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Why Did My Credit Score Decrease?

7 min read

Last Updated: May 28, 2025

Table of contents

Key Takeaways

There are a few reasons why your credit score could drop, including late payments and recent credit inquiries.
You should regularly monitor your credit report to keep track of any changes.
Good credit management can help you get back on track if your credit score recently lowered.

Have you recently checked your credit and noticed your credit score dropped? If so, you may be wondering what happened. Your credit score is an important number that lenders use to determine whether to approve you for credit. A drop in your credit score may have an impact on your ability to get credit in the future. Understanding what categories could be impacting your credit score is important in managing your financial future.

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Late payments

Payment history is one of the key categories that help determine your FICO^® Credit Score, a scoring model used by many lenders. In fact, 90% of top lenders use FICO^® Credit Scores, including Discover.² As a Discover^® Cardmember, you can get your FICO^® Credit Score for free on monthly statements, on mobile and online.²

Your payment history makes up 35% of your credit score,² so a missed payment or late payment can negatively affect a credit score. Late payments can stay on your credit report for up to seven years, so it's important that you pay your bills on time.

What to do if you had a late payment

If you've missed a payment, the best thing you can do is make a payment as soon as possible. While the late payment may still show up on your credit report, if you pay your bill as soon as possible, you may be able to avoid any future damage to your credit score.

High credit utilization

The percentage of available credit you’re using is another category that impacts your credit score. If you use too much, that may show lenders that you're overextended and you might have a difficult time paying back your debts.

What to do if you have high credit utilization?

If you're using a high percentage of available credit, you should try to pay down your balances as quickly as possible to lower your utilization ratio. According to the Office of Financial Readiness, you should ideally aim for a credit utilization ratio of 1–10%.

Credit inquiries

When you apply for credit, lenders check your credit report and credit score. These checks are credit inquiries.

A soft credit inquiry doesn’t impact your credit score. You'll sometimes get a soft inquiry when you pre-qualify for a credit card. Hard inquiries can affect your credit—these happen when you actively apply for a new credit card or loan.

Hard inquiries have an impact on your credit score. The more you apply for loans or credit cards, the more it may negatively impact your credit score.

What to do if you have credit inquiries?

You should try to limit the number of credit inquiries that you make. If you're shopping around for a loan or credit card within a short period of time (usually 14-45 days total), it will count the multiple inquiries as one.

Errors on your credit report

Occasionally, credit reporting errors can be the cause for a drop in your credit score. For example, if a lender reports a late payment that you made on time, it can negatively impact your credit score. Errors on your credit report (for example, new accounts you don't recognize) could also be a sign of fraud; that's why you should regularly review your credit report.

What to do if you notice errors on your credit report?

If you notice errors on your credit report, contact the credit bureau that issued the report to dispute the credit error. The credit bureau will investigate the error. If it's found to be incorrect, the credit bureau will update your credit file accordingly.

Credit limit decrease

When you first got your credit card, your card issuer may have set your credit limit based on things like your income, housing payment, credit history, and credit score. Changes in your credit profile may affect your credit limit. For instance, your credit card company may lower your credit limit if you frequently miss or make late payments. (Note: According to the Credit CARD Act, typically your credit card company must give you notice before they lower your credit limit).

What happens if you continue your high spending habits while having a lower credit limit? You run the risk of increasing your credit utilization ratio. Remember, you should aim for a credit utilization ratio of 1–10%.

For example, let's say you have a total credit limit of $1,000 and you carry a balance of $300. In this case, your credit utilization ratio is 30%. If your credit card issuer lowered your limit to $500, but your balance stayed the same, your utilization ratio would change to 60%. This is how a credit limit decrease could raise your credit utilization ratio and may hurt your credit score.

What can you do if your credit limit decreased?

You can try to request a credit limit increase from your card issuer or open a new credit card account to boost your spending power if you think your credit limit is too low. But if your limit decreased because of poor credit habits (like consistent late payments), a credit increase may be challenging to come by. Instead, you should take steps to improve your credit.

Closed credit account

Even if you have a credit card you don't use much, you should always think twice before closing a credit card account. When you close a credit card account, you may run the risk of increasing your credit utilization ratio.

What to do about a closed credit account

If you closed a credit account recently (or if your credit card company closed your account), then you should check your credit report and your credit score. It might influence your credit score. If you believe that the closed account was an error, you may be able to dispute it.

How do I stay on top of my credit score after a score drop?

Staying on top of your credit score requires a careful look at your current spending habits. Read on to learn more about the steps you can take to better understand your credit score.

Pay your bills on time

On-time payments are essential to get a good credit score. You should pay at least your minimum monthly payment each month.

Keep your credit utilization low

Keeping track of how much you’re spending can help you manage your credit utilization. If your credit card company has a mobile app, you may be able to set alerts that tell you when you’ve reached a certain balance.

Monitor your credit regularly

You should regularly check your credit report. Federal law allows you to receive one free credit report every 12 months from each of the three major credit reporting agencies. The Federal Trade Commission reports that the three credit bureaus have permanently extended the program to include one free report per week.

You can request your free credit report at AnnualCreditReport.com (the only website authorized by the federal government).

Avoid too many credit cards

The amount of new credit that you open can affect your credit score, plus too many cards might result in more spending than you can afford.

Practice good spending habits

Set up a budget to help avoid spending more than you can afford.

The bottom line

Regardless of the reason why your credit score dropped, there are actions you can take to improve it. These same actions can help you prevent a credit score drop. As you make good credit management decisions, you can get back on track if your credit score recently lowered.

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