7 reasons why your credit score has gone down | ClearScore GB (2024)

Have you experienced a drop in your credit score? We explore seven of the most common reasons why this happens.

07 July 2017Hannah Salih 4 min read

7 reasons why your credit score has gone down | ClearScore GB (1)

In this article

  • 1. Missing or late payments
  • 2. An account has gone into arrears
  • 3. A spike in how much credit you use
  • 4. Taking out new credit
  • 5. Settling a financial agreement in court
  • 6. Closing an old account
  • 7. Moving address regularly
  • How much your score changes depends on the overall picture of your credit report
  • Should I worry about my score changing?

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Understanding why your score may have gone down is a great way to help you decide what to do next. It can also help you anticipate when your score might drop again in the future, so you're not hit with a nasty surprise.

Put simply, your credit score can go down if a lender reports any 'negative' information to the credit reference agencies (CRA). If the new information the lender reports to the CRA makes you seem like a less reliable borrower, it can cause your score to drop.

Here are seven possible negative factors that could be the reason behind your score going down:

It’s probably no surprise that paying late or missing a payment on a debt can negatively impact your score.

However, just one late payment, will have less of an impact on your credit score than if you always miss payments.

That's why, even if it's really late, it's always worth making every payment. The longer you leave it to pay a missed payment, the bigger the dent it could make on your credit score. If you’re more than 30 days late making a payment, it’s likely that you’ll see your score drop even more.

2. An account has gone into arrears

If you miss multiple payments on a debt, your account may eventually go into arrears (sometimes known as a default). This means the lender has decided you are not going to pay back your debt. At this point, the lender has ended the agreement you have with them, and can take further action to collect the debt.

When this information gets added to your report by the lender, it may have a significant negative impact on your score.

3. A spike in how much credit you use

Your total available credit limit is the amount you’re able to borrow across your credit accounts. (This normally just means credit cards, since loans and mortgages don’t have a flexible credit limit).

With your credit limit, it’s all about balance. Using too little (or no) credit could harm your score, as you’re not able to prove to lenders how you manage credit. However, using too much of your credit limit could suggest to lenders that you'd struggle to repay any new debt. This can cause your credit score to drop.

It’s recommended that you try to keep your credit usage below 30% of your total credit limit.

Learn more about credit utilisation

4. Taking out new credit

If you’ve taken out new credit, you might be surprised to see your credit score has dropped. There are two reasons why this can happen:

  • When you apply for credit a lender will carry out a ‘hard search’ or a ‘credit application search’ on your report. This type of search is recorded on your report and it can negatively affect your credit score. If you’ve applied for several lines of credit in a short space of time, this may further impact you score. This is because it can give the impression to lenders you’re too eager for credit, which may put them off. (That’s why it’s always best to use an eligibility checker, such as the one on your ClearScore account, before applying for credit).

  • When you take out a new line of credit the average age of your credit accounts will decrease. This may cause your score to go down as lenders tend to prefer seeing older credit accounts. This is because this behaviour suggests stability, which helps prove to lenders that you're a reliable borrower, and a lower credit risk. Once your account gets older and the average credit age on your report goes back up, your credit score should build back up again. So, applying for credit can cause your score to drop slightly at first. However, if you pay back your bills on time and in full, and keep your credit usage in check, the chances are your credit score will recover. It can even help it to improve over time.

5. Settling a financial agreement in court

If you declare yourself legally bankrupt or are issued with a County Court Judgement (CCJ) or an IVA (Individual Voluntary Arrangement) it can significantly harm your score. This is because it tells lenders you have failed to repay debt in the past, and you might be a risky person to lend to.

6. Closing an old account

If you’ve recently closed an account, your score might drop. If the account was quite old, then closing it can cause the average age of your accounts to fall. Sometimes your score may follow suit. Closing an old account can also mean you have less credit available overall. If, by closing the account it pushes your credit usage over the 50% level, then it could negatively impact your score.

7. Moving address regularly

Lenders may see frequent address changes as a sign that you're not in a particularly stable position. Lenders prefer to see stability as it can imply that you'll be more likely to pay them back. So, if they see something on your report that suggests the opposite, it can affect your score.

How much your score changes depends on the overall picture of your credit report

Credit scoring isn’t one size fits all. The impact of certain changes to your report will have a different effect for everyone. The impact on your score will depend on what your report looks like as a whole.

So if you miss a payment but have a good credit history, it’s not likely to lower your score significantly. However, if you have a history of managing your debt poorly it could have a bigger impact.

Should I worry about my score changing?

If your score has dropped by a large amount it’s worth double checking all the information in your report is showing correctly. If you notice any errors, you can report them straight to Equifax.

If you have noticed a minor score drop, it may be useful to wait and see how your score changes over the next 1-2 months. This will let you see whether this is the start of a downward trend. Alternatively, you may find your score goes back up in the following months.

