May 4th, 2010
Dear Credit Karma… Credit Score Dropped! What Gives?
Dear Credit Karma,
I pulled my credit score for the month and it dropped 13 points. I have 100% on-time payments and pay more than the minimum on my credit cards. I also paid all bills early and saved to both my retirement and savings. I haven’t applied for any new credit and I haven’t had my report pulled. I even paid additional to the principal on my mortgage. I expected my score of 707 to go up, not drop to 694. I’m baffled and a bit angry. What gives?
Unexpected credit score drops, especially when you feel you haven’t done anything to warrant it, can be alarming and frustrating. It looks like you went over the laundry list of common negative actions that can cause a credit score to change, including payment history, credit inquiries, and credit lines. Even if you checked out fine in all these areas, a credit score is still influenced by numerous other factors. For example, while you might be consistently paying the monthly minimum on your credit cards, a main component of a credit score is the open credit card utilization, or the total credit card debt divided by the total available credit on your cards. A large amount of debt compared to your available credit is a warning sign of credit risk that could ding your score. Other factors that could play into your dropped score could be total debt, total number of credit lines, your overall credit history, and the list goes on.
Also, the positive effect of good credit behavior on your credit score diminishes with time, which may be why your credit score dropped a few points despite consistent behavior. For example, you may have paid off an auto loan last year which likely had a positive effect on your credit score. But as time goes on, the positive effect of that account diminishes if no new trade lines take its place.
Another possibility is there is an error on your credit report damaging your score. One error can cause a credit score change of 5 to 50 points. These blunders, like a small inaccuracy or an erroneous late payment, happen more often than consumers think and are oftentimes the culprit behind unexpected credit score drops.
Double-check and carefully review your credit report. Request your credit report through AnnualCreditReport.com, a secure site that gives free access to your credit report once a year from each of the three credit bureaus. Once you receive a copy of your credit report, go line by line through every single item and detail to see if there are blunders to resolve.
If you do find inaccuracies, set the record straight as soon as possible by following these steps. Once the credit bureaus verifies the error with the financial institution that was the source of the error, your credit report will be fixed and your credit score will soon reflect the accurate information.
In the future, review your credit report at least once a year to look for these line-item mistakes that could unpredictably ding your score; it is your onus to clear up any misreported information. Hope this helps resolve your credit score issues.
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