Buzz
There you are, going about your day, when a notification from your finance app pops up: 'New Credit Score Available.' You open the app for a quick break, only to find that your score has dropped by 200 points since the last time you checked a month ago.
That’s exactly what one of our editors experienced recently. Did she forget a payment? Was there an undiscovered medical bill? What caused her carefully managed score to fall so sharply, so quickly?
Janet Alvarez, Executive Editor at Wise Bread, explains that this is a fairly common situation affecting many Americans. While building a solid score takes years, a single event can cause a sudden drop. It's unfortunate, but that's how the system works.
A significant dip in your credit score often occurs during major life changes, such as buying a new house or opening multiple lines of credit. However, it could also signal potential fraud.
"The first thing you should do is pinpoint the reason behind the decline, and then take action to resolve it," advises Alvarez. "Depending on what caused it, restoring your score might take a few weeks or even months."
To determine what went wrong, access one of your free credit reports and search for any signs of fraud or mistakes. If something seems off, there are a few steps you can take:
Place an extended fraud alert or security freeze on your credit reports (make sure to do this with all three agencies: TransUnion, Experian, and Equifax) online
Report the fraud to the Federal Trade Commission and your local police (or the police in the area where the fraud took place)
Get in touch with your credit providers and banks (you can request new cards and PINs for your assets, and put a stop on checks)
Reach out to the companies listed on your credit report that you don’t recognize, and confirm the details they have about the reported items. Share a copy of your police report, FTC report, and other relevant documents with them
Keep a record of every conversation you have, and take notes on what was discussed
If your credit score dropped and fraud isn’t the issue, here are some likely reasons:
You missed a payment
Your credit report includes negative marks, such as bankruptcy, accounts sent to collections, or unpaid alimony or child support
You applied for multiple credit cards within a short time frame
Your credit utilization rate is high
You closed an account (though this has a smaller impact)
"The quickest way to damage your credit score is by failing to make a payment on time," says Jill Gonzalez, an analyst at Wallethub. "And yes, there’s little leniency, even after a first late payment, especially in a year like this when credit is tightening and defaults are increasing."
Unfortunately, if you’ve been late or missed a payment, your only option is to slowly rebuild your score, according to Gonzalez.
"A consumer can only 'fight' a significant drop in their credit score if the negative marks were added through no fault of their own, meaning if there are errors on their credit report—which happens about 25 percent of the time—or if there are fraudulent accounts or charges," she says. "In these cases, they can reach out to the credit bureaus and dispute the inaccuracies."
Otherwise, your score's drop will depend on the reason behind it. If it’s because your utilization is too high (you should aim for about 30%), you can pay down some debt. It typically takes about three months to recover from opening a new card, closing an account, or maxing out a card, according to VantageScore Solutions. If a payment was missed, you’ll need to ensure you make timely payments moving forward—it could take a year or more to recover from a missed or defaulted payment.
Should you panic? Not according to Alvarez, unless you’re planning to buy a house or car, or applying for a job that checks your credit score.
"Your credit score represents your overall financial habits over time—not just a momentary glance at how you're doing right now," says Alvarez. "Unless, of course, you miss a single payment. In that case, it could take up to 12 months to recover."
