(6 Reasons) Your Credit Score Go Down When Nothing Changed 2023

Payment History (35%)

Reason 1: Negative Items On Your Credit Reports

These are also known as derogatory marks. On your credit report, they reveal that you have a poor payment history, and they can substantially reduce your credit score by up to 100 points. You can have these marks on your report if you missed a payment, had a late payment, experienced a foreclosure, or if you're declared bankrupt.

Negative items are not pleasant, especially because they can remain on your credit report and negatively affect it for as long as seven years. However, there are steps you can take to deal with them.

Steps To Remove Derogatory Marks:

1. Check If They Are Accurate

   A derogatory remark on your report could be an error. Therefore, you should make sure there are no discrepancies in it. Examine the details of the entries in your credit report and take note of any mistake you find. If you find an error, make a note of what ought to be there and prepare your credit dispute letter.

2. Dispute Errors In The Report

   If you can verify an inaccurate detail in your credit report, file a dispute with the credit bureau to clarify it. Your request will be attended to within 30 days of submission.

3. Write A Pay For Delete Letter To Your Creditor

   If the negative item on your report is accurate and verifiable, you can't remove it easily. However, you can negotiate to be granted A Pay For Delete offer for accounts that have passed their due dates. With this offer, you can remove derogatory marks from your report by paying off your debt.

4. Write A Goodwill Request To Your Creditor

   You can opt to make a humble plea to have negative marks removed from your credit report, especially if you have stopped missing repayments. Consider writing a letter to your creditor to get their sympathy. Make it clear that you used to default on paying your loans in the past but that you are now faithful to timely payment.

5. Wait For The Credit Reporting Time To Expire

   You may have tried the options above, but the issue wasn't resolved. The final option is to wait for the derogatory items to be removed. Negative information, except for bankruptcy, is allowed to remain on your account for seven years, after which it will be removed automatically.

Reason 2: Wrong Information On Your Credit Report

It is not uncommon for credit bureaus to make an error on your report. In fact, a study by the U.S. Federal Trade Commission has revealed that about one-quarter of Americans reported errors on their credit reports that could negatively affect their scores.

In case you are thinking, why is my credit score going down when nothing changed? It just might be a mistake in your report. Thankfully, there are ways to rectify such credit report discrepancies.

Steps To Dispute An Error On A Credit Report:

1. Send a letter to the credit bureau

   When you find an error on your report, you can dispute the consumer credit report of the credit bureau in question via mail or their online platforms. You will need to provide your details and explain the error in the report that you want them to resolve.

2. Consider contacting the loan provider

   Your loan provider, be it a lender, a bank, or a card issuer, is also known as a furnisher. And they are the ones providing data to the credit bureaus. If the error is from the furnishers, you can send your dispute to them so they can stop sending the wrong information to the credit bureaus.

3. Give the credit bureau or furnisher about 45 days to investigate and respond

   The credit bureau and the furnisher typically have 30 days from receiving your request to investigate and verify your claims. They are also expected to revert to you within five days of finalizing their investigation.

4. Review the response to your dispute

   The credit bureau in question or the furnisher is to inform you about the result of their investigation in writing. If they agree that an error was made, you should receive a free copy of your credit report. If they disagree, you can further report your case to the Consumer Financial Protection Bureau to resolve it.

5. Check for updates to your credit report

   When you receive a new copy of your credit report, go through it to ensure it is error-free. You would have to wait for some time, so the change is effected your credit reports. If the update fails to reflect several months after resolving the dispute, contact the credit bureau or the furnisher to report the update to the other bureaus.

Amounts Owed (30%)

Reason 3: Your credit utilization ratio increased

Credit utilization rate refers to how much of your credit you have used. If you recently made larger purchases than you would typically make, it can make your credit score drop 40 points in a short time.

For example, if you have a credit limit of $20,000 and you typically spend $2,000, your utilization rate is 10%. Imagine your spending increases to $10,000; that's a credit utilization rate of 50%. This sudden increase can lower your credit score.

If the cause of a drop in your credit score is traced to an increased utilization rate, maintaining a spending ratio of 10 - 30% can improve your score within a month.

