What it takes to recover from a score drop typically depends on addressing the factors that caused your score to drop in the first place.
To begin, it helps to explore recent changes to your credit reports on Credit Karma:
It also helps to stay on top of the key factors that affect your credit scores, keeping in mind how heavily each factor is weighed. Here are some of the most common reasons a score can drop.
Using more of your available credit
Because potential lenders may see using more of your available credit as an indication you could have trouble paying your bills on time, credit utilization is generally considered a high-impact factor. Experts recommended keeping credit utilization under 30%. If your utilization increases during one or more pay cycles, this could cause a score drop.
Missing a payment on one of your credit accounts
Even if you typically pay off all of your balances on time, just one late payment may take a serious toll on your credit scores. Sometimes even missing one payment can bring down a score by a surprising amount, even if you’ve never missed a payment before.
Closing an old credit account
Closing old accounts means your average age of credit history decreases, which may hurt your scores.
Paying off a loan
While an awesome thing for you, it can change your credit mix and shorten your average age of credit history, which may affect your scores.
Applying for a new financial product
When you apply for certain financial products such as credit cards or loans, you need to authorize the lender to run a hard inquiry to your credit. Your scores may dip temporarily, but can recover over time depending on this and other credit factors.
Having a new derogatory mark on your report
Derogatory items may include (but are not limited to):
- a collections account
- tax lien
- civil judgment
Scoring model changes
Credit scoring models might change how they weigh different factors and your score could adjust based on these changes. Scoring models are kind of like a secret recipe. Since the credit bureaus don’t share all the details of their scoring models, Credit Karma doesn’t know when recipes are changed or what ingredients are getting adjusted.
Multiple changes at once
Sometimes multiple changes to your credit can happen at the same time, making it hard to pinpoint exactly which change caused a score drop.
For example, let’s say you take out a new credit card. This could cause a chain reaction of events, depending on your individual credit situation. When you apply for the card, you’ll receive a hard inquiry. Then, depending on how much of the card’s credit limit you use, your credit utilization may go up or down. Your average age of credit history may be shortened. But, if used correctly, having another line of credit may help strengthen your credit profile in the long term.
The best thing to do is keep an eye on all of your credit factors and pay attention to how changes to each one can affect your scores.