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6 reasons why your credit score has gone down

Have you experienced a drop in your credit score? We explore six of the most common reasons why this happens.

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See your credit report – for free

You can access your credit score and report within minutes through ClearScore.

See my score

Understanding why your credit score has gone down is a great way to determine how to fix it. This will also help you anticipate when your score will drop in the future, which will allow you to brace for the change and make up for it where possible.

Put simply, your credit score will change when a lender reports any information to the credit bureaus. If this paints you as an unreliable borrower, your score will decrease to reflect this.

Here are six negative factors that may be the reason behind your lower score:

It’s probably no surprise that paying an instalment late – or missing it altogether – will negatively impact your score. However, these two offences are weighted differently, and your credit score will receive a harsher punishment if you don’t pay at all.

This means that, even if it's really late, it's always worth making every payment. The longer you leave it, the bigger the dent will be to your credit score and if you’re more than 30 days late, your score will drop even further.

Through ClearScore, you can view the last three years of your payment history. Here, you will be able to see exactly which months you missed payments. Find out how diligent you’ve been by clicking here.

If you miss multiple payments towards your debt, your account will eventually go into arrears and your lender will report you as having defaulted on your loan.

This means that they have accepted that you won’t return their money, and they have ended their agreement with you and plan to take further action to recover their losses.

When they report this to the credit bureaus and it gets added to your report, it will lead to a significant decrease in your credit score.

Your overall credit limit is the amount you’re able to borrow across all your credit accounts. For example, if you have a credit card with a limit of R5,000 and a store account with a limit of R3,000, then your overall credit limit is R8,000.

When it comes to your credit limit, it’s all about balance. If you don’t take out any credit, your score will remain low because you won’t be able to prove to lenders that you manage credit well. However, taking out too much credit may suggest that you’re struggling financially and this can cause your score to drop.

It’s recommended that you only use 30% of your overall credit limit. So, if we consider the above example, you should not take out more than R2,400 between your two open accounts.

Log in to ClearScore, and view the credit utilisation for each of your accounts. You will also have access to the overall balances of your accounts and your credit limits.

If you’ve taken out new credit, you may be surprised to see that your credit score has dropped. There are two reasons why this may happen:

  • When you apply for credit, your chosen lender will make an “enquiry” on your credit report to find out whether you’re a reliable borrower. The credit bureaus will take note of this enquiry and record it on your report, which usually leads to a small dip in your credit score. If you apply to several lenders during a short period, this may further impact your score. This is because it gives the impression that you’re desperate for credit, which may be a red flag for lenders.
  • When you take out new credit, the average age of your credit accounts will decrease. This may cause your score to go down as lenders tend to prefer seeing older credit accounts. Older accounts suggest stability, which helps prove to lenders that you're a low-risk borrower. Once your account gets older and the average credit age on your report goes back up, your credit score should build back up again.

Applying for credit can cause your score to drop slightly at first. However, if you pay your bills on time and keep your credit usage in check, your credit score will recover and grow even further.

To avoid unnecessary enquiries, view your credit report through ClearScore and make sure lenders will be satisfied with your credit score before you apply.

In South Africa, lenders can report you for defaulting on your credit agreements if you haven’t made a payment in 90 days. If this still doesn’t yield any results, they can apply for a court judgement.

Both of these actions will be noted on your credit report, but your score will decrease even more once legal action is taken. This is because it tells lenders you have failed to repay debt in the past, and you may be a risk to them if they decide to lend you money.

Make sure your lenders haven’t reported any defaults or judgements to the credit bureau. Log in to ClearScore and view your credit report immediately.

If you recently closed an account, your score may have dropped. If the account was old, then closing it can cause the average age of your accounts to fall – and sometimes your score will follow suit.

Similarly, closing an old account can also decrease your overall credit limit. For example, imagine you have a credit card and a store account: The former has a limit of R10,000, of which you’ve spent R4,000, and the latter has a limit of R5,000, of which you’ve spent R100. Altogether, your credit utilisation is R4,100 out of an overall credit limit of R15,000 – which is around 27%.

However, if you close your store account, your overall credit limit will decrease to R10,000 and your debt will still be quite high at R4,000. Your utilisation will then be 40%. As a rule of thumb, if closing the account pushes your credit usage over 30%, then it may negatively impact your score.

Credit scoring isn’t one size fits all. The impact of certain changes to your report will impact everyone differently. The effect on your score will depend on what your report looks like as a whole.

This means that if you miss a payment but have a good credit history, it’s not likely to lower your score significantly. However, if you have a history of managing your debt poorly, your score may take a bigger knock.

If your score has dropped by an alarming amount, it’s worth double-checking that the information in your report is showing correctly. If you notice any errors, you can report them straight to Experian.

If you notice a minor drop in your score, it may be best to wait and see how your score changes over the next month or two. This will allow you to see whether it’s the start of a downward trend. Alternatively, you may find your score goes back up in the following months.

It may not be a famous saying, but what goes down can also go back up. A decrease in your score doesn't have to be permanent.

Check out what you should do if your credit score changes, or try out our personalised Coaching Plans, so you can start building it up again.


Hannah is currently studying for a Master's in Comparative Cultural Analysis. She knows all about personal finance, but as a student, she's an expert in money saving tips and tricks.