Your credit score can fall even when you pay bills on time, because payment history accounts for only 35% of your FICO Score. The other 65% comes from amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).
High credit card balances hurt your score regardless of on-time payments. A credit utilization ratio above 30% damages your FICO Score. If you carry a $300 balance on a card with a $1,000 limit, you exceed that threshold. Minimum payments may not be enough to bring the ratio down.
Hard credit checks temporarily lower your score. These occur when you apply for loans, credit cards, rental units, or other credit products. Creditors run them to assess whether you can handle monthly payments.
Closing old credit cards or opening new accounts reduces the average age of your credit accounts, which lowers your score. Paying off loans entirely, while an accomplishment, can hurt your credit mix and average account age.
Reporting errors can also cause score drops. You can check your credit report for free each year to spot mistakes.
To rebuild after a drop, pay down revolving debt first. This strengthens both your payment history and credit utilization ratio. Review your credit report for errors, correct them, and focus on paying on time, keeping balances manageable, and limiting applications for new credit.