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Why has my credit score gone down?

Your credit score and report changes over time, just as your circumstances do.

Reasons your credit score might have gone down

Below we’ve outlined some of the things which could impact your credit score.

Applying for credit

Whether or not you’re accepted, 'hard’ credit searches could impact your credit score, especially if you make a number of full credit applications in a short period of time.

New accounts

When you take out new credit, the average age of your accounts will drop, which might also reduce your credit score in the short-term. If you continue to manage your accounts well though, not only will your score recover, but it could even improve over time.

Closing accounts

If you close a credit account, it might change your credit utilisation ratio and the mix of credit types you use and manage. If you’ve held that account for a long time, it’ll also reduce the average age of your credit accounts. All of which could reduce your credit score in the short-term.

Missing payments

Making payments on time is an important way to show you can manage your finances responsibly. Lenders and service providers, including utility companies, will report arrears, missed, late and defaulted payments to the credit reference agencies, which could impact your credit score.

Paying off accounts

If you pay off an existing balance in full, it can affect your credit score in the short-term, as your credit utilisation ratio and the mix of credit accounts you use and manage on a regular basis will change.

Errors on your credit record

It’s a good idea, especially if you’re planning to apply for credit, to check the details held by each credit reference agency. If you spot something that’s wrong, you could submit a data dispute to the relevant agency, so they can investigate and update their records.

The agencies used by Halifax include TransUnion, Experian and Equifax.

What affects your credit score

Increased debts

Credit reference agencies monitor the amount of credit available to you, and how much you’ve used – this is known as the ‘credit utilisation ratio’. As this gap narrows, your credit score could go down.

Moving house

Your address links your financial activity and identity, helping to prevent fraud. Having the same address for a long time also suggests your circumstances are reasonably stable.

Being on the electoral roll is one way that your identity and home address can be confirmed, which could help to improve your credit score. If you do move home, make sure you get the electoral register updated as soon as you can to limit any impact.

Financial difficulties

Missing payments can impact your credit score, but you might be able to repair things over time, as long as you get things back on track quickly. All lenders offer support with money worries.

However, things like Defaults, County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs) and bankruptcy usually affect your credit score for up to six years.

Why is a good credit score important?

  • The higher your credit score is, the more likely it could be that an application for a mortgage, credit card, personal loan, overdraft or car finance will be accepted.
  • Depending on the type of borrowing, the lowest and longest lasting interest rates might be offered to low risk applicants, who’ve shown they can manage credit well over time.
  • Your credit score can also affect the amount of credit you’re offered.
  • Bad credit might affect your ability to get some jobs, e.g. in legal or financial services.

Ways to improve your credit score

Anything you do will take time, but there are ways to improve your credit score, including:

  • Paying bills on time – including credit repayments, utility and other household bills.
  • Managing accounts well – stay below any credit limits and try to reduce debit balances whenever possible.
  • Limiting new applications – whether or not you’re accepted, ‘hard’ credit searches could affect your credit score, especially if you make a number of full credit applications in a short period of time.
  • Registering to vote – it might boost your credit score if you’re on the electoral register.

More on improving your credit score

A summary on why your credit score could go down

A lot of factors can impact your credit score, causing it to increase or decrease over time.

  • The reason your credit score reduces, could also influence how long it’ll take for it to recover.
  • A good credit score could boost your chances of being accepted for credit when you need it.
  • Things which impact your credit score could include new credit applications and missed payments.
  • You can build your score in a lot of ways, from making sure you’re on the electoral register and managing accounts well, to correcting errors on your record and limiting new credit applications.

Want to read more?

Applying for credit

How does a credit score work?
How to improve your credit score
What is a good credit score?
What affects your credit score?

Using credit

How to pay for a car
How to pay for a wedding
How to pay for a holiday
How to pay for home improvements

Ways to borrow

Credit cards
Loans
Car finance
Overdrafts
Mortgages

Know where you stand with Halifax

Sign up for ‘Your Credit Score’ to see your rating with TransUnion. It’s free to check and won’t hurt your credit score.

More on Your Credit Score