Learn why your score can drop, what affects your score in Canada, and practical steps you can take to help improve your credit over time.
Your score can change from month to month as new information is added to your credit report. While a drop can be frustrating, it doesn’t always mean you’ve done something wrong.
Understanding what affects your score can help you make informed financial decisions and build stronger credit over time.
Common reasons your score may drop
There are several factors that can cause your score to decrease. Here are some of the most common.
1. You’ve missed or made a late payment
Your payment history is one of the most important factors that affects your score.
If you miss a payment or pay after the due date, lenders may view you as a higher-risk borrower. The later the payment, the greater the impact it may have on your score.
If an account goes to collections or you file for bankruptcy, that information can also appear on your credit report for several years.
2. Your credit utilization is too high
Credit utilization refers to how much of your available credit you’re using.
For example, if you have two credit cards with a combined credit limit of $6,000 and a total balance of $2,100, your credit utilization is 35%.
The Financial Consumer Agency of Canada recommends keeping your credit utilization below 35% of your available credit. Higher utilization may signal to lenders that you’re relying more heavily on credit.
3. You recently opened or closed a credit account
Opening or closing a credit account can affect your score.
Older accounts that remain in good standing may help strengthen your credit history over time. Closing one of your oldest credit cards could reduce the average age of your accounts or increase your credit utilization if it lowers your available credit.
If you’re considering closing an older credit card, especially one without an annual fee, it may be worth weighing the potential impact first.
4. You recently applied for new credit
Applying for a loan, mortgage, line of credit, or credit card may result in a hard credit inquiry.
A single inquiry usually has only a small, temporary effect. However, several hard inquiries over a short period could have a larger impact on your score.
When shopping for a mortgage or auto loan, multiple inquiries made within a short period are often treated as a single inquiry by many credit scoring models.
Tips for improving your credit health
If you’d like to strengthen your credit over time, these habits may help.
Pay your bills on time
Aim to make every payment by the due date. If you’re unable to pay the full balance, making at least the minimum payment can help keep your account in good standing.
If you’re having trouble making payments, contact your lender as soon as possible. They may be able to discuss options that work for your situation.
Keep your credit utilization low
Try to keep your total balances below 35% of your available credit whenever possible.
Paying down balances or spreading purchases across multiple cards can help lower your utilization ratio.
Keep older accounts open when it makes sense
If an older credit card doesn’t charge an annual fee, keeping it open may benefit your credit history.
Just remember to use it occasionally so the issuer doesn’t close the account due to inactivity.
Should you worry if your score drops?
Not necessarily.
Some changes, like applying for new credit, may cause only a small and temporary decrease. Others, such as missed payments or very high credit utilization, may have a larger effect.
Rather than focusing on small month-to-month changes, look at the long-term trends in your credit history and continue practicing good credit habits.
Bottom Line
Scores change for many reasons, including payment history, credit utilization, new credit applications, and changes to your existing accounts.
The good news is that many of the factors that influence your score are within your control. Paying on time, keeping your balances manageable, and using credit responsibly can help support a healthy credit profile over the long term.