Why did my credit score drop?

Look at what changed on the report, not at the number

A score is a calculation run on whatever your credit report says on the day it is pulled. A change can reflect new report information, the passage of time (such as account or inquiry age), or a different model, bureau or calculation date. Compare those details before deciding what caused it.

The CFPB lists what scores weigh: whether you pay on time, how much you owe, how much of your available credit you are using, how long your accounts have been open, the number and type of accounts, new applications, and debts sent to collection, foreclosure or bankruptcy (and how long ago). myFICO gives the FICO weights: payment history 35%, amounts owed 30%, length of credit history 15%, new credit 10%, credit mix 10%. The mix of factors and their effects depends on the scoring model and the credit file.

What matters more than the size of the drop is whether it fixes itself. Some causes undo themselves within a month. Others sit on the report for years. Sort yours into the right group before you do anything else.

The causes, from quickest to undo to slowest

The first row is the one to check first, because it is the most forgiving and the easiest to miss. You can pay your card in full every month and still show a high balance, because the balance the score sees is the one the issuer reports, usually around the statement date, not the zero after you pay. A big purchase, a holiday month or a card you used for a work trip can push that figure up for one cycle. The FTC puts it plainly: balances close to the limit "will probably hurt your score." The good news is that this factor has no memory in most cases. Next month's lower balance replaces this month's.

A late payment is the opposite. It falls under the heaviest factor, and paying the overdue amount does not erase the fact that it was late. If your report shows one you did not expect, find out exactly which account and which month before anything else, because a genuine late payment is the most expensive item on this list and a mistaken one is the most worth fighting.

Closed cards hurt in a less obvious way. Neither the FTC nor the CFPB addresses them directly, but the arithmetic follows from the weights: the limit on a closed card stops counting toward the credit you have available, so the same balances now use a larger share of it. If the closed card was an old one, the average age of your accounts can suffer too. Paying off a loan closes it as well; with credit mix at only 10% of the score, expect a small effect, not a large one.

When it "dropped for no reason"

Most of the time, there was a reason; it just did not feel like one. Before you assume an error, check three things in this order.

First, compare the balances on your report with what you think you owe. A card that reported mid-cycle, or a statement that closed the day before you paid, is the usual culprit. Second, look for a card you stopped using. If the issuer closed it, the limit vanished from your available credit, and nothing in your day-to-day life changed.

Third, make sure you are comparing like with like. The CFPB is explicit that you do not have just one credit score. A banking app may show a VantageScore while your card issuer shows a FICO Score, each built from one bureau's report, and the three bureaus do not always hold the same information. myFICO calls FICO Score 8 the version most widely used by lenders, but it is not the only one in circulation. A "drop" from 742 in one app to 721 in another can be two different formulas reading two different files on the same day. Track one score from one source if you want to see a trend.

What did not cause it: prescreened credit offers in the mailbox. The FTC says those are not counted against you.

Shopping for a loan is not the problem people think

Applications do count, under the 10% new-credit factor, and the FTC says too many recent ones "could hurt your score." But the same FTC page notes that several mortgage inquiries within a short period are often counted as one. So comparing lenders for the same loan is not what drags a score down. Applying for a store card at the register, a new phone plan with financing and a car loan in the same season is a different story, and it is the pattern to avoid in the months before a mortgage application.

If something on the report is wrong

Pull all three reports at AnnualCreditReport.com, which is the free source the FTC points to. Read the account list, the late-payment grid on each account and the collections section. An account you never opened, a late mark for a month you paid, a balance that belongs to someone else: each of those is an error, and you dispute it with every bureau that shows it. The bureau behind the score you happened to see may not be the only one carrying it. The CFPB explains how to file the dispute.

Keep the order straight. A mistaken late payment or collection is worth far more effort than any balance trick, because a late mark sits on the 35% factor, and neither one leaves on its own. A balance that looks high but is correct is not an error; it will fix itself on the next report.

Whether the drop costs you anything

A lower number only costs money if it crosses a line a lender prices on. Our daily FICO mortgage reference table starts its top band at 780, so a move from 790 to 770 changes the reference estimate. Actual offers depend on the lender and the rest of the application. It can still matter elsewhere: Fannie Mae's loan-level price adjustments, the one-time fees charged on conventional mortgages, have their best band at 780 and above, so the same slide crosses one fee line. A fall from 740 to 735 crosses another, and from 700 to 695 crosses the line between two myFICO mortgage bands.

So the useful question is not how many points you lost. It is whether you are about to apply for something, and whether the drop put you on the wrong side of a band. If you are not applying for anything in the next couple of months and the cause is a reported balance, do nothing except pay the card. If you are applying soon, find the cause today, and do not open anything new until the loan closes.