Why has my credit score gone down?

Checking your credit score and discovering that it’s dropped substantially can be worrying, especially if you don’t know why. However, if you are confused by a sudden drop and wondering, “why is my credit score going down?”, it’s important not to panic.

There are a number of things that can cause your credit rating to go down. Many of them might seem harmless, or you may have even thought they’d improve your credit score, but once you know what the reasons are, you can anticipate when your score might drop again.

What makes your credit score go down?

A drop in your credit rating can mean a lender has reached out to a credit reference agency and reported negative information about your finances. However, there’s more that can contribute to a bad credit report than just missing payments. So, with that in mind, what makes your credit score go down?

1. Taking out new credit

As strange as it may sound, taking out new credit can often be a key contributor to a drop in your credit score. Initially, this will be due to the hard credit search that’s carried out once your application gets underway, but having new credit also influences the average age of your collective credit.

2. Recently moving house

We all know how much of a hassle moving can be, and the last thing people want to think about is how it might affect their credit rating. But moving house without updating your details can also be seen in a negative light by lenders.

You may also notice a consistent decrease in your score if you move house regularly.

3. Unwanted financial associations

More often than not, one of the key reasons your credit score might drop is the unwanted actions of a third party. For instance, there could be a problem with a joint mortgage or bank account with a partner you’ve recently separated from, you may be a financial guarantor, or you might have to go through the proceedings for a CCJ (County Court Judgement).

All of these are best resolved immediately to prevent your rating from continuing to decrease.

4. A spike in your credit usage

A sudden increase in the amount of credit you use is another cause for credit score changes. For example, making numerous large payments can lead lenders to interpret an overreliance on credit.

5. Repeated credit applications

As we’ve mentioned, full financial applications require a hard credit check, which will have an impact on your score. Doing this multiple times will only hit your score harder. If you do want to seek finance, it’s best to ask your lender to conduct an initial soft credit check, like we do at Zuto. This check will give you an idea on whether you’ll be approved without impacting your score.

Why has my credit score dropped for no reason?

While the main reason for a decrease is often from direct interaction with some form of credit, there may be instances where you think your credit score has dropped for no reason.

The important thing to know is that a drop in credit score can be natural; all credit scores are constantly fluctuating, sometimes without any financial reason. For instance, errors can be made on accounts or your lenders may adjust your total credit limit.

Of course, answering ‘why has my credit score gone down?’ could be as simple as checking the major credit reference agencies and comparing their scoring models. Not all lenders report to all three, so you may find one score decreases while another does not.

In general, however, a minor drop in your credit score when you’ve not done anything isn’t worth worrying about. If, on the other hand, you see a major decrease, it’s best to reach out to the credit reference agency in question for clarification.

Understanding why your credit score goes down isn’t always straightforward. The impacts of certain credit changes affect everyone’s scores differently, and depend on the overall picture lenders have of your finances.

Unfortunately, bad credit is sometimes unavoidable, but this shouldn’t prevent you from getting further credit. Here at Zuto, we specialise in providing bad credit car finance, so get in touch with our team today to find out how we can help you or visit our help and advice page for more information.