Why has my credit score gone down? 14 reasons

It can be a shock when your credit score goes down, especially if you’ve been trying to improve it.

There are lots of possible reasons for a credit score drop. Put simply, if the best way to build a higher credit score is to use credit consistently and make timely repayments over a long period, anything else has the potential to lower your score. 

If you’re asking yourself, “Why has my credit score gone down?” we’ve gathered and categorised the most common causes.  We’ll cover: 

• Mistakes in the way your payments are reported, which could mean your score has been calculated with inaccurate information.

• Issues with payments, including a rundown of the negative payment markers that could appear on your credit report. 

• Changes to the way you manage your credit accounts, covering everything from new credit applications to closing old accounts. 

• Problems with your personal information, and why it’s so important to keep these details up to date across the board. 

We’ll also explain some actions you can take to help your credit score recover.  

Let’s start by explaining how your credit score is calculated because that can often shed some light on what’s happening.

How is your credit score decided? 

It’s important to understand that your credit score – the number you’re given by the credit reference agencies Experian, Equifax, TransUnion or companies like Checkmyfile as an indication of your overall credit health – is different from your credit report. 

Your credit report contains private and public information about how you’ve previously managed credit. In contrast, your credit score is a number generated from that information that can hint at how easy it will be for you to get credit. 

Let’s look at what’s included in your credit report: 

• Electoral Roll records, including your full name and the address where you’re registered to vote

• Insolvency events, like bankruptcy, individual voluntary arrangements (IVAs), or Sequestration

• Judgments, like County Court Judgments or Scottish Decrees.

• Notices of Correction, where you’ve added a note for fraud protection or to notify lenders about, for example, the reasons you’re not eligible to be on the Electoral Roll.  

• A month-by-month rundown of your credit accounts, the total credit limit on those accounts, and the payments you’ve made on the balance 

• Late payments, including how long you’ve been in arrears and any debts that have defaulted 

• Financial associations, including anyone you share an account or credit card with and, potentially, anyone whose loan you act as a guarantor for 

• Aliases, if you’ve changed your name, used a different name for a certain account, or one of your creditors has recorded a variation of your name. 

• Fraud warnings, which alert lenders that you might be vulnerable to people using your name to obtain credit illegally. 

It’s important to know what’s on your credit report because this information forms the basis of your credit score. This means any change to the information on your report, including the increasing age of the entries, can potentially raise or lower your credit score. 

Why is my credit score lower with a different company? 

We’ve mentioned that there are three different credit reference agencies (Experian, Equifax, and TransUnion) who will hold a credit report with your details and will generate a credit score using that information if you ask for one. But your score will likely be different with each company. There is no universal scorecard, and they often receive the information for your credit report from a different combination of lenders.

If your credit score is lower when you check with TransUnion rather than Equifax, it’s likely because of differences in the information they’re working with and how they score each factor. For instance, your mortgage lender might report your payments to both agencies, but your credit card company might only work with one.  

In fact, you could even count this as the first potential reason for a drop in your credit score – you simply used a different service to check, and they gave you a lower score based on the information they had available. 

When you check your credit score with Checkmyfile, you’ll see an independent score based on information from all three credit reference agencies – and a much more comprehensive overview of your credit health. 

Main reasons for a drop in your credit score 

Now that we know how your credit score is calculated, we’ll examine some of the things that can cause it to drop. 

Let’s start with something quite fixable: errors in how your information is reported. 

1. Misreported payments 

Occasionally, you may make a payment on time, but the lender makes a mistake when they report it to the CRA. This means it gets recorded as a late or missing payment and can lower your credit score. 

This is where it pays to keep an eye on your bank statements and your credit report so you can identify mistakes quickly and have them corrected. Remember, both your lender and the CRA are obliged to provide accurate information on your credit history, so there’s a system in place to allow you report any errors you may identify and which should be updated if found to be incorrect. This should happen within one month of the error being confirmed.

2. Fraud and identity theft

If someone has used your name to apply for credit, or if your credit card details have been stolen, your first priority will probably be to protect the balance in your current and savings accounts. But you should also be aware of the potential damage to your credit report if you’re a victim of identity theft. 

