Why did my score decrease?
Have you noticed a dip in your credit score? This could mean many different things. The amount of credit you have, the age of your credit or any altered credit limits could all make your score go down.
Comprehensive Credit Reporting (CCR) changes in Australia made earlier this year could impact your credit score as well.
While there are many possible reasons why your report changed, let’s look at these common factors.
Comprehensive Credit Reporting changes
As of July 2018, CCR changes were implemented nationwide. Under this system, lenders can see more positive information about your financial history. This means they can have a more accurate snapshot of your credit behaviour.
Before CCR, most of the information on credit reports was negative. For example, late payments, defaults or bankruptcies showed up. Incorporating positive information, such as on-time payments, quick default recover and responsible credit behaviour, will now be visible to lenders.
According to MoneySmart, new information that may affect your credit score includes:
- The type of credit you’ve held in the last two years.
- Your usual repayment amount.
- Your repayment habits: frequency and whether you pay on time.
Other common factors in a credit score reduction
There are several other reasons that your credit score may decrease from one month to the next. Here’s a look at common factors.
Recently applied for credit
Credit scores include information about recent credit applications. If you have applied for a personal loan or another credit card, this could make your score dip. Try to limit your enquiries for new lines of credit.
Age of credit
Lenders like to see that you’ve had credit for many years. If you’ve handled credit responsibly over that long period, lenders are more likely to “reward you” with a boost to your credit score.
Change to credit limit
Under CCR, lenders can see more positive information about your financial history.
If your credit limit was recently raised by a lender, this could be a reason your score dipped. Money Smart says that one way to get a higher score is to lower your credit card limits.
Did you make a late payment recently? While this isn’t the end of the world, it could affect your credit score negatively. Start making each and every payment on time and you can make up for the loss in no time.
If you’ve noticed a decrease in your credit score, try not to fret over it too much. By building up responsible credit behaviour over several years, you can get those numbers higher and look more attractive to lenders.