What happens if my credit score drops 100 points?

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A drop in credit score of 100 points can have serious consequences.

Most important points:

  • While a small drop in credit score may not have much of an impact, a drop of 100 points can have more intense consequences.
  • It’s important to know what can cause a drastic drop — and how to avoid it.

If you’re the type of person who regularly checks their credit score, you may find that the number fluctuates from month to month or quarter to quarter. There are several factors that can cause your credit score to rise and fall to varying degrees.

Applying for a new loan or credit card will result in a hard credit check that will generally lower your credit score by five to ten points. If your credit card balance increases over time, it can cause your credit utilization ratio to rise, causing your score to drop. Likewise, if you manage to pay off some of the credit card debt, that ratio can drop, raising your score.

But while smaller swings in your credit score are quite common, it’s less common to see your score dip somewhere in the 100-point margin. If that happens, the consequences could be serious.

What Causes a 100 Point Credit Score Drop?

Your credit score can gradually drop by 100 points due to things like increasing credit card balances, applying for new credit cards and loans, and closing older accounts. But if you see your score drop by 100 points quickly, it’s usually because you’ve been flagged as 90 days or more late on a debt payment.

You would think that a single late payment wouldn’t cause so much credit score damage. But of the various factors that go into calculating that number, your payment history outweighs all the others. A single late payment can cause a serious drop in your score, even if you’ve always been on time with your bills.

In fact, the higher your credit score to begin with, the more damage a single late payment can cause. That may seem counterintuitive, but unfortunately that’s the way credit scores usually work.

What happens if my credit score hits 100 points?

A drop of 10 or 20 points in your credit score may not make much of a difference when it comes to your ability to borrow or qualify for a new credit card. But a 100-point drop could mean the difference between getting a loan or credit card approved or being rejected.

Imagine you are interested in a great credit card offer. If that offer is reserved for applicants with high credit scores and yours goes from a 750 to a 650, you could be turned down.

In addition, you need a minimum credit score of 620 to qualify for a conventional mortgage. If you have a score of 700, but that number then drops by 100, you are below that threshold. A 100-point drop in your credit score could also mean you’re stuck with a higher interest rate on a mortgage, making that loan more expensive.

How to avoid a drastic drop in credit score?

In general, the only thing that will quickly drop your credit score by 100 points is a late payment. If you avoid those, you will usually manage to avoid drastic drops in credit score.

Just to be clear, your credit score may drop by 100 points over time due to other reasons. But if you want to avoid such a quick, seemingly instant hit, make sure you pay all your bills on time. And if you think you’ll be late with a payment because you don’t have the money, get in touch and ask for some leeway. You never know when a lender or credit card company might be willing to work with you, and having that conversation could save you a world of credit score damage.

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