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Why has my credit score gone down?
Your credit score and report can change over time, and is influenced by a number of factors.
A quick summary
Your credit score can go up or down over time, influenced by a number of factors.
- The reason your credit score has gone down could also influence how long it’ll take it to recover.
- A good credit score could improve your chances of being accepted for credit in future.
- Things like new credit applications and missed payments may impact your credit score.
- You may be able to improve your credit score in a number of ways, including making sure you’re on the electoral register, managing accounts well and limiting new credit applications.
Reasons why your credit score may go down
Below are some of the things which could impact your credit score.
New accounts
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.
When you’re approved for new credit, the average age of your accounts will drop, which might also reduce your credit score. However, if you continue to manage your accounts well, not only will your score recover, but it could even improve.
Paying accounts off
If you repay a balance in full, it can impact your credit score, as your credit utilisation ratio will change, and the mix of credit accounts you use and manage on a regular basis may change too. Any negative impact of this is likely to be short-lived though.
Moving house
Your address links your financial activity and identity, helping to prevent fraud. Having the same address for a long time also indicates that your circumstances are relatively 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 house, get the electoral register updated as soon as you can to limit any impact to your credit score.
Closing accounts
If you’ve held an account for a long time, closing it will reduce the average age of your credit accounts. It may also change your credit utilisation ratio and the mix of credit types you use and manage on a regular basis. All of this could result in a lowering of your credit score.
Missed payments
Lenders and other service providers report arrears, missed, late or defaulted payments to the credit reference agencies, which may have a negative impact on your credit score. Making payments on time is an important way to show you can manage your finances responsibly.
Errors on your credit record
It’s good to keep track of your credit score and the information credit reference agencies hold about you, especially if you plan to apply for credit in the near future.
If you identify something that’s wrong, you could submit a data dispute to the relevant agency, so they can investigate and update their records.
The agencies Lloyds Bank work with include TransUnion, Experian and Equifax.
Carrying more debt
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’. Your credit score could go up or down, based on this.
Financial difficulties
Arrears can affect your credit score, but you can work to repair the damage over time, as long as you get things back on track quickly. All lenders offer support with money worries.
Defaults, County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs) and bankruptcy usually impact your credit score and record for up to 6 years.
Why is a good credit score important?
- The higher your credit score is, the more likely it’ll be that a mortgage, credit card, personal loan, overdraft or car finance application will be accepted.
- The lowest and longest lasting interest rates are offered to low risk applicants, who have shown that they can manage their finances responsibly.
- Your credit score can also affect the amount of credit you are offered.
Ways to improve your credit score
Anything you do will take time, but you could improve your credit score by:
- Pay bills on time – including credit repayments, utility and other household bills.
- Manage accounts well – stay below your credit limits and try to reduce debit balances whenever possible.
- Limit new applications – 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.
- Register to vote – it may boost your credit score if you’re on the electoral register.