A FICO score depends on five main factors: payment history, amounts owed, length of credit history, new credit, and credit mix. Each factor carries a different weight, and changes in any of them can move your score up or down. The same actions that help your score grow can also cause it to drop, sometimes slowly and sometimes very quickly.
Understanding why scores decrease helps you avoid mistakes and fix issues faster.
Bankruptcy and foreclosure
Bankruptcy and foreclosure have the biggest negative impact on a FICO score. These events signal serious financial trouble and show lenders a high level of risk. When either appears on your credit report, your score will drop sharply.
The good news is that these events do not last forever. Over time, their impact fades. Bankruptcies and foreclosures typically remain on your credit report for seven to ten years, but their influence weakens as you rebuild positive credit behavior.
Late payments
Late payments are one of the most common reasons scores fall. Missing a payment once can hurt, but missing payments repeatedly or paying late on a regular basis causes even more damage.
Payment history carries the most weight in the FICO model. Even a single late payment can lower your score, especially if you previously had a strong history. Staying current on every bill is one of the fastest ways to protect and improve your score.
Credit utilization
Credit utilization measures how much of your available credit you use. High balances compared to your credit limits can drag your score down.
For example, if a credit card has a $5,000 limit and you owe $2,500, your utilization rate is 50 percent. FICO prefers to see utilization below 30 percent. Lower balances signal responsible credit use and help keep your score healthy.
New credit
Opening new accounts can cause a temporary dip in your score. New credit reduces the average age of your accounts and may include hard inquiries, both of which can lower your score slightly.
This effect is more noticeable for newer borrowers with short credit histories. Over time, as accounts age and you make consistent on-time payments, this issue usually corrects itself.
Credit mix
Credit mix refers to the variety of credit types you use. FICO likes to see a combination of revolving credit, such as credit cards, and installment loans, such as auto loans, student loans, or mortgages.
This factor carries less weight than others, but it still matters. A balanced mix shows that you can manage different types of debt responsibly, not just one.
Final takeaway
FICO scores decrease for clear, identifiable reasons. Late payments, high balances, major financial events, and rapid changes in credit activity all play a role. By understanding these factors and building consistent, positive habits, you can protect your score and set yourself up for stronger financing opportunities in the future.
