Why has my credit score dropped, and what can I do?

Is a falling credit score usually serious?

Seeing a lower number can feel like a punch in the stomach, especially if a loan is on the horizon. Take a breath. Scores move for lots of ordinary reasons, and plenty of them are small and temporary. The useful question is not whether the number fell but what changed underneath it.

Moneysmart describes a score as a number, on a scale from zero to either 1,000 or 1,200 depending on the agency, that reflects the information on your credit report. Change the information and the number follows. So the search for the cause is a search of the report.

What are the most common reasons?

Likely cause	What it looks like on your report
New application	A fresh enquiry with a recent date
Late payment	A missed repayment in your two-year history
Default	A listing for an overdue debt
Higher borrowing	Bigger balances or new limits
New account	A recently opened card or loan
Error	Wrong amounts, dates or duplicated debts
Fraud	Accounts or enquiries you do not recognise

Moneysmart lists three broad factors: the amount you have borrowed, the number of credit applications you have made and whether you pay on time. Most drops trace to one of those.

Could it be a recent application?

Often. Applying for a loan, card or even some phone and finance plans can create an enquiry, and the OAIC says enquiries stay on file for five years. A single new enquiry usually has a modest effect, but several close together can pull a score down further. Our guide on credit enquiries goes deeper, and the piece on why applying everywhere hurts explains the pattern.

Think back over the last few months. Did you sign up for something with a finance component, get a limit increase or shop for a car loan? Any of those could be the source.

Could it be a late payment or a default?

These are more serious. Moneysmart says a missed payment is one not made within 14 days of the due date, and that credit products and repayment history cover the last two years. If a repayment slipped past that point, it can appear.

A default is a step further. Moneysmart says it can be reported for debts of $150 or more that are 60 or more days overdue, after the provider notifies you. The OAIC says defaults stay for five years, and paying one does not remove it, although it will show as paid. If you suspect a bill went astray, check the report for any listing from a phone, energy or other provider.

Could my borrowing have risen?

Yes, and it can happen quietly. A card balance that creeps up, a new buy-now-pay-later account, a top-up on a loan or a limit increase can all alter the picture. The amount borrowed is one of Moneysmart’s three factors. Lenders also tend to treat limits as commitments, so unused credit can still weigh when you apply.

A review of your statements can reveal this quickly. If balances have grown, a plan to pay them down will usually help more than any other single step.

Could it be an error or fraud?

Possibly. Moneysmart advises checking that every listed loan or debt is yours and that your personal details are correct, and notes that debts you do not recognise may indicate identity theft. Errors can include wrong amounts, duplicates, accounts listed as unpaid after being settled and entries belonging to someone with a similar name.

Correcting wrong information is free. If fraud looks likely, the OAIC explains you can request a ban on your report, which lasts 21 days from the request and can be extended. Our guide on protecting your credit score covers prevention.

Why do two scores disagree?

Different bodies use different models and may hold different information. Moneysmart says Experian and Equifax may hold different information about you. The scales also differ. A score of a given size at one body does not translate directly into the other.

So when you compare numbers, compare like with like: the same body, the same service, over time. Better still, compare the reports themselves. A lender reads the file, not the label.

How do I find the cause step by step?

1. Order both reports. You can get them free every three months. Our guide on getting your credit report shows how.
2. Look at dates. What is new since the score was last higher?
3. Check each enquiry. Do you recognise every one?
4. Scan repayment history. Any late marks?
5. Look for defaults and judgments. Are they accurate?
6. Compare balances and limits. Have they risen?
7. Check the personal details. A wrong address can cause mismatches.

Write down what you find and the dates. If something is wrong, contact the body to correct it, with evidence.

What if the cause is real and negative?

Then you have a starting point, which is better than guessing. A late payment can be followed by a run of on-time ones. A default can be paid so it shows as settled. A high balance can be reduced. Our guide on improving your credit score sets out how to rebuild over the months ahead.

If you need finance meanwhile, a bruised file does not always mean the end of the road. Our pages on bad credit home loans, bad credit car loans and private loans with bad credit explain how lenders with more flexible policy think about these situations.

Can I see an illustrative example?

This is illustrative only and not a real person. A borrower notices his score has fallen by a noticeable amount just before a planned refinance. He orders reports from both bodies. The first shows two new enquiries from an online finance offer he had clicked through a month earlier, plus a card balance that has crept up after a holiday.

The second report shows the same enquiries. There are no late payments and no defaults. He pays down the card, avoids new applications and lets a few months pass. His broker then approaches lenders with a clean story. The drop was real but small and explainable.

What mistakes should I avoid when my score drops?

• Panicking and applying for more credit. More enquiries can make it worse.
• Paying a company to fix it. Moneysmart warns against providers that charge to remove negative information, since only wrong information can be removed and you can request that for free.
• Ignoring the report and obsessing over the number. The detail is what lenders use.
• Closing accounts in a rush. Talk to a broker first, since the effect varies.
• Assuming it is permanent. Many causes fade with steady conduct.

When should I talk to a broker?

If you plan to borrow within the next few months, sooner is better. A broker can read your file against lender policy, explain whether the drop matters for the loan you want and suggest whether to apply now or wait. Bring your reports, a list of recent applications and any explanation of events.

Ownright Custom Finance works Australia-wide, and Trevor Scott’s team regularly looks at files with a bumpy patch. If you would like a view, use our apply page or ring 03 7043 7233.

Ready to move forward despite the dip?

Sounds like you’re looking to get a loan even though your score has wobbled. We’re the lending experts in finding lenders who look past a single number, so click here to see if you qualify. We will look at what is available once we have seen the full picture.