If someone uses your details to obtain credit, or even if they just apply for it, it can drop your credit score. 

If you’ve been the victim of fraud, you can apply for a Notice of Correction to be added to the “Notices” section of your credit report explaining what happened. These notes have been devalued over the years because they’ve frequently been used for excuses for late payments. Lenders generally don’t pay much attention to Notices of Correction, but fraud is one of the areas where your future credit applications can benefit from a notice. 

How your payment history can lower your credit score

To lenders, your payment history is the most important section of your credit report. If your credit score goes down, this makes it a good place to start checking that the information in your credit report is error-free. 

The payments recorded on your credit report will vary depending on the lenders you use, but they’ll generally include: 

• Credit cards 

• Personal loans, mortgages, and car finance 

• Some utility bills 

• Some mobile phone payments 

• Some banking products. 

This means the way you manage all these monthly payments can have an effect. 

3. You made a late payment 

Depending on your lender’s reporting rules, any missing payment – even if it’s only a day late – can be reported to the credit reference agencies. Late payments usually show on your credit report within 4–6 weeks.

Even one late payment can cause a noticeable drop in your credit score, and partial payments (where someone pays some of what they owe in that month but not the full amount) can also be recorded as late. 

4. You went into arrears

Arrears are consecutive missed payments for two months or more. These late repayments can be recorded with number markers on your credit report (1 for one month in arrears, 2 for two, and so on), and they can have an increasingly negative impact on your credit score. 

Although occasional late payments are fairly common on credit histories, being more than two months in arrears will start to have a more noticeable impact on your credit score. 

5. You’re only making the minimum repayments on arrears 

Even if you’re making regular repayments, your credit score can drop if you’re in arrears and you’re only paying back the minimum amount your lender allows, as the outstanding balance will still be due. 

From another perspective, making the minimum repayments can mean the balance you owe stays higher for longer and you pay more interest in the long term. 

6. You had a payment holiday

A payment holiday (commonly used as a mortgage holiday) is an arrangement with a creditor to postpone repayments rather than miss them. These holidays can give you breathing room, but they have downsides, including lowering your credit score.  

It all depends on how the lender reports the payment holiday. If it’s recorded with a neutral marker, your lender might take it into consideration, but it won’t have a negative effect on your credit score. However, some lenders report payment holidays as an arrangement to pay, which is considered a negative payment marker similar to being in arrears or defaulting on a payment. This can cause a significant drop in your credit score. 

7. There’s a serious negative payment marker on your credit report

Now, we’ll list the negative payment markers that can indicate a severe, long-term financial problem and drastically lower your credit score. 

This being said, it’s worth remembering creditors have to go through a lengthy process before they add these markers to your credit file. They’re unlikely to come as a surprise and therefore, unlikely to be the reason behind a credit score drop you weren’t expecting.  

The markers that can have the most severe impact on your credit score include: 

• Defaults, which show the relationship between the borrower and the creditor has broken down after an extended period (often around six months, though it can be sooner) of continuous unpaid debts. 

• CCJs (County Court Judgments), which show a person has been ordered by the court to pay off the money they owe to a creditor.  

Note: If you can pay off a CCJ or a default, it’s marked as satisfied, but both can still significantly damage your credit score. 

• Bankruptcy, which shows that a third party (called a trustee or official receiver) is now managing someone’s debt because they had no way of making their repayments. 

How your credit accounts can lower your credit score 

How you manage your existing credit accounts can positively or negatively impact your credit score. Put simply, it’s a balancing act between using enough credit to show you can do so responsibly, and not using so much that your lender suspects you rely on credit to make ends meet. 

Here’s a rundown of the account management decisions that can significantly affect your credit score. 

8. You applied for new credit 

When you apply for new credit, lenders can do two kinds of searches:

• Soft searches for speculative applications. This shows the information on the public record (for example, checking that someone doesn’t have a CCJ and hasn’t been declared bankrupt) but it doesn’t show your full credit history.

• Hard credit searches for full applications. This shows all the information on your credit record with the credit reference agencies the lender works with.

If you have a large number of hard searches on your credit report in a short space of time, it can cause your credit score to drop. Lenders can take the searches as a sign you’re having financial difficulty and need credit fast, or that you’re being repeatedly rejected.  

