A credit score drop feels alarming but most drops have a specific, identifiable cause. In Canada, Equifax and TransUnion each maintain a separate score — they may differ by 10–30 points even with identical data. Understanding what moved your score is the first step to fixing it.
How much each factor can drop your score
| Factor | Typical Score Impact | Recovery Time |
|---|---|---|
| Hard inquiry (new credit application) | −5 to −10 points | 3–6 months |
| New credit account opened | −5 to −20 points | 6–12 months (account age recovers slowly) |
| Credit utilization exceeds 30% | −20 to −50 points | 1–2 months (improves when balance paid down) |
| Credit utilization exceeds 75% | −50 to −100 points | 1–2 months |
| First missed payment (30 days late) | −50 to −100 points | 2–3 years |
| Second missed payment | −additional 30–60 points | 2–4 years |
| Collection account registered | −50 to −150 points | 6 years from date of last activity |
| Consumer proposal filed | −100 to −200 points | 3–6 years (Equifax/TransUnion differ) |
| Bankruptcy filed | −150 to −240 points | 6–14 years |
| Closing an old credit card | −5 to −25 points | 6–24 months |
| Paying off an installment loan | −5 to −15 points | 3–6 months |
The most common causes of sudden score drops
1. Credit utilization spike (most common cause)
Your credit utilization ratio — your balance divided by your credit limit — is reported to the bureaus on your statement closing date, not your payment due date. If you charged a large expense before your statement closed, your score reflects that high balance even if you pay it off in full shortly after.
Example: Your Visa limit is $5,000. You charge $2,200 for a flight. Your statement closes and reports a $2,200 balance (44% utilization). Score drops 30–50 points. You pay it off the next week. Score recovers next month when the new statement closes at $0.
Fix: If you know a large purchase is coming, make a mid-cycle payment before your statement closing date to keep the reported balance low.
2. Hard inquiry from a credit application
Every time you apply for credit — credit card, car loan, mortgage, HELOC, line of credit, phone plan with contract — the lender pulls a hard inquiry. This temporarily reduces your score.
| Number of Hard Inquiries in 12 Months | Approximate Score Impact |
|---|---|
| 1 | −5 to −10 points |
| 2–3 | −10 to −20 points |
| 4–6 | −20 to −40 points |
| 7+ | Significant; may indicate credit-seeking behaviour |
Exception: Multiple mortgage or auto loan inquiries within 14–45 days are treated as a single inquiry by most scoring models (rate shopping assumption).
3. Missed or late payment reported
The largest single-event score drop for most Canadians. Lenders typically report to the bureau after a payment is 30 days past due. One missed payment can drop a score by 50–100 points.
| Starting Score | One Missed Payment Impact |
|---|---|
| 800+ | −100 to −140 points |
| 750 | −90 to −110 points |
| 700 | −60 to −80 points |
| 650 | −50 to −70 points |
| 600 | −30 to −50 points |
The higher your score, the more you have to lose from a single missed payment.
4. Your credit limit was reduced
If your lender reduces your credit card limit — which can happen during economic stress, account reviews, or inactivity — your utilization ratio rises even if your balance stays the same.
Example: Credit limit $10,000, balance $2,500 = 25% utilization (good). Limit reduced to $4,000, balance still $2,500 = 62.5% utilization (damaging). Score may drop 30–60 points.
Fix: Contact your lender and ask why the limit was reduced. If you have a strong payment history, request a reinstatement.
5. A new account reduced your average account age
Credit bureaus reward long-established accounts. When you open a new card, your average account age drops.
Example: You have three cards: 10 years, 7 years, 5 years old. Average = 7.3 years. You open a new card (0 years). Average = 5.5 years. Score drops 5–20 points.
This effect fades over time as the new account ages.
6. An error appeared on your report
Credit report errors are more common than most Canadians realize. A study by the Financial Consumer Agency of Canada found a meaningful portion of credit reports contain at least one error.
Common errors:
- Accounts belonging to someone with a similar name
- A paid collection still showing as outstanding
- A closed account reported as open with a balance
- Duplicate accounts listed twice
- Wrong payment history for a legitimate account
Fix: Pull your full credit report at Equifax.ca and TransUnion.ca (free once per year, or more often online). Dispute any errors in writing.
How to identify what changed
| Step | Action |
|---|---|
| 1 | Pull your free Equifax report at equifax.ca and TransUnion report at transunion.ca |
| 2 | Compare your account list — did any new accounts appear? Any accounts change status? |
| 3 | Check payment history — is any account marked late that should not be? |
| 4 | Check your inquiries section — were any hard inquiries added you don’t recognize? |
| 5 | Compare your balances to the last statement period |
| 6 | If a hard inquiry appears that you didn’t authorize, this may be fraud — report immediately |
Recovery timeline by cause
| Cause of Drop | Typical Full Recovery Time |
|---|---|
| High utilization paid down | 1–2 billing cycles |
| Hard inquiry | 6–12 months (inquiry falls off after 3 years in Canada) |
| New account (score drop from reduced average age) | 12–24 months |
| One missed payment | 2–3 years to return to pre-drop score |
| Multiple missed payments | 3–5 years |
| Collection account | Score improves within 1 year of paying; removed from report after 6 years |
| Consumer proposal | Removed from Equifax 3 years after completion; TransUnion up to 6 years |
| Bankruptcy | Removed from Equifax 6 years after discharge; TransUnion up to 7 years |