Why is My Credit Score Going Down?

It’s not always easy to understand why your credit score has gone down. In this guide, we’ll walk you through how to understand your score and share 9 reasons why it might have gone down. 

What is a credit score?

The Equifax Credit Score is a number out of 1,000 that considers your ability to manage finances and repay debt based on the information held in your credit report. 

How can I know my credit score?

You can run a credit score check with a Credit Reference Agency (CRA) like Equifax. Keep in mind that you don’t just have one score. Different companies will generate different scores for you.

How do I find out if my credit score is bad?

When you run a credit score check with Equifax, you will find a number out of 1,000 that indicates how strong your credit rating is. This score will fall into one of five categories:

• Excellent (811-1000): This range suggests you’re a low-risk borrower and may be approved in most credit applications
• Very good (671-810): This range suggests you have a good credit history and may be approved in many credit applications
• Good (531-670): This range suggests you have an acceptable credit history and may be approved in some credit applications
• Fair (439-530): This range suggests you could be a risky borrower and may face some difficulties applying for credit
• Poor (0-438): This range suggests you’re a high-risk borrower and may need to improve your score before you can secure new credit

What is a good credit score?

In general, a good credit score on the Equifax range sits between 531 and above, and there are various steps you can take to maintain your score.

What is a poor credit score?

In general, a poor Equifax credit score sits below 438.

You may have heard some myths about bad credit scores. For example, some people believe you’ll be added to a credit blacklist. This isn’t true and is one of many credit score myths.

Why has my credit score gone down?

Several factors can cause your credit score to go down. Here are nine possible reasons why your score has gone down.

1. You’re carrying a lot of debt

Credit reference agencies track the amount of credit you use and how much is available to you. This is called your credit utilisation ratio. Your credit score will go up or down depending on your credit utilisation. For example, if you max out your credit card, you will raise your credit utilisation ratio.

If your credit score has gone down because of your credit usage, try reducing the credit you use moving forwards to improve your score. Keeping your credit utilisation below 25% is considered good practice in the industry. 

2. You’re facing financial challenges

If any of the following apply, your credit score will be affected for up to six years:

• You’re undergoing the bankruptcy process
• You have county court judgments
• You have individual voluntary agreements
• You have defaults on your credit report 

Resolving financial difficulties is a long-term challenge. However, paying off debts over time will help you gradually improve your credit score.

3. You’ve applied for lots of new credit in a short period of time

When you make a formal application for credit, a lender will run a hard credit search on you. Hard credit searches are likely to affect your credit score if you make multiple applications in a short timeframe as it may indicate a desperation for credit to a lender.

Hard credit searches are necessary for obtaining new lines of credit so as long as you don’t make too many in a short period of time, and make repayments on time, the impact on your credit score will be positive over time.

Alternatively, soft credit searches don’t affect your credit score and are commonly used when looking for credit deals on comparison websites.

4. You’ve moved house

Your address connects your financial activity with your identity. Because of this, if you live at the same address for years, this suggests your circumstances are stable.

That’s why moving house can temporarily lower your credit score. You can counter this by joining the electoral roll at your new address as soon as possible. This will help confirm your home address and identity, which can help boost your score.

5. You’ve closed an account

Closing an account you’ve had for a long time reduces the average age of your credit accounts. It can also change the combination of credit types you use and adjust your credit utilisation ratio.

Both of these factors can lower your credit score in the short term. 

6. You’ve missed payments

If you’ve missed a payment, the lender may have reported this to the credit reference agencies. Make sure to resolve this late payment and avoid any more to raise your credit score.

Missing several payments can seriously damage your score. 

7. There are mistakes in your credit record

Errors in your credit record can damage your credit score. Check the information credit reference agencies have on file for you. This is vital if you want to apply for credit soon. If you find any mistakes, submit a data dispute to the agency. For Equifax, you can do this by visiting the Equifax Online Help website.

If you do notice any mistakes on your credit record, be wary of identity theft. This is more common than many people realise. If you think you’re being targeted, speak to the Credit Reference Agency (CRA) immediately.

8. Your credit limit(s) has decreased

If one of your lenders lowers your credit limit, your credit score may dip. This is because your credit utilisation ratio will change even if your spending stays the same. In this case, try reducing your spending for a while to revive your score.

9. You share an account with someone who has a poor credit rating

Joint accounts are co-scored when applying for credit together, which means one person’s weak credit score will affect the other’s. To avoid someone else’s poor credit rating affecting yours, be careful who you open an account or take out a mortgage with. Or if you still want to open an account with them, make sure you share our tips on how you can improve your credit score.

What can I do with a bad credit score?

If you have a bad credit score, you may still be able to get a loan. While some lenders won’t accept your applications, other lenders do offer loans to borrowers with lower credit scores. .

How to get a loan with a low credit score

You can apply online, through credit brokers or in lender branches (where available) for a loan designed for those with low credit scores. The type of loans potentially available include:

• Personal loans: These often have higher interest rates and lower borrowing limits than secured loans. However, they may be ideal if you don’t want to secure your loan against an asset and don’t have a guarantor.
• Secured loans: You put up an asset such as your home as a guarantee for these loans. While you may be able to borrow a greater amount, please be aware that your home may be repossessed if you do not keep up with repayments. 
• Guarantor loans: A friend or relative agrees to pay your loan if you can’t. This may help you access a better loan, but it does come with the risk of passing your debt onto a loved one.
• Debt consolidation loans: These loans allow you to group all of your debts into one place. This saves you from paying multiple monthly repayments and can make your debt more manageable.

Keep on top of your credit score with Equifax

A dip in your credit score doesn’t define your financial future. You can improve and manage your score by:

• Paying all bills on time
• Staying below your credit limits
• Joining the electoral roll
• Only applying for credit occasionally

Create an Equifax account (your first 30 days are free then it’s £14.95 a month) to access your monthly credit report and credit score. Take time to understand your credit, address any issues, and create a plan for long-term financial stability.