11 Actions That Can Lower Your Credit Score - Experian (2024)

Experian, TransUnion and Equifax now offer all U.S. consumers free weekly credit reports through AnnualCreditReport.com.

Good credit can make it easier to qualify for credit cards and loans, but like staying physically fit, keeping your credit in shape requires diligence. Here are 11 actions that can lower your credit score and how to avoid them.

1. Making Late Payments

Lenders typically report your accounts to one or more of the three major credit bureaus (Experian, TransUnion and Equifax). Once a payment is 30 days past due, the creditor reports it as a late payment, and it stays on your credit report for seven years.

Because payment history is the biggest factor in your credit score, even one late payment can have a big impact. Some 35% of your FICO® Score (used by 90% of top lenders) is based on payment history.

When you discover you've forgotten to pay a bill, go online or call the lender to pay it. Paying before a billing cycle ends may avert a late payment on your credit report. Then set up reminders or autopay to keep paying on time.

2. Using Too Much Credit

Your credit utilization ratio reflects how much of your available revolving credit you're using. Lenders examine the ratio across all your accounts and the ratio for each individual account. To calculate credit utilization, divide your outstanding revolving credit balance by your credit limit and multiply by 100 to get a percentage. A $4,000 balance on a card with a $10,000 has a utilization ratio of 40%, for example.

Using over 30% of your available credit can do extra damage to your credit score; keeping credit utilization under 10% can positively impact it. Because credit utilization accounts for 30% of your FICO® Score, excessive utilization has a significant impact. Aim to keep your credit card balances under 30% of your limits and ideally below 10%.

3. Applying for Too Many Credit Accounts

Whenever you apply for credit, the lender checks your credit report; this is called a hard inquiry. Hard inquiries remain on your credit report for two years, though they typically affect your score for just a few months. A single hard inquiry usually decreases your score by five points or less, but too many hard inquiries for different types of credit at once have a bigger impact. Hard inquiries and new credit accounts together make up 10% of your FICO® Score. Applying for too much credit at once suggests you're financially overextended and more risky to lenders.

Shop around without hurting your credit by getting prequalified. Prequalification uses a soft inquiry (which doesn't affect your credit scores) to check if you're likely to qualify for credit. If you need to do a full application to get the specifics of your loan, keep them within a 14- to 45-day time frame whenever possible. Credit scoring models generally treat multiple hard inquiries for the same type of credit in a short time as one inquiry, limiting the impact to your credit score.

4. Closing Credit Accounts

Closing a credit card can cause your credit score to drop for several reasons.

First, it reduces your available credit, possibly increasing your credit utilization ratio. Closing accounts can also eventually shorten your credit history, which is based on the average age of all your credit accounts as well as your newest and oldest account, and makes up 15% of your FICO® Score. Finally, credit mix—having both revolving and installment credit—accounts for 10% of your FICO® Score. If you don't have any other revolving accounts, closing a credit card could reduce your credit mix and credit score. Unless there's an annual fee, it may be wise to keep the account open or, if there is an annual fee, talk to your card issuer about switching to a card without an annual fee.

5. Having Your Credit Limit Lowered

Recurring late or missed payments, excessive credit utilization or not using a credit card for a long time could prompt your credit card company to lower your credit limit.

This may hurt your credit score by increasing your credit utilization. Paying credit card bills on time and keeping credit utilization below 30% can keep your credit limits stable and boost your credit score.

6. Defaulting on a Loan

Defaulting on a loan has a major negative impact on your credit. After 90 days without making a debt payment, lenders typically consider you in default. A loan default stays on your credit report for seven years. Lenders may also take your collateral by repossessing your car or foreclosing on your home. A foreclosure is especially derogatory to your credit; only bankruptcy is worse.

To avoid defaulting, contact your lender to ask about changing your payment schedule or request a deferral, forbearance or loan modification. You can also try refinancing your loan to a more affordable payment. Consider credit counseling for advice on budgeting and repaying debts.

7. Cosigning on a Loan That Becomes Delinquent

Late or missed payments on a loan you cosigned for could appear on your credit report, damaging your credit. If the borrower stops paying altogether, you become responsible for the full amount.

Before cosigning a loan, carefully consider the borrower's reliability and investigate any state laws that protect cosigners. After cosigning, checking your credit report regularly can alert you of late payments you may need to bring current.

8. Accounts in Collections

Debts seriously past due (typically 90 days late) may be sent to collections. The creditor's collection department or an outside collection agency attempts to collect the money you owe.

By the time a debt goes to collections, late payments have already hurt your credit. A collection account on your credit report multiplies the damage. Collection accounts stay on your credit history for up to seven years after the debt became delinquent.

If you're having trouble making payments, contact your creditor immediately to discuss options. A reputable credit counseling agency can help you develop a debt repayment plan.

9. Debt Settlement

Debt settlement companies negotiate with your creditors to settle your debt for less than you owe. Typically, you pay the debt settlement company instead of your creditors; they hold that money in an account and then use it to settle with your creditors for a reduced amount. Sometimes presented as an alternative to bankruptcy, debt settlement can be almost as damaging to your credit due to all the missed payments on your credit report. Even after paying the reduced debt, not repaying the full amount is noted on your credit report and makes you a poor credit risk.

Consider a debt management plan with a nonprofit credit counseling agency instead. Credit counselors help negotiate payments so you can repay your entire debt, minimizing harm to your credit score.

10. Bankruptcy

Filing for bankruptcy to gain relief from debt should be a last resort. No other action causes more damage to your credit. Depending on whether you file Chapter 13 or Chapter 7, the bankruptcy remains on your credit report for seven to 10 years. Bankruptcy may also mean giving up your belongings to pay creditors.

