Your credit score is an indication of how trustworthy a borrower you are. When you apply for a new loan or credit card, the lender or issuer will run a credit check to make sure it's not taking on too much risk in lending you money or extending you a line of credit. So the higher your credit score is, the more likely you'll be to not only get approved for a loan or credit card, but snag a more affordable rate on any funds you're borrowing.
That said, it's common for credit scores to fluctuate frequently. And you may find that your credit score drops 10 points numerous times in your life.
In most cases, a 10-point drop in your credit score won't be a big deal, and it won't impede you from being able to borrow money when you want to. But in rarer cases, a 10-point credit score drop might be a problem.
What can make your credit score drop 10 points?
There are several things you might do that result in a 10-point drop in your credit score. First, the simple act of applying for a new loan or credit card might cause your credit score to drop five to 10 points. Secondly, if your credit card balance rises a bit but not drastically, that, too, could cause a modest drop to your credit score in the ballpark of 10 points.
For the most part, a 10-point credit score drop isn't something to stress out over -- especially if your credit is great to begin with. Credit bureau Experian says that a credit score of 800 to 850 is exceptional. If you start out with a credit score of 830 and it drops to 820, that's really not a big deal at all. A score of 820 will still put you in a position where you're extremely likely to get approved for whatever loan or credit card you apply for.
Similarly, let's say you start out with a credit score of 690, which is good, and then your score drops to 680. A 680 is also considered good, so all told, that 10-point drop isn't bumping you from one credit score category to another.
On the other hand, let's say your credit score falls from a 620 to a 610. You generally need a minimum credit score of 620 to qualify for a conventional mortgage loan. So in this specific example, a 10-point credit score drop could be problematic.
How to avoid a 10-point hit to your credit score
You can potentially avoid modest drops in your credit score by not applying for new loans or credit cards and keeping your balances on your credit cards relatively low compared to your spending limit. But in reality, there's generally no sense in taking steps to actively avoid a 10-point credit score drop, namely because it's usually not a very big deal.
In fact, let's say there's a great credit card offer you want to capitalize on that could result in a $300 sign-up bonus you can easily snag. Should you really pass up $300 to avoid a tiny hit to your credit score? Probably not, especially if your score is great to begin with.
On the other hand, a 100-point credit score drop could have a major impact on your finances, and your score might drop that much if you're late with even a single bill. So rather than stress about 10-point drops, make sure you're being timely with your bill payments so your credit score doesn't suffer more extensive damage.
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FAQs
A 10-point drop in your credit score won't impact your ability to borrow in many cases. In some situations, it could stop you from getting a loan. You can avoid small credit score drops by keeping your credit card balances low and judiciously applying for new credit.
Why did my credit score go down by 10 points? ›
Reasons why your credit score could have dropped include a missing or late payment, a recent application for new credit, running up a large credit card balance or closing a credit card.
What happens when your credit score drops? ›
Credit scores can fluctuate over time, but a big drop in your score can potentially impact your ability to get approved for a new loan or credit card. Understanding why your score went down is the first step to getting your credit back on track. And there are steps you can take to start rebuilding your credit.
Is it normal for credit score to fluctuate 10 points? ›
Credit score fluctuations are normal. They routinely adjust each month. But if there are major drops in your credit score (let's say 25 points in a month or two), it's best to investigate.
Why did my credit score drop 17 points for no reason? ›
A late payment was reported
If you've recently missed a payment, it could cause a drop in your credit score. Your payment history is another important credit score factor. If you look at your credit reports, you should see your history of payments for each account listed.
How can I raise my credit score 50 points fast? ›
What actions you can take to boost your credit scores?
- Review your credit reports for errors and dispute any inaccuracies. ...
- Keep paying your bills on time. ...
- Improve your credit mix. ...
- Improve credit utilization. ...
- Read more.
Try paying debts and maintaining your credit utilisation ratio of 30% or below. There are two ways through which you can pay off your debts, which are as follows: Start paying off older accounts from lowest to highest outstanding balances. Start paying off based on the highest to lowest rate of interest.
How long does it take for credit score to go back up after dropping? ›
How long does it take for your credit score to go up?
| Event | Average credit score recovery time |
|---|
| Bankruptcy | 6+ years |
| Home foreclosure | 3 years |
| Missed/defaulted payment | 18 months |
| Late mortgage payment (30 to 90 days) | 9 months |
3 more rowsJul 27, 2023
Things like new credit applications and missed payments may impact your credit score. You may be able to improve your credit score in a number of ways, including making sure you're on the electoral register, managing accounts well and limiting new credit applications.
Why is my credit score so low when I have no debt? ›
Various weighted factors mean that even with no credit, your credit score could still be low because the length of your credit history or credit mix, for example, could also be low.
- 1. Make On-Time Payments. ...
- Pay Down Revolving Account Balances. ...
- Don't Close Your Oldest Account. ...
- Diversify the Types of Credit You Have. ...
- Limit New Credit Applications. ...
- Dispute Inaccurate Information on Your Credit Report. ...
- Become an Authorized User.
You can improve a bad credit score by paying your bills on time, paying off debt, avoiding new hard inquiries and getting help building credit.
What day of the month does your credit score update? ›
Generally speaking, there is no set date each month when you can expect your credit scores to be updated. It all depends on when your lender sends information to the credit bureaus, when those bureaus update their reports and when credit scoring companies use those reports to update their scores.
Why did my credit score drop 10 points? ›
Using more of your credit card balance than usual — even if you pay on time — can reduce your score until a new, lower balance is reported the following month. Closed accounts and lower credit limits can also result in lower scores even if your payment behavior has not changed.
Why is my credit score going down if I pay everything on time? ›
It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.
What is considered a big drop in credit score? ›
It's common for credit scores to fluctuate in small increments. However, if you see a large drop of at least 15 to 20 points, you should find out the cause. This can help you determine whether it fell based on your actions, a credit reporting error or possibly identity theft.
Why has my credit score gone down when nothing has changed? ›
Things like new credit applications and missed payments may impact your credit score. You may be able to improve your credit score in a number of ways, including making sure you're on the electoral register, managing accounts well and limiting new credit applications.
Is it normal for credit score to drop 5 points? ›
If you're delinquent on a bill or rack up a very high balance on your credit cards, then you might see your credit score drop quite a bit. If you're only seeing a five-point drop, however, then chances are, it's because of a hard inquiry on your credit report.
How many points can your credit score go down? ›
According to FICO data, a 30-day missed payment can drop a fair credit score anywhere from 17 to 37 points and a very good or excellent credit score to drop 63 to 83 points. But a longer, 90-day missed payment drops the same fair score 27 to 47 points and drops the excellent score as much as 113 to 133 points.
