Your FICO credit score, a number between 300 and 850, is used by lenders as an indication of whether or not you’ll be likely to repay your debts. Since your credit score affects everything from your ability to get a credit card to your ability to secure a mortgage, knowing what can make your credit score go down is crucial. Late payments, having only new accounts, many credit inquiries, and bankruptcy can all make it drop.
One of the most common reasons people see their credit score go down is a late payment. Lenders who look at your credit report can see if you are 30, 60, 90, or more days delinquent on an account. If you’re significantly late with a payment, expect to see your credit score fall. For this reason, consumers with a past history of tardiness sometimes decide to take advantage of the automatic bill paying services offered by many banks.
Since 15% of your credit score is based on the length of your credit history, having only new accounts in your name lead to a low number. For this reason, younger consumers tend to have slightly lower credit scores than their older counterparts — even if all other factors are equal. To boost your score, avoid continually closing old accounts. Even if you have a credit card you seldom use, leave the account open so lenders see it as a longstanding part of your credit history.
The amount of credit inquiries made on your report can also make your credit score go down. This is because lenders believe you may be planning to go on spending spree if you’re trying to open several new accounts in a short period of time. To keep your score up, don’t apply for credit cards or loans unless they are absolutely necessary. Personal inquiries won’t affect your credit score, however, so it’s fine to request a copy of your credit report on a regular basis in order to check for discrepancies or signs of identity theft.
While bankruptcy can provide a fresh start for those in serious financial trouble, filing for bankruptcy will make your credit score go down significantly. In addition, it will stay on your credit report for 10 years. Typically, filing for bankruptcy will make your credit score drop by 160 to 220 points.
If you’ve recently been denied credit because your score is too low, don’t be discouraged. Since the FICO scoring system is designed to allow recent good behavior to help offset past mistakes, making a conscious effort to use credit cards responsibly and pay your bills on time will gradually improve your score. It’s not an easy process, but the results are well worth the extra effort.