 reasons your credit score might have dropped and what you can do about it.
Late Payments: Did you miss a payment? Late payments are one of the most common reasons for a credit score drop
- Average point drop: 50-100 points
High Credit Utilization: Your credit utilization rate is the amount of credit you’re using compared to your credit limit.
- Can drop your score as much as 50 points
Credit Report Errors: Mistakes on your credit report can lead to an undeserved credit score drop.
- Average point drop varies by severity of error
New Credit Inquiries: Every time you apply for credit, it triggers a hard inquiry. Multiple inquiries can harm your credit score.
- Average point drop of 5 points per inquiry
Collections or Bankruptcy: Serious financial issues like collections or bankruptcy can lead to a significant drop in your credit score.
- Average point drop of 130-240 points or more
Why it’s important to monitor your credit
Monitoring your credit allows you to catch errors early, detect fraud, and make sure your score is accurate. By keeping an eye on your credit score, you can take steps to improve it and avoid a drop.
What else should you look for on your credit report?
Mistakes can be made by the three major credit bureaus which can result in errors on your credit report. The following are some common types of credit reporting errors:
- Errors with your personal identifiable information (PII), such as an incorrect name, address, or phone number
- Confusion of account information with someone who has a similar or the same name as you
- Listing the same debt multiple times with different names
- Incorrect account information due to identity theft (Brigit can help you with identity theft protection)
- Inaccurate dates (e.g. opening date, last payment date, or date of first delinquency)
- Reports of late payments or delinquencies that are incorrect
- Reporting authorized users as the account owner
- Marking closed accounts as open or vice versa
Balance and data management mistakes
- Incorrect current balance or credit limit
- Reinsertion of incorrect information even after rectification
- Listing the same accounts with different creditors multiple times
If you’ve seen your credit score drop, consider using Brigit’s Credit Builder*. It’s an easy and affordable way to build credit by reporting positive payment history (the biggest impact to your credit score) to the credit bureaus. See how it works with this 30-second video.
*Impact to score may vary. Some users’ scores may not improve. Results will depend on many factors, including on-time payment history, the status of non-Brigit accounts, and financial history. Results show that customers with a starting credit score of 600 or below were more likely to see positive score change results. A Brigit subscription is required.
Banking services provided by Coastal Community Bank, Member FDIC.