Why Did My Credit Score Go Down When Nothing Changed?
Posted by Frank Gogol in Credit Scores | Updated on August 21, 2023
You pay the same bills, use and pay off the same credit cards, and have the same number of loans every month. And yet, your credit score changes from month to month. You might be asking yourself: “Why did my credit score go down when nothing changed?”
A small variation in your credit score should be expected. If you see a big change in your credit score, you should investigate and find out why your score changed.
Below we detail some of the reasons your credit score might have changed.
Can a Credit Score Drop Even if Nothing Changed on My Credit Report?
It can sometimes seem like your credit score fluctuates up or down even if you seemingly haven’t done anything to influence it.
Sometimes your score does change based on factors out of your control. For example, there are different scoring models for calculating your credit score based on your financial information. It is common to see differences in scores from one model to the next.
However, if you see a big drop in your score, it is usually triggered by something specific. Most times your behaviour influences your score in ways that may not be obvious.
Below are some common reasons why your credit score may go down when nothing has changed. This will give you an indication of what to look for on your credit report.
Why Did Your Score Change?
Your credit score gives lenders a sense of your debt-repayment history. Although different models are used to calculate your score, they all take the same financial behaviour into account. Your credit score is calculated based on your payment history, the amount of money you owe, the length of your credit history, the type of credit you have, and the new credit that has been added. A change in your score means one of those factors has changed.
Reported High Utilization
One of the factors that influence your credit score is your utilization of credit. Your utilization rate is the amount you owe on your credit card relative to your credit limit. If you are reported to have high utilization, you owe an amount of money close to your credit limit. Low utilization shows lenders that you are a responsible borrower and repay most or all of your purchases quickly. This will influence your credit score positively.
Did you make a large purchase on a credit card recently? Even if you paid it off quickly, there is a chance your lender reported this higher balance before you paid it off. If this is the case, your credit score should bounce back once the balance is reported as being paid off.
If you buy more stuff on credit, your utilization ratio will increase. But what if you have not increased your spending? Why did your credit score go down when nothing changed?
If you didn’t change the amount you owe, perhaps your credit card company has increased or decreased your total credit limit. If your spending habits remain the same, a decrease in your credit limit would increase your credit utilization ratio and harm your score. If your credit limit has recently altered, that will change your utilization ratio and affect your credit score even if nothing else has changed.
You Closed an Account
Closing a credit card account can affect your credit score in a couple of ways.
If you close one account, but still have a balance on other cards, closing your account can increase your credit utilization score. Even though your total debt remains the same, you have less available credit. Closing the account decreases your total credit limit. This means your current debt is higher relative to your new lower total credit limit and available credit balance.
Additionally, closing a long-running credit card account can impact your score differently. Generally speaking, the older the average age of your account, the better your score. Lenders like to see that you have accounts with a long history of on-time payments. If you close an account that’s been open for a long time, it can bring your credit score down.
Generally, you’ll be the one authorizing a credit card to close, but card companies can also close your account without your knowledge.
A New Hard Inquiry
There is a difference between a soft and a hard credit inquiry.
A soft inquiry on your credit report can only be seen by you. They do not impact your credit score. A soft inquiry shows you or another company checked your report. A soft inquiry cannot be used to make a lending decision. It is usually for a background check or credit monitoring that you signed up for.
On the other hand, a hard inquiry is an inquiry on your credit report that is made with the intent to make a lending decision or offer you a contract. A hard inquiry can temporarily lower your credit score. If you’ve recently applied for a credit card or loan, the lender has probably made a hard inquiry on your credit report. Even though nothing has changed yet, your credit score can go down a bit as a warning to other lenders that you are considering other lending options.
If you feel that nothing has changed, you might be overlooking a hard inquiry from an account that is already on your report. For example, if you request a credit line increase for one of your existing credit cards, this could also trigger a hard inquiry.
There’s Been an Error
If you have gone through all of the reasons above and are still wondering “Why did my credit score go down when nothing changed?” then there might have been an error on your credit report.
Carefully read your credit reports again. You may have to dig for some clues. Make sure all of your open accounts are on there, and that there aren’t unauthorized accounts opened in your name. If you think you’ve been a victim of identity theft, speak to your lender and the police.
If you find any errors on your credit report, make sure you have them fixed and removed as soon as possible.
Lynette Khalfani-Cox, a personal finance expert also known as The Money Coach, explains that you have two options when it comes to filing a dispute on your credit report: “You can contact either the credit bureau, or you can contact the data furnisher (the company that provides information to each bureau). For a quicker response, the data furnisher may be your best option, but they aren’t legally obligated to pursue every type of dispute and most only accept disputes through the mail.”
Should You Worry About Changes to Your Credit Score?
Changes in your credit score are completely normal. There’s no need to worry about small fluctuations.
That being said, it’s good to check your credit report at least once a month so you can monitor these changes when they occur. Remember, a changing score means changing information. If you see a big change in your credit score, make sure you know what triggered it.
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If your credit score fluctuates from month to month you might be asking yourself: “Why did my credit score go down when nothing changed?”.
Your credit score might have gone down for a number of reasons.
Although slight fluctuations in your credit score are nothing to worry about, if you see a big change in your credit score, make sure you know what triggered it.
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