Why has my credit score gone down?

Taking out a new credit agreement, such as a new credit card, overdraft, mortgage, or any other credit product, could temporarily decrease your credit score. 

Other things, such as closing or switching bank accounts, using a higher amount of your credit limit on a credit account, a balance transfer or closing a credit account, may potentially lower your credit score, depending on how long you’ve had the account and what type of credit product it is.

Repeated hard searches (an in-depth review of your credit history) conducted within a short period (more than 1-2 hard credit checks within six months) can affect your credit score.

Defaults can significantly impact your credit score, as they result from a borrower failing to meet the terms of a credit agreement after missing payments. Learn about how a default can affect your credit score.

Debt consolidation is a form of debt refinancing that involves taking out one loan to pay off multiple debts. Whilst this can sometimes help manage debts more effectively, it’s worth considering whether this is the right approach for you. Taking out more debt or getting closer to a credit limit can lower your credit score.

When you use products such as Buy Now Pay Later (Klarna, Clearpay, Zilch, Amazon monthly payments, PayPal pay later or PayPal pay by 3), you enter into a credit agreement and whilst you may not see an impact on your credit score, this can appear on your credit report and some lenders will evaluate your use of these products when reviewing applications for credit.

Incorrect information, such as a home address that differs from the one where you’re registered to vote, could also lower your credit score.

If you are financially connected to someone else, such as through a joint account or shared loan, you may be adversely affected if they have a poor credit history, are in arrears with payments, or have County Court Judgments (CCJs) against them.

A variety of factors determine your credit score. However, some things have little impact, such as:

• checking your credit score
• conducting soft credit searches
• student loans do not affect your credit score
• in credit balances, savings or investments.

Factors such as your salary or income, whether from employment or Universal Credit, do not affect your credit score, however, lenders do factor these in when you apply for credit.

Gambling does not directly impact your credit score; however, any adverse consequences of excessive gambling—such as high debt levels or missed payments — could consequently harm your credit rating.

Also, using services like PayPal or transferring money between accounts does not affect your credit score as credit reports only record borrowing behaviour.

If you're struggling to make payments, talking to your lender about potential difficulties or arranging an alternative payment plan won't directly impact your credit score. However, missing a payment will. It's best to reach out to your lender before missing a payment, as they may be able to offer a temporary payment arrangement or alternative plan, helping you avoid damage to your credit score.

If your credit score has decreased on your credit report, it might be worthwhile to obtain a copy and review its contents as a first step towards improving your situation.

Find out how to get a free copy of your credit report in our guide How to improve your credit score.