Photo by Kaleb Tapp via Unsplash

Sometimes managing credit and monitoring your credit score can feel like a game of chess. But while the credit impact of certain financial moves may feel like a mystery, there are some general guidelines surrounding what may happen to your credit score in different circumstances. 

So let’s take a look at what may happen to your credit score if…

You receive a hard credit inquiry

Size of Credit Score Drop: 5 points or less, according to FICO

A hard credit inquiry generally occurs when you voluntarily apply for a new form of credit and the lender or creditor pulls your credit report to determine your credit health. This may cause your credit score to drop five points or less, at least in the short term. 

If you’re shopping for a mortgage, for instance, and can’t avoid multiple credit pulls from potential lenders, Experian suggests keeping those pulls within one 14-45 day period. Generally you shouldn’t be penalized solely for multiple hard inquiries if they are kept to this time period and they are all for the same type of credit. 

You receive a soft credit inquiry 

Size of Credit Score Drop: None

A soft credit inquiry may occur for a few different reasons, with or without your permission. This includes when you check your credit report, when a company is looking to offer a pre-approval for a promotional offer, or when a company you have an existing relationship with needs to confirm specific information about you. 

The good news? According to Experian, a soft credit inquiry should not lower your credit score

You make a late payment

Size of Credit Score Drop: It depends

First things first: late payments generally are not reported to Credit Reporting Agencies (CRAs) –– like Experian, Equifax, and TransUnion –– until they are at least 30 days, or one full billing cycle, late. So if you make a payment a few days past the due date, it usually won’t impact your credit, though you could incur a late payment fee depending on the type of account. 

Now the amount your credit score may drop once a payment is 30+ days late depends on a number of different factors including, among others, your current credit score, how late the payment actually is, how many late payments you’ve had (with that particular creditor and other creditors), and the length of your credit history. 

FICO has outlined some helpful example profiles that show how various factors, notably a late payment, can impact a credit score. Here’s the late-payment snapshot of five difference credit profiles. 

Person 1: 

  • Starting credit score: 736
  • After a 30 day late payment: 685 – 705
    • Drop: 31-51 points 
  • After a 90 day late payment: 655 – 675
    • Drop: 61-81 points

Person 2: 

  • Starting credit score: 607
  • After a 30 day late payment: 570 – 590 
    • Drop: 17 – 37 points 
  • After a 90 day late payment: 560 – 580
    • Drop: 27 – 47 points

Person 3: 

  • Starting credit score: 669
  • After a 30 day late payment: 625 – 645 
    • Drop: 24 – 44 points
  • After a 90 day late payment: 590 – 610
    • Drop: 59 – 79 points

Person 4: 

  • Starting credit score: 710
  • After a 30 day late payment: 645 – 665
    • Drop: 45 – 65 points
  • After a 90 day late payment: 530 – 550
    • Drop: 160 – 180 points

Person 5: 

  • Starting credit score: 793
  • After a 30 day late payment: 710 – 730  
    • Drop: 63 – 83 points 
  • After a 90 day late payment: 660 – 680
    • Drop: 113 – 133

The largest credit score drop occurred with person 4 — a 160 – 180 point drop for a payment made 90 days late. According to FICO, higher scores may drop more with late payments because their score does not already reflect past risky behavior. In addition, this person had only two years worth of credit history, making one negative mark more significant than normal.

You have an account sent to collections 

Size of Credit Score Drop: Potentially 100+ points according to credit.com

If you have an account the original creditor has sold to collections after not receiving payment for some time –– usually more than 120 days –– the impact on your credit report can potentially be quite substantial. However, just like with late payments, the exact drop in your credit score will vary depending on a variety of other factors such as your current score and the number of other negative marks you have on your credit report. In addition, the impact of an account in collections diminishes over time and is generally removed after about 7 years –– so the more recent it is, the bigger the impact it could have

If you pay off the account in collections, the impact to your credit score will likely depend on the credit scoring model used. (Remember, you have multiple credit scores.) For instance, later models from FICO and VantageScore (FICO 9 and VantageScore 3.0 and 4.0) both ignore collections accounts that show a zero balance, generally resulting in less of an impact on your score. But there is no guarantee that a creditor or lender is using the latest scoring model (and they aren’t actually required to, according to CNBC). 

