Missing a payment, maxing out a credit card, or having an unpaid account submitted to collections are all things that could hurt your credit score. Likewise, too many inquiries of the wrong type, a bankruptcy, and applying for a store credit card may also drop your score. But most people don’t realize that how much your score drops – just a few points, or sinking to new lows – depends on what your credit score was BEFORE the damage occurred.

It’s true – where your FICO score stands previous to any negative reporting makes a big difference how far it drops.

Take a look at this case study between Consumer A and Consumer B:

Consumer A has:
A 680 FICO
6 credit accounts
Several active credit cards
An active auto loan
A mortgage,
A student loan
They have an 8-year credit history
A moderate utilization ratio (amount of debt compared to total available balance) of 40-50%
But 2 90-day delinquencies that occurred 2 years ago on a credit card
And a 30-day delinquency on an auto loan from a year earlier
Consumer A has no accounts in collection and no adverse public records

Consumer B has:
A FICO of 780
10 credit accounts including several that are active
An active auto loan
A mortgage in good standing
A student loan
They have a fifteen-year credit history
With a credit utilization ratio of 15-25% – which is very favorable
And have NEVER missed a payment on any of their credit obligations
Consumer B likewise has no accounts in collection and no adverse public records

So if we line up these two consumers and start throwing negative credit items their way, the their FICO score should drop about the same number, right? Wrong. In fact, the amount FICO penalizes them for new negative events is somewhat based on what score – and credit history – they’ve exhibited in the past.

Consider:

Score after these are added to credit report:  
Consumer A
680 FICO
Maxing out a credit card     650-670
A 30-day delinquency         600-620
Settling a credit card debt   615-635
Foreclosure                         575-595
Bankruptcy                          530-550

Now let’s look if those same negative events hit Consumer B’s credit report:

Consumer B
780 FICO
Maxing out a credit card      735-755
A 30-day delinquency          670-690
Settling a credit card debt    655-675
Foreclosure                          620-640
Bankruptcy                           540-560

What do you notice?
Maxing out a credit card had the smallest FICO drop for both consumers, but while it was only a 10-30 decline for Consumer A (who started with a 680 score), Consumer B (780) was penalized 25-40 points, almost twice as much in some cases.

And for Consumer B, a bankruptcy could drop their FICO score by as much as 240 points, while it would only be 130-15 points for Consumer A.

What we see is that people with higher FICO scores see a bigger hit to their credit when they miss a payment, max out a card, foreclose on a property, or with just about any negative reporting.

Why is that?
It may seem counterintuitive, but it actually makes perfect sense; when a consumer has a lower credit score to start, FICO has already factored in negative items or missteps. Remember that credit scores basically rate the risk of a borrower defaulting on a loan in the future, and with lower credit scores, that risk is already represented.

But when a consumer has a great score, the presence of a new negative event overuse of credit, a missed payment, or even something more severe is often far more significant, as it represents the first time that risk has been factored into the score.

So now we know that the two different people could see different reductions in their credit scores depending on where they started – and all credit score drops aren’t created equally.