What happens if my credit rating drops by 100 points?

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A 100 point drop in credit score could have serious consequences.


Key points

  • While a small drop in credit rating might not have much impact, a drop of 100 points could have more intense repercussions.
  • It is important to know what could cause a drastic fall and how to avoid it.

If you’re the type of person who checks your credit score regularly, you might notice that the number fluctuates from month to month or quarter to quarter. Different factors can cause your credit score to go up and down to varying degrees.

If you apply for a new loan or a new credit card, it will lead to a thorough investigation of your credit file which will generally reduce your credit score by five to 10 points. Meanwhile, if your credit card balances increase over time, it could cause your credit utilization rate to increase, which would lower your score. Likewise, if you manage to pay off some of your credit card debt, this ratio could drop, helping to boost your score.

But while small fluctuations in your credit score are fairly common, it’s less common to see your score dip somewhere in the ballpark of 100 points. If this happens, the consequences can be serious.

What causes a credit score drop of 100 points?

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

You would think that one late payment couldn’t cause so much damage to credit rating. But of the various factors that go into calculating this number, your payment history carries more weight than any other. Just one late payment could cause your score to drop significantly, even if you’ve always been on time with your bills.

In fact, the higher your credit score, the more damage a single late payment can cause. It may seem counter-intuitive, but unfortunately, that’s how credit scores tend to work.

What happens if my credit rating is hit at 100 points?

A 10 or 20 point drop in your credit score may not make a big difference in your ability to borrow money or qualify for a new credit card. But a drop of 100 points could be the difference between being approved for a loan or a credit card, or being rejected.

Imagine that you are interested in a great credit card offer. If this offer is only for applicants with high credit scores and yours drops from 750 to 650, you may be declined.

Additionally, you will need a minimum credit score of 620 to qualify for a conventional mortgage. If you have a score of 700 but that number then dips by 100, you will be below that threshold. A 100 point drop in your credit score could also mean you end up with a higher interest rate on a mortgage, making that loan more expensive.

How to avoid a drastic drop in credit rating

Typically, the only thing that will quickly drop your credit score by 100 points is a late payment. If you avoid them, you will usually be able to avoid drastic credit score drops.

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

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