Length of Credit History (15%)

Reason 4: You closed or paid off your account

This fact might seem illogical, and you are probably wondering why is my credit score dropping because I closed or paid off my account.

Well, when you close an account, you reduce your overall available credit. If you do not reduce your spending accordingly, your credit utilization rate will increase. Thus reducing your credit score.

Also, if you pay off a loan, your credit mix can change, thereby causing a drop in your credit score. If you intend to cancel a credit card or close an account because you don't need them, you might want to consider keeping them open. This helps you have a healthy credit mix and to avoid a dip in your credit score.

New Credit (10%)

Reason 5: A New hard inquiry was initiated

A hard inquiry is usually made on your account by lenders when you apply for credit services, such as personal loans, auto loans, and credit cards. A hard inquiry can drop your credit score by up to 10 points, even if your loan request is approved.

To preserve your credit score, try to minimize loan requests by applying only when it is necessary. Also, when you want to apply for a credit card or a loan, first ask the lender if you can be pre-qualified or pre-approved for them.

Types of Credit in Use (10%)

Reason 6: Identity theft

Your credit score can drop if you are a victim of identity theft. In America, these thieves affect one in twenty people yearly. An identity thief can steal your identity, thereby having unauthorized access to your account. They can then use your account to take out loans that can greatly impact your credit score.

You can do the following to ensure you are not a victim of identity theft:

1. Monitor your credit score and your credit reports regularly. If you notice any activity that points to identity theft, report it immediately.
2. If you realize you have fallen victim to credit card fraud, reach out to one of the three national credit bureaus to place a fraud alert on your account or freeze your credit. If you contact one of them, the other two will be notified immediately.
3. You can contact the Foreign Tax Credit (FTC) to file an identity theft report. After which, you can initiate dispute enquires if you want to.

4 Strategies to Boost Your Credit Score

If the solutions above are not really applicable to you, all hope is not lost. There are other methods you can adopt to improve your credit score quickly.

1. Pay off more of your revolving credit balances

Common types of revolving credits include credit cards and personal lines of credit. You can increase your credit score by at least 20 points by paying off more of your revolving credits.

This would keep your credit utilization rate low, thus improving your credit score. You can boost your credit score even faster by paying off your entire balance every month.

2. Improve your credit limit

You can improve your credit limit by applying for a new card or increasing your loan limit on an existing card.

Increasing your credit limit increases your overall credit balance, thus lowering your utilization. It is, however, important that you do not max out your card every month or spend more than you can afford to pay.

Also, if you want to apply for a new credit card, first make proper inquiries on the terms and conditions because any hard inquiry on your account will reduce your credit score. Ensure you are not applying for too many credit cards within a short period.

3. Request to remove negative items that have been repaid from your report

An account of unpaid loans on your credit report negatively affects your report. If you have some late payment entries in your report that have long been settled, you can request for them to be removed. Whilst this might not be an easy process, your credit score will increase significantly if you can get it done.

4. Pay off your debt twice every month

You can adapt the technique of paying off your debt twice a month instead of paying it at once at the end of the month.

When you build this habit, it presents you as a borrower with good spending habits. You will have a lower running balance and a lower credit utilization rate. In the long run, it makes a significant difference in your credit report and your credit score.

FAQs For Why Your Credit Score Is Going Down When Nothing Changed

Q1: Should I pay off my credit card in full or leave a small balance?

It is good practice to pay off your credit card as much as possible, primarily because you will pay less in interest.

Also, you will have a good payment history, thereby increasing your likelihood of getting a loan limit raise. Additionally, you will have a lower utilization rate which keeps your credit score healthy.

Q2: Why does my credit score decrease when I have no debt?

With your debt balance decreased, credit scores keep dropping due to increased overall utilization rate, lack of mixed credits, and decrease in the average age of all accounts.

However, it is financially healthy to pay off your debt. A reduction in your credit score, even after paying off your debt, is temporary. With time, your credit score will rise again.

Q3: Does your credit score go down every time you look at it?

You can check your credit score as often as you want. Looking at your credit report or your credit score has no impact on the value at all. In fact, it is advisable to check your credit reports and scores regularly to ensure there are no errors on your account.