To avoid bankruptcy, consider bringing in extra income through a side gig or extra work hours, implementing a drastic debt repayment strategy or getting credit counseling to help you pay off debt.

11. Inaccuracies on Your Credit Report

Incorrect information on your credit report could simply be a lender reporting inaccurate data, but could also signal fraud. The extent of the damage to your credit score varies.

To verify your credit report is accurate, get a free copy from the three major credit bureaus at AnnualCreditReport.com. (Checking your own credit won't affect your credit score.) You have the right to file a dispute with the credit bureau if you believe information is inaccurate.

The Bottom Line

The same good habits that help you maintain a good credit score can help you improve a poor score. Bringing late accounts up to date, paying bills on time and minimizing credit utilization show lenders you can manage your money—and theirs—responsibly.

11 Actions That Can Lower Your Credit Score - Experian (2024)

FAQs

What makes Experian score go down? ›

Even just one missed or late payment can negatively impact your credit score, so it's important to keep on track with your payments. Your credit score is always under scrutiny, so you should always aim to make your payments in full and on time every month.

Does Experian bring down your credit score? ›

Doing so will never hurt your credit score and, in fact, checking your Experian credit report can help you protect your credit and promote long-term credit score improvement.

What actions will decrease your credit score? ›

Several factors can ruin your credit score, including if you make several late payments or open to many credit card accounts at once. You can ruin your credit score if you file for bankruptcy or have a debt settlement. Most negative information will remain on your credit report for seven to 10 years.

What are 5 things that can hurt your credit score? ›

5 Things That May Hurt Your Credit Scores
  • Making a late payment.
  • Having a high debt to credit utilization ratio.
  • Applying for a lot of credit at once.
  • Closing a credit card account.
  • Stopping your credit-related activities for an extended period.

What reduces credit score? ›

Missing payments could damage your credit score – that includes credit card, student loan or even utility bill payments. Some things won't impact your score, including your income and savings, or spending your own money with a debit card.

What are the disadvantages of Experian? ›

The main disadvantage of Experian is that, unlike FICO, it is rarely used as a stand-alone tool to make credit decisions. Even lenders that review credit reports in detail rather than go off a borrower's numerical score often look at results from all three bureaus, not just Experian.

Why is my credit score going down if I pay everything on time? ›

It's possible that you could see your credit scores drop after fulfilling your payment obligations on a loan or credit card debt. Paying off debt might lower your credit scores if removing the debt affects certain factors like your credit mix, the length of your credit history or your credit utilization ratio.

What habit lowers your credit score? ›

Making late payments, even a single day late, can significantly affect your credit. This becomes especially true if you make a habit of paying late. Some lenders or credit card companies will charge you a fee for being a single day late and could cut you off from making further purchases on the account.

What are 10 things you could do to hurt or even destroy your credit? ›

10 Things That Can Hurt Your Credit Score
  • Getting a new cell phone. ...
  • Not paying your parking tickets. ...
  • Using a business credit card. ...
  • Asking for a credit limit increase. ...
  • Closing an unused credit card. ...
  • Not using your credit cards. ...
  • Using a debit card to rent a car. ...
  • Opening an account at a new financial institution.

What are 3 ways your credit score can drop? ›

Below are some common reasons why your credit score might have dropped:
  • You have a high balance on your credit cards. ...
  • A late payment was reported. ...
  • You closed a credit card account or paid off a loan. ...
  • You paid off an installment loan. ...
  • You recently applied for credit. ...
  • You're the victim of identity theft.
Apr 4, 2023

Which action can hurt your credit score? ›

Here are some examples of those factors: Missing payments or making late payments. Having a past-due account transferred to a collection agency or debt buyer. Applying for credit too frequently in a short amount of time.

What brings credit score down the most? ›

If you are more than 30 days past due on a payment, credit issuers will report the delinquency to at least one of the three major credit bureaus, likely resulting in a drop in your score. Payments that become 60 or 90 days past due will have an even greater effect on your score.

What hurts credit score the most? ›

1. Payment History: 35% Making debt payments on time every month benefits your credit scores more than any other single factor—and just one payment made 30 days late can do significant harm to your scores. An account sent to collections, a foreclosure or a bankruptcy can have even deeper, longer-lasting consequences.

How accurate is Experian? ›

Information from Experian is just as accurate as info from the other two major credit bureaus (Equifax and TransUnion), and products like Experian Boost aim to help the roughly 50 million people in the U.S. with little-to-no credit history get credit scores that accurately reflect their credit risk.

Why is my credit score going down when nothing has changed? ›

Heavy credit card use, a missed payment or a flurry of credit applications could account for a credit score drop. Amanda Barroso is a personal finance writer who joined NerdWallet in 2021, covering credit scoring.

Why is my Experian score lower than the rest? ›

The importance of each variable typically changes between the bureaus. For example, TransUnion may put a 40% weighting on your payment history, whereas Experian may put a 35% weighting on payment history. The difference in importance, or weighing, will lead to different scores among the bureaus.

Why is my credit score dropping for no reason? ›

There are lots of reasons why your credit score could have gone down, including a recent late or missed payment, an application for new credit or a change to your credit limit or usage. The most important information to understand about credit is the factors that go into your scores.

Is Experian credit score accurate? ›

Credit scores from the three main bureaus (Experian, Equifax, and TransUnion) are considered accurate. The accuracy of the scores depends on the accuracy of the information provided to them by lenders and creditors.

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