Credit Score Basics > Why is my credit score going down? And how can I get it back up?

Why is my credit score going down? And how can I get it back up?

4 minute read · Updated 9th April 2024

If you keep on checking your credit score over a long period, you might notice that it changes quite often. Sometimes your credit score will increase, and other times it will decrease. Usually, this is something that you don’t need to worry about. Credit scores can naturally fluctuate due to a variety of reasons.

However, it's hard to keep calm when our credit score has unexpectedly dropped or it seems to be decreasing regularly. There are a number of reasons why this may occur but don't panic! In this article we'll cover the main reasons why a credit score can go down, how to stop it and even how to build it back up again.

Missed or late payments make your credit score go down

One of the biggest culprits for large credit score drops are missed or late payments. These have a huge impact on how lenders view you and can indicate two negative signals. One, that you are not responsible enough to stick to your end of the credit deal. Or, that simply you can’t afford to repay your debts.

Lenders will report your missed payments to credit bureaus, who will add this as a negative factor to your credit file. These negative factors will quickly affect your credit score. If you continue to miss payments and don’t settle what you owe, your credit score will plummet.

Missed or late payments can have a significant impact on your score and will be stored on your credit file for 6 years. Of course, this will affect applications for further credit in the future.

To avoid this scenario, make sure your repayments are set to automatically cover at least the minimum required each month.

Recent credit applications

When you apply for new credit, the lender will first look at your credit history to see if you qualify. They make a hard check on your credit file, which in turn is registered on your file. This way lenders see how many times you've applied for credit and when.

Applying for a lot of credit over a short period of time can negatively impact your credit score. Why? Because lenders can interpret it as a sign of desperation. They might think that you are in trouble and will be less likely to pay back what you owe. The lender is simply doing a risk assessment on you before handing over any credit.

To avoid this, you should try not to apply for lots of new credit over a short period of time.

It is important to note, that there is also a soft check of your credit file. This is not registered on your credit file - so no one else sees how many times this has been checked. Soft checks can be performed by pretty much anyone. When you check your credit file it is considered a soft check. But also landlords, utility providers or even potential employers can complete a soft check on your credit file. Companies can see your credit score as a sign of how trustworthy and responsible you are.

Using suddenly more credit makes your credit score go down

Increased credit utilisation simply means that you’re using a higher percentage of your agreed credit allowance than you were previously. For example, if you have £1,000 available credit and spend £500, you’re utilising 50% of your credit. If you then buy a television for a further £500, you’re utilising 100% of your credit.

Credit utilisation is a tricky balancing act because there are several reasons why it may increase and subsequently negatively impact your credit score.

Increased spending

Buying expensive items on your credit card will quickly increase your credit utilisation. Try to avoid making lots of new purchases unless necessary and keep your credit utilisation percentage towards the lower end of the scale.

Closing accounts can make your credit score go down

Voluntarily closed accounts

Some people close their credit accounts if they’re not planning to use a credit card, but this isn’t always a good idea. Let’s say you’ve got 2 credit cards that each contain a maximum credit allowance of £500, for a total of £1000. If the first card is maxed out at £500 but you haven’t spent anything on the other card, you have a credit utilisation of 50%. But then you decide to close the unused credit account – you now have a £500 maximum credit allowance that is fully utilised. Although you closed down a line of credit, you’ve actually increased your credit utilisation to 100%.

Involuntarily closed accounts

Likewise, if a creditor decides to lower the amount of credit available to you, your credit utilisation may increase. For example, if you initially had £1000 available credit and had spend £100, you’d have a 10% credit utilisation. If the lender then reduced your maximum available credit to £500, you’d immediately see your credit utilisation rise to 20% without spending an extra penny.

Inaccurate information on your credit file

To receive an accurate credit score, the information on your credit file also needs to be accurate. Sometimes, information can be processed incorrectly by lenders, yourself, or because you’re a victim of identity fraud. This can negatively impact your credit score.

It’s important to check your credit file regularly to make sure that the information on file is up to date and accurate.

Severe financial difficulty

If you’ve recently experience financial difficulties and have had to file for bankruptcy via a Debt Relief Order or an Individual Voluntary Agreement, you will find that these remain on your file for 6 years and will prevent your from obtaining new lines of credit.

Incorrect or shady details on your credit file

Sometimes, it’s the little details that make a big difference. If you’ve moved home a lot, especially as a renter, you may see your credit score drop. This may also be the case if you are not on the electoral register at your current address. Likewise, your credit score can be negatively affected by unstable accounts – for example, if you were to rapidly open and close new lines of credit.

Ultimately, the best way to maintain a healthy credit score is to make sure you are paying your bills on time, minimising the amount of credit utilisation on your accounts, avoiding unnecessary large payments, refraining from applying for lots of new lines of credit, and checking that the details on your file are accurate.

Don’t forget that it is natural to see your credit score fluctuate so a small drop in score is unlikely to be something to worry about. By following the above advice you’ll be much more likely to see a credit score you’re happy with on your account over the long-term.

Curious to find out more about credit scores? We explain everything you need to know about credit scores here, show you how they are calculated, and how to get your credit score mortgage-ready.