Why has my credit score gone down when I haven’t missed any payments?

If your credit score has gone down, you may—without realising it—have missed a payment on your credit card, a utility bill, or a loan. 

The first step to take when your credit score has dropped is to double check that you’ve paid all your bills on time. Usually, it won’t have a big impact if you’re just a couple of days late. But if it goes 30 days without you paying, it will affect your credit score. 

But if you’re sure you haven’t missed a payment, there might be other things affecting your credit score. Read on to discover some of the most common issues, as well as the steps that are worth taking to improve your credit. 

1. You recently moved house (without updating your details)

Moving house can affect your credit score, albeit indirectly. 

First, if you haven’t updated your details on your bank/credit accounts, your positive activity (for example, monthly repayments of an overdraft or credit card) can be missed off your credit report. This might make it harder to gain or maintain a good credit score.

It is also important to update your address on the Electoral Roll (i.e. register to vote using your new address), which you can do here. This helps lenders verify your information, and ensures there are no discrepancies.

Another reason why moving home might affect your credit score is that you’re likely to be setting up new utility providers. Energy and phone/internet companies may perform a “hard” (a.k.a. “full”) credit check when assessing your credit health. These checks get registered on your report, meaning lenders can see you’ve applied for credit. 

A single hard check is unlikely to lower your score. But if you make lots of applications in a short space of time, it can have a significant impact on your credit score. (Keep reading: we explain more about why this happens in section 3 of this guide). 

So, moving house won’t affect your credit score in and of itself, but all these factors related to moving house might mean your credit score has gone down even though you haven’t missed any payments. The good news is that it should increase again if you continue to keep up with all your payments. Though this usually takes a couple of months, it’s not something to be too concerned about. 

How to improve your credit score: Immediately update your address on the Electoral Roll. This way, all your files are up-to-date, and all relevant information will be returned on your report—contributing to an accurate score that reflects your current credit health. 

2. You’re using a high volume of credit

Even if you haven’t missed any payments on your credit card bills, simply using a high volume of credit can have an effect on your credit score. 

When you use your credit card, you’re borrowing money from the bank. By using it responsibly, not missing repayments, and paying it off in full regularly, you show the lender that you can borrow reliably. This tends to increase your credit score. 

However, if you’re going deep into your credit limit by using your credit card a lot, while at the same time only making the minimum monthly repayments stipulated by your lender, your credit utilisation rate will be higher. This basically means you’re using a high percentage of the credit that you have available to you. 

High credit utilisation can negatively impact your credit score. However, whether or not this will influence the outcome of your credit applications depends on the lender. Some will take it into consideration, and others might not. To be on the safe side, it’s recommended to maintain an average credit utilisation rate of 30%.

How to improve your credit score: Stay aware of your credit utilisation rate, and regardless of whether it’s affecting your score, try to keep it to around 30% of your credit limit across your accounts. If you can, try to pay off your credit card in full every month - this also saves you lots of money on interest. 

3. You applied for a lot of credit in a short period of time

When you apply for credit—whether it’s a credit card, a loan, or mortgage—the lender will check your credit report to see whether you’re a reliable borrower. This check, known as a hard search, which will be registered on your credit report. 

If you apply for or a lot of credit in a short period of time, each of your applications will leave a record on your credit report—and that impact can add up.

If future lenders can see that you’ve made lots of applications, that introduces uncertainty. While they can’t see whether your applications were accepted or declined, they might interpret that lots of applications are the result of being rejected. As a result, you might be perceived by them as a risky prospect.

On the flip side, it might also mean that you’ve been accepted for a lot of credit recently meaning your utilisation may have increased significantly from what they see on your report. Again, this may cause lenders to be wary of over-indebting you. 

How to improve your credit score: Put a limit on the number of times you apply for credit, and only apply for credit when you really need to. Typically, we recommend around one application per month—so, on average, that’s about 12 a year.

4. You closed a credit agreement

If you close a credit account, you’ll have less positive payment history on your file than you had previously. This can have a negative impact on your credit score. 

Your credit report contains a record of your borrowing across all your financial accounts, so if you have multiple credit cards that you’re using responsibly, they’ll all be recorded on your file. That’s a good thing for your credit score, because you’re showing responsible activity. Plus, credit utilisation comes into play here:

Let’s say you have 3 credit cards each with a credit limit of £5,000. You’ve spent £1,500 on 2 of them, but you decide to close the third card that you don’t really use. Across your 3 cards, you’d have been previously using £3,000 of credit across an available £15,000—which is 20% of your available credit. But after you’ve closed the third card, you’re now using £3,000 of an available £10,000—30% of your available credit.

This is the credit utilisation rate (or ratio) that we mentioned earlier. The higher the ratio, the more likely it is that lenders will see you as relying too heavily on credit, and so this might affect the chances of your application being approved. 

What’s more, the older your credit card is, the bigger impact it will have on your credit score if you close it. That’s because the average age of your accounts is another important piece of information that’s recorded on your credit report as it shows stability and reliability.

How to improve your credit score: Be diligent about which accounts you close and which ones you keep open. Bear in mind that closing some accounts might affect your credit score more than others. Remember you shouldn’t simply open up new accounts to offset the ones you’ve closed.

5. You have an old account that you’ve forgotten about

It can be easy to forget about old bank accounts that you haven’t used in a long time, but some bank accounts will continue to charge you fees even if you’re not using it. And if you’ve forgotten about them completely, the account might fall into arrears. This will affect your credit score, even if it’s a small debt, because late or missed payments will be reported on the account. 

Unmonitored accounts can also be at high risk of fraudulent activity, which could go unnoticed for long periods of time. It’s best to keep an eye on all of your accounts, or close them if you don’t need them anymore.

How to improve your credit score: Check back to ensure that you close any dormant accounts that you no longer use. You may have to pay off any fees that you’ve been charged. Monitoring your credit report is a great way to avoid forgetting about accounts. 

6. You’re the victim of identity theft

If you see a big drop in your credit score and you don’t know what caused it, you may have been the victim of identity theft. This means that someone could be using your personal and financial details to commit fraud. 

That usually involves taking out credit in your name, opening accounts using your details, or account takeover of a dormant account. You may notice that, along with your credit score, other information on your credit report has changed too. For instance, there may be addresses that you’ve never lived at, or accounts in your name that you never opened. 

How to improve your credit score: Immediately inform the relevant bank or lender if you don’t recognise any activity on your credit report. If you think you might have been the victim of identity theft, contact the police via Action Fraud as soon as possible.  

7. You paid off a loan

Credit scores sometimes seem counterintuitive. For example, if you have successfully paid off a loan, you can often see your credit score drop—even if that’s ultimately a good thing. This is because you’ll have one fewer active credit account showing your positive payment history. The good news is that this drop will usually only be temporary. 

How to improve your credit score: Ensure that other aspects of your finances are still in good health. For instance, keep up with monthly payments on your other credit agreements, keep your details updated, and minimise your number of new credit applications.

There are many reasons why your credit score could go down—even if you haven’t missed any payments. It could be something as simple as you having moved house, or something more serious, such as identity fraud.

Know your file

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