Even two or three applications in the space of a month can be enough to cause a drop in your credit score. 

9. You’ve started using more of your available credit 

It’s important to use credit to build up your credit score, but lenders are also very interested in how much of your available credit you’re using each month. They see it as an indication of your financial health and your ability to manage credit without becoming over reliant on it.

Lenders measure this in terms of your credit utilisation ratio (also called credit utilisation rate or CUR). For example, if your card has a limit of £1,500 and you put £1,000 on it, you’ve used 2⁄3 of your available credit for a CUR of 67%. 

In the eyes of lenders, this CUR is a little high. This is because when you start to use close to the maximum amount of your available credit, there can appear to be more of a risk that you’ll spend more than you can afford to repay, and are becoming over reliant on the credit. If you consistently get close to your credit limit each month, your credit score can decline as a result. 

In general, keeping your CUR closer to 30–40% can be better for your credit score, because this strikes the balance lenders are looking for. You show you are using credit responsibly and only as much as you can afford, without posing much of a risk in terms of potential missed payments.  

10. You closed a credit account 

When you borrow money – like for a car loan or a mortgage – the goal is ultimately to close the account because you’ve paid it off. This can be a good thing for your personal finances, but it can also cause a temporary dip in your credit score.

There are a few important factors at play here. When you close a credit account: 

• You collect fewer positive payment markers. If you close an account when you pay off a loan in full, you’ll stop adding those positive payment markers to your credit history each month. The old ones will still contribute, but they carry less influence than your open accounts, and you’ll have less fresh evidence that you’re managing credit well. 

• Your CUR goes up. If you cancel a credit card (for example, going from using three cards on a regular basis to two), you might spread the same monthly borrowing over fewer cards, meaning your CUR goes up for both cards. 

• The average age of your credit accounts goes down. Generally, accounts you've used for a long time can have a more positive impact on your score than new credit accounts. When you close an older account, the average age decreases, especially if you replace it with a brand-new one. 

There are good reasons to close accounts you no longer use. It reduces the chance of someone using your account fraudulently without being noticed. It also lowers your overall credit limit, which can be a particular advantage when you are intending to apply for new credit. This is because the lender won’t have to consider if you could still make repayments on your new credit if you started taking advantage of that existing unused balance.  

You should still expect your credit score to take a small, short-term hit when you close a dormant card or pay off a loan. Thankfully, this should quickly readjust if you’re still using credit and making your other repayments consistently. 

How changes to your personal details can lower your credit score

Lenders need to check and cross-reference your details to establish that you are who you say you are, and they use the UK’s Electoral Roll (also called the Electoral Register) to do this. The Electoral Roll is a list kept by each local authority in the UK that shows who’s eligible to vote in elections. 

Your Electoral Roll details should exactly match the details you provide on an application. Your name should be spelt the same. You should list your middle name (if you have one) and your title on both. Your address should be consistent, with no small mistakes like listing a house number as 4 when it should be 4a. If in doubt, it’s best to format your address as it appears in the Royal Mail Postcode finder, as this is what most companies use for address matching. 

If the information on your Electoral Roll entry doesn’t align with the information a potential lender holds on you, the credit history the lender sees might not show them the full picture. This can cause them to decline your application straight away simply because they can’t verify your identity. It can also lead to a drop in your credit score for two reasons: 

• You miss out on potential positive payment markers because the credit reference agencies can’t associate them with your name. 

• You may have to make more credit applications and pick up more hard searches because the limited credit history is affecting your ability to get credit. 

These are some of the most common inconsistencies and changes to personal details that can lower a credit score. 

11. You moved house and didn’t update your address

Every time you move house, you should update your address with your lenders and on the Electoral Roll as soon as possible to make sure that both your Electoral Roll entry and your credit history are taken into account when your credit score is calculated. 

It can also help to remember your old addresses when you make new credit applications. Lenders will often want to check your last six years of address history to get a full picture of your finances. 

12. You changed your name and didn’t update your details 

Changing your name – whether by deed poll or after you get married or divorced – comes with a lot of admin. 

