Why has my credit score changed when I didn’t do anything?
Your credit score is a powerful number that can support you to get anything from a mortgage on your family home to finance on your dream car.
This persuasive number is far from static, though. If you use credit in your daily life, new information will feed down into your credit file and your score will subsequently go up or down.
But what happens when your credit score changed for no reason?
It’s normally not as mysterious as it seems, so let’s look at some of the most common reasons why your credit score might have changed even when you haven’t done anything differently.
A forgotten account
In a world where we switch and save often, it’s easy to lose track of accounts. An old account could have simply finally been closed after being dormant for a number of months and now have been updated on your credit report.
It’s worth taking a moment to do a spring clean of your accounts to ensure you’re on top of them and that old accounts don’t have any balances pending – as even small amounts can hurt your score.
Credit utilisation has changed
Your credit utilisation is what percentage of your credit you’re actually using, and it plays a big part in your credit score.
If you use more of your credit, this will cause your credit utilisation percentage to increase and your score to usually decrease.
Equally, if you’ve paid off a large sum of debt, your credit utilisation will drop and your score will get better.
But if your spending habits haven’t changed, it could be the credit provider changing your limit, which will affect your utilisation ratio.
Often they’ll let you know if you’re eligible for a change in credit limit, but you may not have realised until you see the change in your score.
Applications for credit
Every time you apply for a credit card, loan or another form of borrowing, the lender will search your credit report to see if you meet their lending criteria.
This is called a hard search and leaves a mark (also known as a footprint) on your credit report, so other prospective lenders can see you have applied for credit.
A credit search like this will affect your credit score. And if you make several applications for credit in a short period of time, this will have an even greater effect on your score.
The good news is, as long as you borrow responsibly and don’t make too many requests for credit, the impact on your score will only be temporary.
You’ve closed your account
You’ve finally paid off the balance on your credit card and closed your account. This is a good thing, right? Well not always for your credit score, unfortunately.
Closing an account can have two effects on your credit report. Firstly, it brings down the average age of your credit history. Typically, the longer you’ve had credit (and have used it responsibly), the higher your score will be.
If you’ve closed an account that you’ve had for many years, your credit history will have been shortened and might be a reason your credit score changed.
Secondly, your credit utilisation ratio will be affected, as your credit limit has decreased, but other levels of debt have stayed the same.
There’s an error on your report
An administrative error can play havoc with your credit report. Something as simple as a misspelled name or address could have an impact on your score.
Other errors to look out for include outdated account information. Bear in mind, there’s always a lag between account information being updated and showing up on your report, though.
It’s wise to keep a regular check on your credit history for any errors or misreporting, so you can report it and ensure any harm done to your score is only temporary.
Updates aren’t in real-time
It can take up to six weeks for a change on an account to show up on your credit report and affect your score.
Activity such as missed payments are not reported to the credit reference agencies until they’re 30 days late usually, so think back to see whether something you did last month could be the reason your credit score changed.
You’ve moved home
It’s not just financial information that can impact your score. Even something simple such as a new address can have an effect.
If you’ve moved home recently, make sure you’ve changed your address on the electoral roll, as well as with all your creditors.
Information has fallen off your report
Negative information doesn’t stay on your credit report forever, and there are set time frames depending on the nature of the credit status. The majority of negative information, however, is removed from your file after six years.
So if you see a sudden improvement in score, could it be that something has finally fallen off your report?
While searches stay on your report for one year, late payments, County Court Judgements (CCJs), defaults, Debt Relief Orders and Individual Voluntary Arrangements (IVAs) are removed after six years.
It’s only some forms of bankruptcy orders that can linger on your account for longer – in some cases up to 15 years.
Identity theft poses a very real threat to your credit score. In obtaining passwords or access to your accounts, fraudsters can wrack up debt under your name, open new accounts and obtain lines of credit.
Your credit report can often give you the first signs that you’ve been a victim of identity theft.
Look for new searches or accounts on your report that you don’t recognise. Your bank accounts will also give you an idea, so regularly check there too for any signs of unusual activity.
If you believe you’ve been a victim of identity theft, it’s important to act quickly and get in touch with the financial institutions involved to inform them.
Should I apply for car finance now?
Before you can take out car finance, first you need to qualify. This is where your credit score plays an important role.
Spending a little time looking through your credit report and seeing what you can do to improve it is never a bad thing before applying for any type of credit.
By taking some simple steps to polish up your finances and increase your score, you have a better chance of not only being accepted for car finance, but getting a better interest rate too.
Of course, past financial activities on your report are sometimes out of your control. But at Hippo, we believe that bad credit shouldn’t stop you from getting the car finance you need.
That’s why we will only ever conduct a soft search when checking your eligibility so as not to harm your credit score.
You can check whether you’ll be approved for car finance in minutes without affecting your credit score using our ‘Apply Now’ feature: