Why did my credit score drop?

Even though your credit score is only one of many factors looked at when you apply for credit, it’s a very influential factor. A dramatic drop in your credit score could dash your chances of credit approval. This is 1 of many reasons you should check your credit score regularly.

You get 1 free credit report a year, after which you pay a nominal fee for updated reports.

But you can check your credit score whenever you like, for free. Nedbank clients can do so through Online Banking or the Money app, but you can use the Money app to check your credit score even if you’re not a Nedbank client. Open the app and you’ll find the Credit Health dashboard. Click that button, complete a simple registration to accept the terms and conditions, and you’ll be able to check your credit score anytime.

You don’t need to check it every week, but we recommend that you take a look at your credit score at least once a month to pick up any errors or adverse marks against your name. You’ll want to clear these up quickly, so that you regain a better credit score. You can also maintain a decent score by avoiding some pitfalls.

The biggest pitfalls

These are the 5 main reasons why your credit score could be affected negatively:

  1. Missed or late payments Nothing destroys your score quite like missed payments. This is always a red flag to credit bureaus and lenders because it could be the start of continued non-payment of accounts.

  2. Debt judgments by a court If you’re struggling to pay your bills and haven’t made any arrangement to settle your debt, you may have legal judgments made against you. This is a serious infringement and will hamper your efforts to get credit until you’ve sorted it out.

  3. Too much debt Your credit score will also suffer if you have high levels of debt in relation to your income, or if you’ve maxed out your credit cards. Remember, too much reliance on debt is seen as a danger sign that you may struggle to keep up with your payments.

  4. Identity theft Being the victim of fraud, especially identity theft, can damage your score without you even being aware of it. Protect yourself by reading up on how criminals defraud ordinary people.

  5. Errors on your credit report Wrong information on your credit report could also affect your score without you being made aware of it. You can correct this fairly easily by getting hold of the credit bureau in question and provide proof of payment or settlement of debt where required.

Other factors affecting your credit score

The following actions can also lower your credit score, although not as dramatically as the factors above:

  • Opening accounts Your score could be affected if you take on more debt by opening new credit accounts because it increases your debt repayments, taking up more of your monthly income. Your credit score, in a way, reflects how much more debt you can afford. Every time you take on more debt, that amount drops – and so does your credit score.

  • Credit checks Your score at some credit bureaus could also be lowered by certain types of credit checks, especially if you apply for credit from several different lenders at the same time. But background checks by landlords requesting your credit report shouldn’t affect your score.

Managing, or even just monitoring your credit report can seem like a never-ending task. But pay close attention to it, because it plays such an important role in whether you get credit, and at what rate.