Here's What Happens When Your Credit Score Drops 10 Points

Your credit score is an indication of how trustworthy a borrower you are. When you apply for a new loan or credit card, the lender or issuer will run a credit check to make sure it's not taking on too much risk in lending you money or extending you a line of credit. So the higher your credit score is, the more likely you'll be to not only get approved for a loan or credit card, but snag a more affordable rate on any funds you're borrowing.

That said, it's common for credit scores to fluctuate frequently. And you may find that your credit score drops 10 points numerous times in your life.

In most cases, a 10-point drop in your credit score won't be a big deal, and it won't impede you from being able to borrow money when you want to. But in rarer cases, a 10-point credit score drop might be a problem.

What can make your credit score drop 10 points?

There are several things you might do that result in a 10-point drop in your credit score. First, the simple act of applying for a new loan or credit card might cause your credit score to drop five to 10 points. Secondly, if your credit card balance rises a bit but not drastically, that, too, could cause a modest drop to your credit score in the ballpark of 10 points.

For the most part, a 10-point credit score drop isn't something to stress out over -- especially if your credit is great to begin with. Credit bureau Experian says that a credit score of 800 to 850 is exceptional. If you start out with a credit score of 830 and it drops to 820, that's really not a big deal at all. A score of 820 will still put you in a position where you're extremely likely to get approved for whatever loan or credit card you apply for.

Similarly, let's say you start out with a credit score of 690, which is good, and then your score drops to 680. A 680 is also considered good, so all told, that 10-point drop isn't bumping you from one credit score category to another.

On the other hand, let's say your credit score falls from a 620 to a 610. You generally need a minimum credit score of 620 to qualify for a conventional mortgage loan. So in this specific example, a 10-point credit score drop could be problematic.

How to avoid a 10-point hit to your credit score

You can potentially avoid modest drops in your credit score by not applying for new loans or credit cards and keeping your balances on your credit cards relatively low compared to your spending limit. But in reality, there's generally no sense in taking steps to actively avoid a 10-point credit score drop, namely because it's usually not a very big deal.

In fact, let's say there's a great credit card offer you want to capitalize on that could result in a $300 sign-up bonus you can easily snag. Should you really pass up $300 to avoid a tiny hit to your credit score? Probably not, especially if your score is great to begin with.

On the other hand, a 100-point credit score drop could have a major impact on your finances, and your score might drop that much if you're late with even a single bill. So rather than stress about 10-point drops, make sure you're being timely with your bill payments so your credit score doesn't suffer more extensive damage.