An unexpected decline in your credit score can be concerning, especially if you’re unsure why it happened. A low score can restrict your loan eligibility, secure favorable interest rates, or get approved for new credit cards. What’s more frustrating is that there isn’t always a clear explanation or a customer service line to call for help.
Don’t worry—you’re not powerless. In this guide, we’ll cover the most common reasons your credit score might decrease and how to rebuild it.
What is a Credit Score, and Why Does it Matter?
Lenders use a three-digit credit score to evaluate the risk of lending you money, which indicates your creditworthiness. A higher credit score suggests a greater likelihood of timely debt repayment. Major credit bureaus such as Experian, Equifax, and TransUnion calculate your score using the information in your credit report.
According to Experian, credit scores are determined by:
- Payment history (35%)
- Amounts owed / credit utilization (30%)
- Length of credit history (15%)
- Credit mix (10%)
- New credit inquiries (10%)
Common Reasons Why Your Credit Score Might Drop
1. Late or Missed Payments
Payment history, such as late or missed payments, is the most significant factor in determining your credit score. One missed or late payment can reduce your score by dozens of points. The longer the delinquency goes unresolved, the worse the damage.
Pro tip: Set up automatic payments to avoid late payments
2. High Credit Utilization Ratio
Your credit utilization refers to how much of your available credit you’re using. For example, if you have a $10,000 limit and a $5,000 balance, your utilization rate is 50%. Experts recommend keeping this below 30% to avoid negatively impacting your score.
3. Closing a Credit Card Account
Closing a credit card—especially one with a high credit limit—can increase your utilization ratio and reduce the average age of your accounts. Both can negatively affect your score.
Example: If you have two cards with $5,000 limits and a $2,000 balance, your utilization is 20%. Close one card, and it jumps to 40%.
4. Applying for New Credit
When you apply for a credit card or loan, lenders conduct a hard inquiry, which may temporarily lower your score. Multiple hard pulls quickly can be a red flag to lenders.
5. Defaulting on a Loan or Declaring Bankruptcy
Loan defaults, bankruptcies, and foreclosures are major credit events that can significantly harm your credit score. These events can remain on your credit report for 7–10 years.
6. Identity Theft or Credit Report Errors
Your score could drop significantly if someone steals your identity and incurs charges, or your report contains errors. Inaccurate reporting from creditors can also be to blame.
How to Improve Your Credit Score: 5 Proven Tips
If your credit score has taken a hit, there are steps you can take to start improving it today. Here’s what we recommend:
1. Make On-Time Payments Every Month
To make payments on time, consider setting up automatic payments, using a bill pay service, or visiting a Fibre Federal Credit Union & TLC location in Washington or Oregon.
2. Monitor Your Credit Report Regularly
Check your credit reports to spot errors or signs of identity theft. You’re entitled to one free credit report annually from each bureau at AnnualCreditReport.com.
You can also monitor your credit card using My Credit Score by SavvyMoney, which is available through our Online Banking and mobile app. Take advantage of daily credit monitoring, educational content, and a free credit report.
3. Keep Your Credit Utilization Low
Pay credit card balances and avoid maxing out your cards. Keeping your utilization ratio under 30% is ideal—under 10% is even better.
4. Avoid Opening Too Many Accounts
Applying for multiple loans or credit cards simultaneously can signal risk to lenders and temporarily hurt your score.
5. Create a Budget to Reduce Debt
Set a realistic monthly budget that you can consistently adhere to. Your top priority should be paying off high-interest credit card debt.
What to Do If You’re a Victim of Identity Theft?
If you believe your credit score dropped due to identity theft, take the following actions immediately:
- Contact your financial institution and credit card companies to report unauthorized activity.
- Place a fraud alert or credit freeze with Experian, Equifax, and TransUnion.
- Report the theft to the Federal Trade Commission.
- File a police report in your area—this documentation can help when disputing fraudulent charges.
Credit Score FAQs
1. Does Checking My Credit Score Lower It?
No. Checking your credit is considered a soft inquiry and has no impact on your score.
2. What Is a Low Credit Score?
Credit scores are typically categorized as follows:
- Excellent: 800 and above
- Very Good: 740–799
- Good: 670–739
- Fair: 580–669
- Poor: Below 580
3. How Often Is My Credit Score Updated?
Credit scores are generally updated every 30 to 45 days based on new data reported by your lenders.
4. How Much Can a Collection Affect My Credit Score?
A single collection account can lower your score by 100 points or more, and multiple collections have a compounding effect.
5. Why Did My Score Drop After Paying Off Debt?
Paying off debt may reduce your account mix, lower your credit utilization history, or close an old account—factors that can temporarily impact your score.
Rebuild Your Credit with Fibre Federal Credit Union
A lower credit score doesn’t have to hold you back. At Fibre Federal Credit Union, we can help you understand and improve your credit with tools, education, and personalized financial guidance.
Contact us today or visit your nearest location in Washington or Oregon to learn more about building a strong financial future.
