A FICO score is determined by 5 factors: payment history, amounts owed, length of credit history, new credit, and credit mix. All of these points have a different weight on your FICO numbers. While you can work many of these in your favor to help your score rise in the ranks, these could also be the same reasons why someone would slowly (or suddenly) see a drop.

Bankruptcy and Foreclosure

We’ll start on what makes the greatest impact and work our way down. Or course, more significant events such as bankruptcy or foreclosure will hurt you the most and will take the longest to recover from. But the good news is that you can still age out of the effect they have on your financial history after 7-10 years.

Late Payments

Late payments will also cause a drop, especially if you have missed several payments in a row or miss them on a regular basis.

Credit Utilization

How much of your total credit are you using? Credit utilization could be the reason why you see a score knocked down a notch. This essentially means you’re using up a majority of your credit line. So for instance, if you have a card with a $5,000 limit and you owe $2,500, then your credit utilization is calculated as 50%. It’s best to aim for less than 30% if possible.

New Credit

How old are your accounts? If you are a relatively new borrower and you’re taking on new debt, your score can decrease a little. This is easily fixed as your accounts age and you acquire a good history of paying off balances in a timely way.

Credit Mix

Finally, ask yourself if you have a healthy mix of credit. FICO likes to see that you have retail accounts, installment loans, and credit cards in addition to a home mortgage. While this does not have a great impact on your FICO score, it’s still helpful to show that you are financially responsible in a variety of areas, not just one.


Read How Can I Better My FICO Score? and What is a Vantage Score?