Why Did My Credit Score Drop and How to Fix it?

Your credit score is important, and due to this, you will want to know where it stands. If you check and you notice that it dropped, then you need to figure out why. You also want to know how to go about fixing the issue to bring the score back up.

Credit scores can drop for any reason, at any time and if you’re not sure why then it might be time to do some checking to find out what happened. Once you know, you’ll have a better way of knowing what to do about it.

We will go over some of the more common reasons why your credit score dropped and ways you can go about being able to fix it.

Check Your Credit Score for Free

The first thing you need to do is to make sure you have access to your credit score and report. This will generally give you an idea of how many accounts you have, what their standing is, and anything else you might need to know about your score and report.

You’re easily able to look into the credit score using one of these programs to find out what exactly happened with yours.

  • Credit Karma 
  • Online annual credit report 
  • Borrowell 
  • Mogo

Any of these apps or downloads can help you learn more about your credit report, so you know exactly what needs to be repaired.

Common Credit Report Factors That Can Decrease Your Score

There are a number of common credit report factors that decrease your score to be aware of. Knowing a bit more about the changes that can take place and how to fix them is going to put you in the best shape to get better financial freedom from this.

Late Payments are one of the biggest and most common reasons for a credit score to drop. Being able to make on time payments for all of your loans is going to keep your credit score where it needs to be. This is also one of the biggest reasons that a credit score drops a lot. If you keep up on payments, you don’t have to worry about a credit score dropping many points.

Using too much available credit is a big thing to think about, as well. You want to keep your revolving credit around 30%. This is the debt you should have and when you increase this amount, this brings your credit down a lot.

Applying for credit in a short amount of time in many areas can also bring your credit down. However, if you are checking for mortgages, doing this through a lot of companies at the same time can help you keep your credit score around the same number, even if it was brought down the first time with the first company.

Defaulting on your accounts by not paying on them or being extremely late on them. The best way to fix this is to ensure that you pay your debts on time, every time. Not paying them throughout months is going to keep you behind and cause even more issues. Being up to date on them can help you keep your score in good standing.

Closed accounts can also cause an issue, but this one is hard to fix because you cannot open them back up. Keeping your accounts in good standing so they don’t close is one of the best things you can do to keep them open.

Fixing Your Scores is Essential

If you find that your credit score is dropping because of one of these or another reason; it is important that you fix it. You want to have a good credit score and with making better financial decisions, you’re better off being able to have the financial freedom you’re looking for.

Make sure to keep track of your credit score every day to watch for any changes, or new accounts that might be given on it. This way, you’re not surprised should something happen or change and you’re not aware of it until months later. Your financial freedom starts with a healthier credit score. Stay in the know with the many apps available to monitor it.

So, what is a good credit score in Canada? Let’s dive into numbers here!

Frequently Asked Questions About Why My Credit Score Dropped and How to Fix It?

What can drop your credit score the most out of everything?

The most common reason is by having late or missing payments on some of the debt on your account. This will reduce your credit score by a decent amount.

Another factor could be that your credit utilization has gone up. If this is the case, you will want to make sure that you are using less of your credit, rather than more or paying it down in a timely manner.

Will my credit score drop if I pay off all of my debt?

Your score might drop if you quickly pay off all of your debt. However, this is temporary, and it will go back up within a couple of months. This is something that happens because it is a shock to the credit system, and it can cause the score to drop.

What are the five categories that my credit score is divided into?

Credit scores are divided into five different categories, and they’re represented by the data that goes along with them. These include:

  • Payment history
  • Amounts owed
  • Length of credit history
  • New credit
  • Credit mix

All of these have a specific percentage, with the payment history coming in with the most at 35%, then 30%, 15%, 10% and 10%. This means that when you miss a payment, this is going to impact your credit score the most, while having a less than savory credit mix will not impact your credit score as much.

What if I find something on my report that wasn’t from me?

You can dispute anything on your credit report and ensure that you have it removed. This will then free up that and increase your overall score because that was a mistake that was made. This is also why it is important to monitor your report to check for any changes that might not be you making them.

However you choose to increase your credit score depends on what is wrong with yours, but having poor credit is not a forever thing. Build your credit again with some quick tips and tricks to get you there, here!

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Amanda Leach

Fifteen years can be a long time to work in one industry, but not when you are doing something that you love. Amanda has enjoyed the freedom of working as a freelance writer for the majority of her career. She has successfully combined her passion and skill for writing while still enjoying a life filled with travel, learning and exciting new experiences. While she loves exploring all different types of writing, her PhD in Consumer Psychology has made her a sought after writer for marketing, business and technology fields. Amanda is a regular contributor to Smarter Loans.