Can FICO score drop for no obvious reason?
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My FICO has been dropping steadily over the last few months for no obvious reason. I’ve seen my score going down from mid to low 700s. I don’t have any late payments or any other negative marks on my credit report, so why is this happening to my score?
There’s always a reason
FICO score is an information based algorithm. What this really means is that for your FICO score to change – the input information to the FICO formula (i.e. your credit profile) must also change.
Even if you haven’t spotted any obvious reason that explains why your FICO has dropped, there must be less-than-obvious changes to your credit profile that may have caused the drop.
One such very common, yet not entirely obvious cause is an increased utilization ratio. If you’ve been using more of your available credit lately, that could account for a drop in your FICO score.
Another cause could be search for new credit. Each time you apply for a credit card, car loan etc., an inquiry (one or more) is added to your credit report. While one inquiry hardly impacts your score, few inquiries in a short period of time may explain 10-30 points drop.
If you’ve been actively searching for new credit while gradually increasing your utilization, a mid to low 770s drop in your score is actually very obvious.
If you can, try to reduce your expenditure, pay down the balances on your credit cards and hold off from opening any new credit accounts. By doing this, you should see your FICO score bounce back fairly quickly.
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