There are many reasons why the credit score might drop, and not all of them are obvious and easy to find. Here is the list of 9 most common reasons for a credit score drop, along with the ways to address the issue.

Missed or late payments
Payment history is the primary factor affecting credit score because it accounts for approximately 35% of the credit score. In most cases, a late payment is reported by creditors once it is one month past due. It is important to know that late payments might remain on file for up to 7 years.

Solution
Once the last payment is noticed, it is recommended to pay it as soon as possible, ideally before it is 1 month past due. If payments become 60 or 90 days past due, the credit score drops even lower. Hence, the sooner a late payment is paid, the better it is.

The unpaid account sent to collectors
Collections accounts are considered severe delinquency that might have a serious negative impact on credit scores. When a collection account gets older, it affects the credit less but it still stays on a credit report for up to 7 years.

Solution
It might be helpful to ask for a goodwill deletion on those accounts that have been already paid. In some cases, a goodwill letter sent to collectors might convince them to remove a debt collection from the credit report.

Large purchase on a credit card
Utilization is the second most important element on a credit report that is defined as the balance-to-limit ratio. Good credit utilization should be no higher than 30%. This means that less than 30% of the available total credit is used. If you make a large purchase, you might exceed this percentage and ruin your credit score.

Solution
In order to utilization three things can be done: paying off some credit card debts, increase a credit limit on a card, or opening a completely new credit card. If you pay off your balances, it will help to keep credit utilization low and improve the credit score.

Lowered credit limit
Even if your balance on a credit card remains the same but the limit was lowered, it will raise your credit utilization. As a result, it might cause a credit score drop.

Solution
If the limit was lowered, it is recommended to decrease spending on this credit card and open a new card, which will help to get utilization back to under 30%.

Submitting an application for a loan, mortgage, or a new credit card
Applying for a new credit allows a lender to check a credit score and a history. This process is called a hard inquiry that affects a credit score. If you apply for too many new cards within a short period of time, you might seem desperate to lenders for credit.

Solution
To avoid unnecessary hard inquiries, it is better not to apply for too many new credit cards and focus on those you already have and use.

Closing a credit card
Closure of a credit card might have a negative impact on a credit score. It increases the utilization ratio and lowers the credit limit. If you are closing one of your oldest credit card accounts, it might significantly lower the average age of credit card accounts. The length of a credit card history accounts for about 15% of the total credit score.

Solution
It is better not to close your account, unless the card has too high annual fees. Keeping an account open will help to maintain the length of credit history and keep the credit limit at the same level.

Paying off a loan
Even though paying off a loan provides you with more financial freedom, it has an impact on a credit score because you lose one of your credit accounts.

Solution
Keep other accounts open, do not be late with payments, and try to keep a credit utilization ratio as low as possible. It is a guarantee that your credit will continue to improve.

A victim of an identity theft
If the credit score has dropped for no reason, it might be an indicator of identity theft. Check your credit report for unknown addresses and unfamiliar accounts, and then, if you notice any, take immediate action.

Solution
There is a website identitytheft.gov that helps to sign up for a personal recovery plan. Other options include freezing credit with three credit reporting bureaus or setting up a fraud alert.

It is important to constantly monitor your credit score changes or drops and once you notice any to contact one of the credit repair services that will help you find a solution.