1. You Have Missed or Made a Payment Late

It is really important to make sure that all of your payments are made on time. As your payment history is an important part of your credit score, just one late or missed payment can lower it. However, even if it is late, you should always make every payment because just one late payment will have a lesser impact on your score compared to always missing your payments.

If you are late with a payment, try to make sure that you are no more than 30 days past the due date because it is likely to have a greater negative impact on your credit score.

2. You Have Defaulted on an Account

If you have missed multiple payments on a debt that you owe, the account may go into arrears (also known as defaulting). When the lender reports this information to the CRA it negatively impact your credit score.

3. You Have Settled a Financial Agreement in Court

Your credit score will be significantly affected if you are issued with County Court Judgment (CCJ), enter an Individual Voluntary Arrangement (IVA) or declare yourself legally bankrupt. As you have failed to repay debt in the past, lenders are likely to view you as a high risk.

4. You Have Made a Big Purchase on Your Credit Card

You should try to keep your credit usage below 30% of your total credit limit (this is the amount that you are able to borrow across your credit accounts). This means that if your total credit limit is £5,000, you should keep your balance below £1,500.

So if you have just made a large purchase and maxed out your credit card, it may suggest to lenders that you are not in a position to repay any new debt, and this may have caused your credit score to drop.

5. Your Credit Limit was Lowered

As mentioned above, you should try to keep your credit usage below 30% of your total limit. So if your credit limit has been lowered, your credit usage has increased even if your balance has not increased, resulting in a drop in your credit score.

For example, if your total credit limit was £5,000 and your balance was £1,500 your usage is at 30%, but if your credit limit was decreased to £3,000 your credit usage would then be 50%.

6. You Have Closed a Credit Account

Closing an old credit account can cause your credit score to drop for two reasons:

• It will mean you have less available credit, potentially increasing your credit usage ratio
• If it is an old account it will reduce the average age of your accounts, therefore reducing the length of your credit history

7. You Have Opened a New Line of Credit

There are two main reasons that your credit score could have dropped if you have opened up a new line of credit:

• Lenders may carry out a 'hard search' on your report when you apply for credit. This search is recorded on your report and can negatively impact your credit score (more on this below)
• The average age of your credit accounts decreases when you open a new credit line, and as lenders prefer to see a longer credit history this may cause your score to go down. 

Don't worry though, as long as you make your payments on time and are responsible with your credit usage, the chances are that once your average credit age on your report increases, your credit score is likely to go back up.

8. You Have Applied for Credit

When you make a credit application, lenders need to determine your credit worthiness to help them make their decision on whether or not to lend to you. To help them do this they will request a copy of your credit history. This type of search is known as a 'hard search' and it is recorded on your credit report.  It is normal to have a few hard searches on your credit report, but if you have made multiple applications within a short time period it may negatively impact your score.  This is because it may give the impression that you are 'credit-hungry' and this can result in lenders not considering you for new credit.

If your credit score has dropped as a result of applications, this is likely to increase in the future, on the basis that you don't contine to make credit applications.

9. You Change Address on a Regular Basis

Lenders like to see consistency on your credit report as it suggests that you are less of a financial risk and are more likely to repay your debt.  If there are frequent address changes on your report, it may indicate that you are not in a stable postion and this could impact your credit score. 

10. You Have Inaccurate Information on Your Credit Report

It is possbile that there are incorrect details within your credit report which are making your credit score drop. Make sure that you check your report on a regular basis to ensure that everything is correct. 

If something is incorrect, it may be because a lender has mistakenly reported incorrect details, or it could be a sign that you are the victim of identity fraud. If you spot something on your report that you believe is incorrect, make sure that you raise a dispute as soon as possible.