It’s important to remember to update your details with all your creditors and on the Electoral Roll. Otherwise, the credit reference agencies won’t be able to find your complete credit history when generating your credit report and score. 

13. There’s an admin error somewhere in your personal details

As well as being out of date, it’s possible for your personal information to be incorrect because of an admin error. Something as simple as a typo can lead to a drop in your credit score. There are two main things to consider here: 

• A misspelt name, address, or an incorrect date of birth could mean the positive payment markers that could bring your credit score up aren’t included in your credit report. 

• A typo could mean your lender accidentally associates someone else’s late payment with your name, and their negative payment markers could appear on your report. 

Remember, you have the right to have any mistakes on your credit report corrected. If you think your credit score has gone down because of a mistake in your personal details, contact your lender to start the process of correcting the error. 

14. You lived abroad

Unfortunately, you can’t take your credit score with you when you move across borders because different countries use different credit reference agencies and different systems for calculating credit scores. 

For example, if you had a high credit score when you lived in Newcastle and then lived in Toronto, Canada for two years, your UK credit score might well have dropped when you returned because you weren’t using your UK accounts, and your phone contract and credit card were tied to an account in a different country. 

This can be a particular problem for people who live abroad for longer than six years. Because your credit record only contains the last six years of your payment history, it’s possible to return to the UK and find yourself with no credit history (and a low or neutral credit score as a result).  

Steps you can take if your credit score has gone down 

First things first, if you’ve found out your credit score has gone down because you’ve just had a credit application denied, it’s important not to panic. Remember, although hard searches from applications are recorded on your credit report, the outcome is not. Future lenders will not be able to see if your application was approved or denied. 

If the drop in your credit score is more an ongoing frustration than a nasty surprise, you might also be able to take some steps to improve your credit rating over time. 

The most important thing is to maintain the monthly repayments on your debts. Every month you do this, you add new positive payment markers to your credit report and build up evidence that you can use credit responsibly.  

It can also be helpful to: 

• Remember the sweet spot of 30–40% CUR. Using this portion of the limit on your credit cards shows lenders you know how to use credit and can do so responsibly, without making it seem like you rely on it to get through the month. 

• Remove old financial associations from your accounts. For example, if you had a joint account with an old flatmate but you’ve since moved out, you can end the association once the joint account has been closed. Although the link can’t hurt your credit score, lenders can see that it exists, and they may take your associate’s credit report information into account. This could affect their decision on what deals to offer you when you apply for credit. 

• Register to vote or update your Electoral Roll details. You can register online in as little as five minutes. When your name is recorded accurately on the Electoral Roll, credit reference agencies will be able to match the information in your credit history successfully, so lenders will see all relevant information. 

• Check your personal details with all your lenders and correct any mistakes. This minimises the risk of credit report inaccuracies and helps make sure your entire positive payment history is included when your credit score is calculated. 

How long will it take for my credit score to improve? 

It can take several weeks for your credit score to change, regardless of whether the new marker on your report is positive or negative. So, if you’ve made a change that should improve your credit score but you’re still waiting to see the benefits, patience is key. 

Lenders tend to report information to the CRAs they work with on a monthly basis. Depending on when in the cycle you made the change, it can take anything from two to six weeks for the CRA to receive the information, process it, and add it to your credit report. 

Electoral Roll information can also take a notoriously long time to update. Depending on the time of year when you update your details, it could take up to three months to see a change in your credit score. 

Quick summary: Why has my credit score gone down? 

Your credit score can go down for common reasons relating to: 

• Your personal details, including the way the information is recorded and whether it’s consistent across all the private and public records in your name. 

• The credit accounts you use, especially if you open new accounts, close very old ones, or apply for several new accounts in a short period of time. 

• Your payment history, including when you make your payments and how much you repay. 

• Mistakes on your credit report or fraud, which can lead to problems with your credit score even when you’ve done everything you can to stay on top of your repayments. 

If your credit score has recently dropped, the good news is you can take steps to bring it back up again. Locating potential errors in your credit report, updating your details so CRAs can find the most recent information about your financial habits, and staying credit active can all get you back to a good credit score over time. 

Grow your score.

We present clear paths to progress, identifying actions which can raise your score, build positive habits and arm you with the know-how to keep them up. Check your file