We understand it can be confusing to try and figure out why your score has gone down. In the app, we will provide you with information to help explain what has happened.
However, there are a number of common reasons why your score may have dropped, such as:
Missing or late payments
It’s probably no surprise that paying late or missing a payment on a credit product can negatively impact your score.
It’s always worth trying to make all your payments on time, this will ensure you keep your credit file healthy and continue to grow your scores.
A sudden increase in how much credit you use
The amount of available credit you actually use will also have an impact on your credit score. For example, if you’re near the limit on a credit card, this could be an indication that you’re struggling financially. As a result, this could negatively impact your score.
If possible, it’s always worth keeping your total utilisation (the amount of credit used vs the amount of credit available to you) as low as possible. As a general rule, if you can keep it below 50% this helps to increase your score.
Taking out new credit
If you’ve taken out a new credit product, your score can dip for a short period of time. There are two main reasons why this can happen:
When you apply for credit a lender will carry out a hard search. This type of search is recorded on your report and it can negatively affect your credit score to begin with. If you’ve applied for several lines of credit in a short space of time, this may further impact your score. This is because it can give the impression to lenders you’re too eager for credit, which may put them off.
When you take out a new line of credit the average age of your credit accounts will also decrease. This may cause your score to go down as lenders tend to prefer seeing older credit accounts as it shows a more stable borrowing history.
However, it’s worth noting that these factors may not harm your score in the long run and that by continuing to make payments on time you will see your score increase again.
Settling a financial agreement in court
If you declare yourself legally bankrupt or are issued with a County Court Judgement (CCJ) or an IVA (Individual Voluntary Arrangement) it can significantly harm your score. This is because it tells lenders you have failed to repay debt in the past, and so might be a risky person to lend to.
Moving address regularly
Lenders may see frequent address changes as a sign that you're not in a particularly stable position. Lenders prefer to see stability as it can imply you'll be more likely to pay them back. So, if they see something on your report that suggests the opposite, it can affect your score.