It might not be a famous saying, but what goes down can go back up. A decrease in your score doesn't have to be permanent. Check out our list of ways to improve your credit score, or try out our personalised Coaching programmes, so you can start working to build it back up again.

7 reasons why your credit score has gone down | ClearScore GB (2)

Written by Hannah Salih

Content Creator

Hannah is currently studying for a Master's in Comparative Cultural Analysis. She knows all about personal finance, but as a student, she's an expert in money saving tips and tricks.

7 reasons why your credit score has gone down  | ClearScore GB (2024)

FAQs

What causes your credit score to go down? ›

Credit scores can drop due to a variety of reasons, including late or missed payments, changes to your credit utilization rate, a change in your credit mix, closing older accounts (which may shorten your length of credit history overall), or applying for new credit accounts.

Why did my credit score suddenly drop huge? ›

Repeated credit searches

Simply applying for credit can have a negative effect on your score. If lenders see repeated attempts to secure financing over a short period of time, they may see this as a sign of desperation and decide against extending you credit.

Why has my credit score gone down clear score? ›

Put simply, your credit score can go down if a lender reports any 'negative' information to the credit reference agencies (CRA). If the new information the lender reports to the CRA makes you seem like a less reliable borrower, it can cause your score to drop.

Why has my credit score gone down after moving? ›

Your credit score can go up or down as a result of changes to your report, that's why changing your address can have a negative impact. Staying at the same address for a long time is viewed as a sign of stability, which is why changing your address can cause your score to drop.

Why did my FICO score disappear? ›

If you haven't used credit in more than 10 years, your old accounts have most likely dropped off your credit report by now, which means there's nothing in your credit history to score. Credit scores represent the information in your credit report.

Why is my credit score so low when I have no debt? ›

Various weighted factors mean that even with no credit, your credit score could still be low because the length of your credit history or credit mix, for example, could also be low.

Why did my credit score drop 40 points after paying off debt? ›

It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.

Why has my Experian score gone down? ›

Credit scores can decrease for a number of reasons, including high balances, missed payments and closed accounts. You can review recent factors that may be affecting your credit score by checking your credit score for free with Experian.

What hurts your credit score? ›

Making debt payments on time every month benefits your credit scores more than any other single factor—and just one payment made 30 days late can do significant harm to your scores. An account sent to collections, a foreclosure or a bankruptcy can have even deeper, longer-lasting consequences.

What are 5 things that can hurt your credit score? ›

5 Things That May Hurt Your Credit Scores
  • Making a late payment.
  • Having a high debt to credit utilization ratio.
  • Applying for a lot of credit at once.
  • Closing a credit card account.
  • Stopping your credit-related activities for an extended period.

What habit lowers your credit score? ›

Making a Late Payment

Every late payment shows up on your credit score and having a history of late payments combined with closed accounts will negatively impact your credit for quite some time. All you have to do to break this habit is make your payments on time.

Why does my credit score go down? ›

There are lots of reasons why your credit score could have gone down, including a recent late or missed payment, an application for new credit or a change to your credit limit or usage. The most important information to understand about credit is the factors that go into your scores.

Can a credit score be 1? ›

That's because your credit score doesn't start at zero. In fact, the lowest possible score from FICO® and VantageScore® is 300. But unless you've had some recent trouble with on-time payments or high spending, your score likely won't be that low.

Why has my credit score gone down 10 points? ›

You have negative markers on one or more accounts

Even just one missed or late payment can negatively impact your credit score, so it's important to keep on track with your payments. Your credit score is always under scrutiny, so you should always aim to make your payments in full and on time every month.

How can you fix your credit score if it goes down? ›

How To Repair Your Credit
  1. Check Your Credit Report For Errors. Many Americans live with errors on their credit report and don't even know it. ...
  2. Focus On Small, Regular Payments. ...
  3. Reduce Your High-Balance Accounts. ...
  4. Consider A Debt Consolidation Loan. ...
  5. Work With A Credit Counseling Agency. ...
  6. Build Toward A Target Credit Score.

Why is my credit score low when everything is good? ›

Many factors contribute to a low credit score, including little or no credit history, missed payments, past financial difficulties, and even moving home regularly. Credit reference agencies collect information from public records, lenders and other service providers, before generating a credit score.

What would drop a credit score the most? ›

Making Late Payments

Because payment history is the biggest factor in your credit score, even one late payment can have a big impact. Some 35% of your FICO® Score (used by 90% of top lenders) is based on payment history. When you discover you've forgotten to pay a bill, go online or call the lender to pay it.

Why is my credit score going down after paying off debt? ›

This is because your total available credit is lowered when you close a line of credit, which could result in a higher credit utilization ratio. Additionally, if the account you closed was your oldest line of credit, it could negatively impact the length of your credit history and cause a drop in your scores.

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