You file for bankruptcy

Size of Credit Score Drop: Often 200+ points if you have a good score

Bankruptcy can cause a drastic drop in your credit score. How large that drop is can also change based on multiple factors including, without limitation, the health of your credit score before filing, how long it has been since you filed, and what type of bankruptcy you filed. 

Chapter 7 bankruptcy, which generally wipes out your debt, can remain on your credit report for 10 or so years from the date you filed. Chapter 13 bankruptcy, which essentially reorganizes your debt by establishing a repayment plan , can remain on your credit report for 7 or so years from the date you filed. The credit score impact of bankruptcy tends to diminish over time, even if the bankruptcy is still noted on your credit report. 

Just like with late payments, filing bankruptcy may lead to a larger credit score drop for those with higher credit scores to begin with

You apply for a new credit account or loan

Size of Credit Score Drop: It depends 

What’s the impact of a new credit account or loan on your credit score? That might be the most complicated credit score question to answer.

Let’s take a look at a few factors that may change whether your score increases or decreases and by how much.  

The average age of your credit.
Impact: Negative (assuming you already have other established credit accounts)

The length of your credit history –– which is calculated as the average age of all of your credit accounts (i.e., the average of the amount of time all of your credit accounts have been open) –– is said to make up 15% of your credit score. In this case, the older your credit, the more responsible you may look to potential lenders. 

The bad news? Opening a new credit account will almost always lower your average credit age

Your credit mix.
Impact: Potentially positive 

Another factor in calculating your credit score is your mix of credit accounts. If you have a diverse mix of credit accounts –– like credit cards, auto loans, and a mortgage, for instance –– a potential lender may see you as more equipped to handle new credit. 

So, if the new credit you are applying for makes your credit mix more diverse, it could potentially have a positive impact on your credit score. 

The number of hard inquiries you’ve had.
Impact: Negative

Generally, in order to have a new credit account opened in your name, a lender or creditor will have to run a hard inquiry on your credit. As mentioned earlier, this could lead to a credit score drop of about 5 points, give or take. However, the impact could be greater if you’ve had a number of hard credit inquiries for different types of credit accounts spread out past the 14-45 day window considered acceptable for rate shopping. 

Your credit utilization.
Impact: Potentially positive 

Your credit utilization is the total amount of credit you’ve used at a given point in time vs. total the amount available to you. The concept of credit utilization applies to all of your revolving credit accounts –– like credit cards –– that you can borrow from, pay over time, and repeat. 

Opening a new revolving credit account could potentially provide a positive benefit to your credit score by increasing the amount of credit available to you which, in turn, would lower your overall credit utilization. 

Your credit health.
Impact: Potentially positive or negative

Again, the overall health of your credit can indicate how opening a new line of credit may impact your credit score. If your credit is in good standing, a new line of credit may lead to nothing more than a small, temporary reduction in your credit score.

You increase your credit utilization

Size of Credit Score Drop: It depends 

Making up 30% of your FICO score and considered “extremely influential” by VantageScore, credit utilization is widely considered to be a key factor in determining your credit score. Generally, the recommendation is to keep your credit utilization at or below 30% –– meaning you don’t charge more than 30% of the credit you have available to you. But what happens when you go past that? 

That answer is also a little complicated.

One important factor to note: According to TransUnion, lenders and creditors generally report account information once a month or once every 45 days. However, the credit bureaus don’t require them to submit such information by a certain date, so your credit report and credit score can change often. So, for instance, if you made a large credit card payment, your credit score may still reflect a high credit utilization –– depending on when you made the payment and when your creditor reported the balance to the CRAs. 

Other factors will likely play a part as well –– for example, how high your credit utilization actually is. A 90% credit utilization ratio, for instance, may lead to a higher credit score drop than a 35% ratio. In addition, your current credit score can also play a part in how significantly any of the above will impact your score. 

The Bottom Line 

Knowing exactly how much your credit score will change based on different circumstances is complicated, to say the least. But by understanding the factors that may have a negative impact on your credit score, you can focus on positive credit building habits going forward. 

Learn all about credit scores and credit reports here.

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