Why Did My Credit Score Go Down When Nothing Changed?

Updated on October 2, 2022 Reviewed by Josh Mora, CFP

For the most part, lending and credit facilities contribute to financial activity across the world. However, given the peculiar nature of debts, most people have to show some potential of repayment to receive any credit. One way lenders determine creditworthiness is a credit score. This score outlines your financial history and how suited you are to lending opportunities.

Your credit score is bound to fluctuate for a number of reasons that are perfectly normal to everyone. However, if you experience a drastic, exceptional fall in your credit score, you should consider reviewing the reasons for that.

A drop of 15, 20 or more points in your credit score may be due to several factors including some of the following:

1. Seeking Credit

Your credit score is quite sensitive to your financial transactions, particularly lending applications. Applying for a new credit account like department store cards or lines of credit can trigger a small FICO score drop, this is called a “hard inquiry”. Additionally, activities that lead to requests for your credit history, such as taking a mortgage, can negatively impact your credit score. That’s because every time you apply for credit, an “inquiry” is added to your account. Every inquiry that arises from a potential financial obligation is deemed to be a hard credit and they can reduce your FICO score by about 5-10 points. Multiple inquiries in a short time frame will have a greater effect on your score than a single inquiry. 

2. Increase in Your Utilization Ratio

Does this sound strange? Well, it should. The increased Utilization ratio is common parlance in credit scoring. It primarily determines how much credit you are using compared to your total available credit.

For instance, if you had 4 credit cards with a $1,250 credit limit each ($5,000 in total available credit) and you took out credits worth $750 on each ($2,000 in credit balance), you’d have 60% as your credit utilization ratio ($3,000 / $5,000 = 60%).

Overall, the lower your ratio, the more balanced your score will get. So, if you’ve taken out a sizeable amount of your available credit recently, it could cause a decline in your FICO score.

Recommendation: You get a poor credit utilization ratio when you go above 30% of the maximum amount in any of your individual accounts from your total available credit amount.

Therefore, if you have 2 credit cards that have $2000 limits, it’s better to have both cards at a utilization rate of less than 30% compared to having one credit card greater than 30% in terms of your credit score. You plan to adopt this recommendation with a large purchase next month. You plan to put the credit on your card with the highest maximum and then pay it off to 30% the first month, off the next.

3. You May Have Been “Rebucketed”

As a general rule, only FICO knows the exact variables that determine your credit score. Albeit in determining FICO scores, you are usually grouped with other people with similar credit profiles into a “bucket” or “scorecard”. For each bucket, there’s a minimum and maximum score to allow you to be in that “bucket”.

Factors that contribute to your bucket include late payments accounts, the number of collection accounts, and old dormant accounts. It’s possible to be at the top or both of different scorecards or buckets. When there are changes to your accounts such as a late payment or deleting a collection account, you may be moved up or down to a new bucket. Moving up to a new bucket places you at the bottom of that bucket which implies that you’re not yet considered as good as your new peers. On the other hand, moving down buckets means you’ve fallen in credit score rating. Subsequently, in both cases, your score may drop a bit.

Comparing Different Credit Scores

There are quite a number of credit score reporting agencies worldwide. These agencies have different reporting standards and for the same financial history, therefore your credit score may differ across the board. Some of the top reporting agencies include Experian, Equifax, and Transunion. Ultimately, your FICO score is what is all boils down to.

The differences between your FICO scores and VantageScores may be as wide as about 100 points. Given that, the factors that cause a decline in your scores include a decrease in the average age of your accounts, an increase in utilization, reports from a new account, multiple inquiries or an update in derogatory information on your account.

