Your credit score impacts a lot of things in your financial life. A good score can help open up your options, so seeing your score drop can be frustrating! Let's shed some light on what can cause your credit score to drop.

Some of the main reasons your score may have dropped:
  1. You missed a payment on any of your current debts or bills that report to the Credit Bureaus.

  2. You made any of your payments late. Note that payments take a few days to process from the time you send them.

  3. You are using a higher % of the credit you have available to you (credit utilization rate).

  4. An account was closed or cancelled OR opened.

  5. You paid off a loan - that's right your score can go down when you finish paying a loan!

  6. You applied for new credit, this could be any type of credit from a credit card to a mortgage.

  7. You filed for bankruptcy/consumer proposal, had a debt sent to collections, or had a judgment or foreclosure.

  8. Someone fraudulently used your information to apply for and use debt.

  9. There are errors on your credit report.

Now let's talk about why each of the items above has a negative impact on your credit score.
  • Items 1 and 2: Missed/late payments have a pretty significant impact on your score because your payment history makes up 35% of your score.

  • Item 3: Your credit utilization rate makes up 30% of your score. Using 30% of your available revolving credit, (which includes credit cards, and lines of credit) or less is recommended.

  • Items 4 and 5: Your credit history makes up 15% of your score so any account closing (even if it's because you paid off a loan), especially ones that you've had for a long time will impact your score. The age of your newest account is also a factor, so new accounts can cause a small drop.

  • Item 6: New credit inquiries (when a lender pulls your credit report) make up 10% of your score. If you're applying for different types of credit close together this could have a significant impact.

  • Item 7: These types of derogatory marks on your credit report make up 10% of your score and many can stay on your credit report for a long time.

  • Items 8 and 9: Any type of fraud or errors on your report can impact multiple items above so I recommend disputing them as soon as possible. If there are loans/credit cards that you didn't apply for on your report, reach out to the lender and let them know right away.

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