4 surprising reasons why your score might have dropped

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4 surprising reasons why your score might have dropped


You're on top of your finances -- your payment history is flawless, you keep your utilization below 30 percent and your accounts are in good standing.

However, when you log in to Credit Karma to receive your eagerly awaited score update, you see that your score has dropped - even though you can't think of any negative changes you've made.

It can be disheartening to see your score go down when you've been working hard to keep your finances in order. So, what's up? Here are four surprising reasons why your score might've changed.

1. You forgot about that old, never-used account - and your issuer canceled it without telling you.

If you ever decided to apply for a card in a retail store spur-of-the-moment to get a discount, you're not alone. And if you're like me, you may have stopped using or forgotten about that card.

When an account becomes inactive, lenders can and sometimes will close the account - and they may not be obligated to give you notice when they do so. Banks don't make money off of a card that isn't being used because they don't collect interest if there's no balance; therefore, there's little incentive for them to keep inactive accounts open.

There's also no industry standard for how long an account must remain inactive before being closed.

Closed accounts can affect your score for a number of reasons. For example, if your spending remains the same after your account is closed, your credit utilization rate will increase since the total available credit you now have across all your cards will decrease.

What you can do: Consider setting up a small monthly charge, such as a Netflix subscription, to your card and then set up auto-pay to make sure you don't miss a payment.

2. You have a new hard inquiry.

While you may not have applied for a new credit card recently, you might have made some changes in your life that resulted in a hard inquiry on your credit report:

  • You switched your internet provider, signed a new cellphone contract or signed up for premium cable because you didn't want to miss out on the new season of "Game of Thrones." Internet, cellphone and cable providers can conduct credit checks with your permission to see if you have the financial capacity to pay for their services.
  • You applied for or signed a lease on a new place. Landlords have the right to run credit checks on their tenants (with permission) to check for past eviction judgments and determine if you are fiscally responsible.
  • You upgraded one of your current credit cards or asked for a credit limit increase. Depending on your bank and lender, asking for a credit card upgrade or credit limit increase could result in a hard inquiry. Ask your lender whether it will pull your credit report with a hard inquiry before requesting any upgrades or credit increases, and deciding based on their response.

It's also important to keep in mind that if you have an account in collections, the collection agency may pull your credit report. Collection agencies can pull your credit report to check for personal information that relates to the collection of a debt.

What you can do: In most of these cases, pulling your credit report will typically require your authorization. It's always a good idea to ask the lender or service provider whether these transactions will result in a hard inquiry. Also, if you find a hard inquiry that you didn't authorize, keep in mind that it may indicate fraud, and you may want to take action as soon as possible.

3. You paid off a loan.

This may sound strange, but paying off a loan can cause your score to drop initially. When you pay off a loan and close the account, you may end up with fewer types of credit accounts, which could impact your score.

John Danaher, president of TransUnion Consumer Interactive, a subsidiary of TransUnion, recommends "keeping a mix of credit accounts and loans so you're able to build and establish good credit history." Having different types of accounts can benefit your credit health because it could help lenders to see you as more financially experienced.

What you can do: Don't fret. While paying off a loan has the potential to lower your credit score initially, it can result in a more flexible cash flow, which can provide you with the means to pay down other debts. It can also lower your debt-to-income ratio, which can increase your chances of getting approved for future loans.

4. You're an authorized user on a delinquent account.

It can be easy to forget that you were previously added as an authorized user of an account to help you build credit. When you're an authorized user on another person's account, credit bureaus will generally report that account's balance, payment history and utilization on your credit report.

You can benefit as an authorized user if the primary account holder is someone who pays his bills on time every month and keeps his utilization low.

However, if the account holder misses a payment or maxes out his credit card, its impact can negatively affect your score as well.

What you can do: You may be able to get yourself removed from the account if you contact the lender and request that your name be removed. If the lender agrees, the account should no longer appear on your credit report after a reasonable period of time, and if it still does, you can contact the bureau to dispute it.

It's important to keep in mind that if the account is the oldest one on your credit report, its removal could lower your average age of credit history and may result in a score drop. It might be worth it, though -- score changes from your age of credit history don't typically impact your score as much as a late payment.

Bottom line

Credit scores can change for a number of reasons, and there may not be cause for alarm if yours changed by a few points.

While the reasons listed here might explain why your score dropped, lenders tend to focus more on your payment history as well as your utilization because it shows them that you're consistently staying on top of your finances.

There are many steps you can take to continually work on your financial health. Auto-payments and credit limit alerts can usually be set up through your lender's website and can help you make sure that you get your payments in on time and that you keep your utilization low.

About the Author: Anna is a Member Support Specialist at Credit Karma. When she's not communicating with our members about credit, she can be found with her dog either on a long hike or huddled together on the couch watching scary movies.

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1 Contribution
3 People Helped

Helpful to 3 out of 3 people

i am dropping credit karma. they dropped my score 100 pts for no reason, so i contacted experian to check and it actually was about 60 points higher. so dont be fooled, check other credit monitoring companies.

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1 Contribution
4 People Helped
Helpful to 4 out of 4 people

Mine just dropped 94 points! over night... no reason. And on Equifax. TransUnion increased when they both have been steady and similar for years... Credit Karma just sends articals to what or why if may have happened... NO HELP AT ALL...it is almost impossible to contact anyone from Credit Karma or Equifax. There doesn't seem there is ONE SINGLE PERSON you can talk to. 

I have requested all 3 creidt reports, nothing shows up out of the ordinary and they are all similar! WHy does CK show Equifax dropping SO MUCH? 

How do I know if this is a CK error, system down or someone stole my idendity? 

Very Upset nad frustrated. 

1 Contribution
1 Person Helped

Helpful to 1 out of 1 people

It's frustrating to see it drop 2-3 points every week and not know why.  None of those items in the article apply to me.  At one point I was at 790 something.  Lost 34 points for no great reason I coudl think of, I think my credit utilizations was up to 6%.  I've now got it down to 2%,  all payments on time. It kept dropping 2-3 points every week after that.   Now I'm back out of the Excellent Zone of over 750, and back down to just the Good Zone.  Makes me feel like working to get a good credit score is a futile effort, the Bureaus are B.S.

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Enter Your ReplyI just paid off a home mortgage and lost 60 points for it!  I thoroughlyt believe the credit score agencies are trying to keep people in debt by insisting you have to have the right "mix" of credit. This is all BS!

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0 People Helped

Impossible to find out what's going on with credit score drop of 40 points for no reason.  I thought Credit Karma would do more than provide some generic articles about scores under the circumstances.  Equifax and TransUnion are also no help.  Wondering if the Wizard of Oz is behind the curtain.

1 Contribution
0 People Helped

My credit score dropped 178 points!!!!! You read that right! And for no reason!!! There is no apparent reason as to why it dropped. I am furious! Nothing changed and there is no info as to why it dropped. I have worked TOO hard to build up good credit! **** CreditKarma!!

2 Contributions
0 People Helped

Hello Everyone,

I agree with you all.  I saw a 32 point drop for no reason that anyone can tell me.

There is only one solution that seems to get answers, FILE A COMPLAINT with the Better Business Bureau.

do it for both Credit Karma and (in my case) TransUnion.

Credit scores do affect everything in your life when it comes to money matters.

I do believe that the Credit Bureaus only want to show 'bad' things in your scores, otherwise the companies that use them will not need them.

2 Contributions
1 Person Helped

I am so sick of Transunion. They dropped my credit score on Credit Karma 20 points for no reason. I also don't like they changed their website so you can't dispute information.

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