Credit score dropped over 110 points for no reason?

Question

Hi everybody,

I'm a newbie looked to purchase my first rental property with a conventional loan. I applied with a few lenders and they pulled my credit score. Both commented that I had an excellent score, in the high 700 range.

This month, I got an alert from my credit wise account that my credit score had dropped to 630?? I have not taken out any new lines of credit or a mortgage and I have no idea why it dropped so drastically. I pulled my full credit report and can't see anything suspicious or unusual. I have zero debt and I really don't understand this sudden change. My credit score history has been steady and unchanged for the past several years.

Any insights? I'm kind of bummed out- I was proud of my credit score! Thanks in advance for any advice.

Stephanie Medellin · Answer

Credit wise is a credit monitoring feature offered through credit cards - I know Capital One offers Credit Wise with Transunion scores.

A few things:

There are three credit bureaus - Equifax, Experian, and Transunion.  Each has several different scoring models, and as far as I know none of the free services will provide you the same score as a mortgage lender will pull.

Mortgage lenders pull a credit report with scores from all three bureaus, and they will use the middle score.  You could have a 630 from Transunion, a 740 from Experian, and a 732 from Equifax.  The 732 is your middle score.

Credit scores are required for most mortgage loans purchased or securitized by Fannie Mae. The classic FICO credit score is produced from software developed by Fair Isaac Corporation and is available from the three major credit repositories. Fannie Mae requires the following versions of the classic FICO score for both DU and manually underwritten mortgage loans:

• Equifax Beacon® 5.0;
• Experian®/Fair Isaac Risk Model V2SM; and
• TransUnion FICO® Risk Score, Classic 04

These scores listed above are not provided by Credit Karma or any other free service.

Credit Wise should tell you why your score changed, but maybe it didn't actually change because the way the score is calculated is completely different than your lender's score.

Even if you have no debt, the closing balance on your credit cards each month is what will report on your credit.  For example, say you have a Chase credit card with a $1000 credit line.  Last month you had a car repair that cost $900, and for convenience, you paid the bill with your Chase card.  You received your monthly statement with a $900, and paid it in full.  However, your credit score was calculated with 90% of your credit line being used for the month ($900 out of $1000).  Having this happen on a few cards with small credit lines can cause your score to drop - temporarily.  If you don't use your cards for a few months and a $0 balance reports, your score will go up.  This is the biggest reason I see for low credit scores when someone has no negative credit history.

Another thing that can cause your score to drop (although I don't know if it would drop 110 points) is for old closed accounts to stop reporting after 7-10 years.  Maybe you had some installment loans that have been paid off for 7 years, and they're no longer reporting.  That would be a positive tradeline no longer being factored in to your score.

Chris Seveney · Answer

@Emily Fraser

Which website are you using that showed you this?

If you applied with several lenders and they pulled reports having your credit pulled (hard pull) can lower your score

Also how many years have you had established credit? The younger you are the more it will have greater swings

Emily Fraser · Answer

Thanks for all the replies everyone. I find it all very confusing. I think that what happened is that I currently don't have any credit cards or lines of credit at the moment. I had a Chinese credit card (because I was living in China) and I foolishly thought that this would count towards my overall credit score. I haven't had my credit pulled for anything in 4-5 years because I've been living outside of the USA and haven't needed to. I think that the mortgage applications may have triggered a re-calibration and my credit was adjusted based on the fact that I have no history of credit payments in the past several years. Also, as someone said above, the mortgages were not approved, due to my unique living circumstances. I appreciate all the input. Hopefully it will adjust again soon.

Caroline Gerardo · Answer

Mortgages use a tri merged report which is not the same as a consumer report. Not the same scoring math.

I WOULD NOT sign up for multiple monitoring services.

Each mortgage pull in 29 days same cycle reduces about 4-7 points depending on how deep and old your total number of years and balances.

Having a credit card go over 69% of the line can reduce 13 points.

Closing an account can reduce 21.

Credit cards offering you increase in line, transfers with zero interest or changes can reduce score depending on depth of your years having established credit.

Wrong address, wrong social, input error 3 points

If you have the full old report and the total new one I can tell you why; but that won't change it. Time, paid as agreed, staying the course, not appearing to need credit will increase the score.

Opt out of mailing with USPS and opt out of credit card companies offering you credit. Never ever open a "financed card" like the ones that offer furniture with no payments for x months - that hurts score, looks needy. Pay minimum due and add a payment monthly. Pay a day before due date. If Capital one mails you - for sure they pulled the credit twice. Rip it up but don't close.

All the pieces of credit scoring are math. There are MANY kinds of scores, not all the same. Vantage/FICO/trimerged/consumer/auto/background/rents... are some types

Brian Childres · Answer

@Emily Fraser

Hey Emily- My credit went down 71 points earlier this year simply because we put a lot of travel expenses on our Chase card in one month. It only took a couple of months for it to go back up to the original score. The scoring system is really ridiculous and you have to be patient with it. Your score will return to where it belongs before too long.

Galen Ikonomov · Answer

Piggby bagging what Chris said..

If you had your credit pulled multiple times within 0-30 days for a mortgage inquiry, that should not have such a massive difference in the credit score. Now, if you had your credit pulled in June and then late July and then beginning of September ( these are examples ), that will be a different story.

Emily Fraser · Answer

It was twice in the same month.

Emily Fraser · Answer

The thing is- there's no late payment/ missed payment/ any reason for the dip. I have 18 years of established credit and zero missed payments/ collections. There was only two hard pulls, so it shouldn't cause a 110 point loss. Credit Wise is the company that gives me monthly updates on my credit score.

Marcus Auerbach · Answer

@Emily Fraser - that explains it. You need a lot of "good" data points in your in file to weigh against the negative ones. I often see credit reports of tenants that are low, but only because there is almost nothing on it.

You could say the system is rigged in favor of those who participate and have a lot of credit (and pay like clockwork).

Bud Gaffney · Answer

@Emily Fraser identity theft? High credit card utilization? Try Credit Karma, but also make sure you haven’t been victim to ID theft.

Credit score dropped over 110 points for no reason?

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