Did Your Credit Score Fall? Here’s Why.

March 22nd, 2021 by
Credit score fall

Photo by Andrea Piacquadio /

Your credit score is determined by using information that is found in your credit reports. As lenders provide updates to this information, your score may change from time to time.

A small drop in your score may not be a cause for alarm, especially if you have developed and practiced good credit habits, according to TransUnion.

Related: How to Find a Financial Advisor

Your credit score may be affected for many reasons, missed payments, high loan balances, and even wrong information on your credit report.

Missed Payments

Payment history is created month-to-month as lenders report your account activity to the national credit reporting agencies.

These include accounts such as credit cards, car loans, mortgages, and retail accounts. Missing a payment from one or all of these types of accounts could lead to negative reporting when it comes to your credit report.

There is no exact answer as to how much a particular missed payment will affect your score.

One way to help reduce the risk of a missing payment is to establish an automatic payment plan of the debt.

If after reviewing your credit report you notice there are mistakes in reporting of your payments,  contact your lender to start getting this corrected.

High Balances

If you keep high balances on your credit cards or have made large purchases that have not been paid off, your score can be impacted as well.

A good rule of thumb is to keep your credit use down to only 30% of the available credit to you. As an example, if you have a $10,000 credit limit, you should try and keep the balance less than $3,000 each month.

Related: What is the difference between a FICO Score and a Credit Score?

It is important to remember that 30% is not a magic number, but rather a recommend goal as you try to reduce your balance.

The secret to maintaining good credit health is not that much of a secret at all.  Paying off your balances on time and in full each month is the key.

Negative Information

Foreclosures, accounts in collections, and bankruptcies are examples of negative information that can also lower your credit score.

With some exceptions, negative information, or what is also known as “derogatory marks” may stay on your credit report for up to seven years.

Related: Hard Credit Inquiries: How Many Is Too Many?

One exception is that of certain bankruptcies that can last on your record for up to ten years. 

Fortunately, derogatory marks have a less severe impact on your credit score as time goes on.


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