7 Things to Do If Your FICO® Score Drops
Your FICO® Score can decrease for a variety of reasons like a late payment or higher credit card balance. Learn what you could to do if your FICO Score drops.
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For the first time in 10 years, the average FICO® Score of the U.S. population has decreased. The latest FICO Score population data points to a rise in debt levels and missed payments, which are leading contributors driving this drop in average score. Having good credit can be challenging in a tough economy like the one we're experiencing. Here are some actions to consider if your FICO Score drops.
1. First, determine how much your score dropped
A drop of a couple of points may not cause concern for most, but a more substantial drop may warrant more attention.
2. Understand why your score dropped.
You may already have an idea of why your score dropped if you subscribe to a credit monitoring service. For instance, most credit score monitoring services provide an explanation on the main score factors most negatively impacting the credit score. Comparing these score factors between scores can help you understand what is driving the change in score over time.
Otherwise, if you're not sure what caused your score to fall, start by checking your credit report, which can clue you in to your current score. You can obtain your credit reports here at myFICO.com or you can get your free reports through AnnualCreditReport.com.
Once you have your credit reports in front of you, review them carefully. Look for any information that could have caused your score to drop. For instance, your score may have been impacted by recent late payments, high credit card balances, new collections, or recent credit inquiries.
3. Dispute credit report errors.
Credit reports occasionally contain mistakes that could impact your FICO® Score. If you find errors on your credit report, you can dispute them with the credit bureaus and the reporting creditor. They'll review your dispute and correct any confirmed errors.
4. Address late payments.
Because payment history is the biggest factor in your FICO® Score, late payments can cause a significant dip in your score. After just one 30-day late payment, even an excellent score can drop significantly. The further behind you are on payments, the worse it is for your score.
Bring your past due accounts to current by making up any recently missed payment and be diligent about paying on time going forward. You won't immediately recover the points you lost, but you can prevent further damage to your score for those missed payments.
5. Lower your credit card balances.
If you've recently made a big purchase or you've been relying on your credit cards more than usual, your credit utilization may have increased. Using a significant portion of your credit limit can appear risky to lenders and your FICO® Score may reflect the increased risk.
When you can afford it, start paying down your balance to lower your credit utilization. In the future, consider whether you can pay your balance in full before using your credit card for large purchases.
6. Make sure your identity hasn't been compromised.
Realizing someone used your identity to open accounts in your name can feel frightening. The good news is that you can have these accounts blocked from your credit report.
First, place a fraud alert or security freeze on your credit report. The fraud alert warns lenders of potential identity fraud and requires them to take additional steps to verify your identity before granting credit. A security freeze offers another level of protection by locking your credit report from new inquiries. Later, when you're ready to apply for credit of your own, you can temporarily lift the freeze.
The next step is to file an identity theft affidavit with the FTC. Then, dispute the fraudulent accounts with the appropriate credit bureaus, providing the identity theft affidavit to help the credit bureaus with their review and removal of the fraudulent accounts.
7. Wait before putting in new applications.
As time passes, negative information gradually has less impact on your credit scores. Even just a few months after you've become current you may see impacts on your FICO® Scores.
There's no guaranteed timeframe— it depends on the specific actions that affected your credit score, your credit history, and how you manage your credit going forward.
LaToya Irby is a financial writer with over 14 years of experience. She's been quoted and published as a credit expert in several major publications including USA Today, U.S. News and World Report, TheBalance.com, and The Chicago Tribune.