Recommendations from Different Sources:

  • Your spending habits may vary across different periods and so does your credit utilization. In the same way, your credit score will fluctuate throughout your lifetime. So, you should be ready for different instances of it rising and falling. But if your credit report does not contain disturbing details, you really should not worry over a 30 point drop in your credit score. Over time, your score will improve so long you use credit facilities responsibly.
  • You should consider your credit report as more important than your credit score. In the grand scheme of things, 20 points is fairly minimal. Moreover, the score is only time-based and FICO may determine your score at different periods in a single month. When evaluating your credit score, remember it’s only a time-based snapshot. So, look out for the date it was determined, the credit bureau, and the score range you fall under. 
  • A 15 point decrease is never worth fretting about. It’s always certain that credit scores will fluctuate but if your score is above 700, you’re good to go. 
  • Your credit score is only important about twice: when you’re requesting a loan or getting a new credit card. Never worth the stress.
  • Credit scores are never a reflection of the quality of your personality- and to be honest, it’s just a flow chart game to other companies. Your credit score can change a lot month to month so , it’s nothing worth bragging about or staying depressed over. If you’re not taking out a loan soon, there’s practically no reason to care about what your credit score says. So, why not just take it off your thoughts.
  • A minor reduction from say, 810 to any score in the 750+ range should not be a concern.. Since the score is in the same range, your credit risk does not change significantly. I have score fluctuations around the top end of 700s and 800s. I don’t consider it anything to fret about, especially if you’re not making a credit application. The most important consideration is your credit utilization rate. The most proven way to improve your utilization is to pay credit card debts at least twice monthly, as opposed to once a month. Also, increasing your credit limit can prove very helpful. 
  • Using a large chunk from your credit card balance tends to decrease your score until there is a lower balance reported for the credit card. This reduction in scores will happen even if you pay up on time.  If there is an error in your credit report, it can also cause it to be reduced. Additionally, low credit limits and closed accounts can cause your credit scores to go low, regardless of whether your payment behavior remains the same. But if you’re very sure the credit score reduction was entirely baseless, make sure you confirm with your financial institutions to avoid a potential case of identity theft. 
  • Any change to your credit takes about six weeks after an event occurs. In essence, you may not get the benefits of paying off your credit card until after two reporting cycles. Similarly, the drop in your score may not appear immediately when you open a new account.
  • Having an old account in a critical state in your credit report can further lead to a drop in your credit score.
  • Additionally, not having credit cards is quite harmful, it is important to be known for having responsible borrowing habits. Most folks contributing to MyFICO forums recommend having three credit cards: two with rewards for things you’re already spending money on, and one with a low-interest rate for larger surprise purchases or for something you need to spread payments out on.

Final Thoughts on Why Credit Score Goes Down

Your credit score is important if you will be requesting a loan, taking out a mortgage or applying for some other credit facility. In such circumstances, it’s best if you pay particular attention to the factors that can cause your score to drop. From this article, you must have seen how taking new credit facilities or applying for new credit cards can push your credit scores lower. 

Besides, using too much from your credit balance will harm your credit. Many times credit card companies will  increase your limit arbitrarily. Keep your wits about you and stay responsible. To prevent irresponsible usage, you should refrain from taking out new credit unless it is highly necessary. And when you do, be sure to spread out your credit and pay off as soon as you can. That way, you’ll look like a responsible borrower over time.

If you find that your credit score falls as a result of rebucketting, there’s nothing much you can do. You’ll simply have to take the advice of most Reddit users: your credit score shouldn’t impact your personal life. Be responsible with your finances and best believe you’ll have little or no issues with your credit report, which is the most important.

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1 Comment

Joy ONale
Joy ONale June 2, 2022 at 3:48 pm

This is a ridiculous system. My payment are 100% on time, I have an 18% utilization, no derogatory remarks,low hard inquires….my score just dropped 12 points. The reason given was an account DECREASED??? Yet, I can pay an account down $500 and it go up only 2 points!! So random.
I AM CONFUSED!! It goes down when you charge, even if you pay it off before it even hits the statement. This is not a clear tool showing credit worthiness. It is so unstable, up and down. It should be your history.