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What Lowers Your Credit Score
16 Sep 2019

What Lowers Your Credit Score? 5 Things to Be Aware Of

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April 2018 was a great month for U.S. consumers—it was then that the average FICO score went up to an impressive 704. That’s the second year in a row that average FICO Scores were in the 700 range.

As great as that news is though, it doesn’t paint the entire picture of the state of credit scores in the US. For instance, there’s still 11% of consumers who have a credit score of 549 and lower. Those scores are already considered “poor”.

Now the question is, how exactly does a person’s credit score get this low? What lowers your credit score and what can you do to prevent such drops in your creditworthiness?

That’s exactly what we’ll share with you in this post, so be sure to keep reading!

1. What Lowers Your Credit Score the Most: Missed Payments

This year, 16% of adults, or about 40 million people, say they may miss paying at least one credit card due date. For 30% of these folks, lack of funds is the reason they may miss their dues.

Moreover, 7 million car loan borrowers were behind on their payments for 90 days or longer at the end of 2018.

During the same time frame, the delinquency rate of real estate loans was at an average of 1.79%. While that shows a huge improvement, it still means that 2.83% of home loans were delinquent. Commercial loan borrowers were doing better, with only a 0.78% delinquency rate.

We can go on with the statistics on missed payments, but the gist is, it’s the main culprit that lowers credit scores.

For one, because payment history makes up 35% of an individual’s FICO score. Your payment history tells lenders how responsible you are in paying back your dues. If you fail to make your credit payments on time, then lenders will consider you a high-risk borrower.

That’s why it’s important to pay off your credit cards and other debts as soon as you can. If possible, set up automatic payments for your credit dues or alerts to remind you of your due dates. You should also ask your lenders if you can choose a due date that works best for you.

2. A High Credit Utilization Rate

High credit use is another answer to the question, “what can lower your credit score?” If you have a high credit utilization rate, that can indicate that you rely too much on non-cash sources.

Let’s say you have a total of $15,000 credit limit available on three cards. The current amount you owe on them is $5,000. That means you have a 33% credit utilization rate.

This is still okay, but be sure that you don’t go beyond it. In fact, if you can, bring it down to less than 30%. High-risk borrowers are those who use more than 30% of their available credit.

Also, keep in mind that 30% of a FICO score is for credit utilization rate. That’s a huge chunk of your score, so it’s best to use less than a third of your available credit at any given time.

3. Applying for Too Many Loans at the Same Time

If you’re wondering what brings your credit score down, a “soft credit inquiry” or a “hard” one, it’s the latter. Soft credit checks don’t affect your credit scores, nor do they appear on your credit report, so they are like no credit check loans. These occur whenever you check your own score or if a lender checks it to pre-approve you for a credit offer.

The “hard” credit checks are those that can affect your credit score. These occur when a potential installment loan lender you applied for credit with reviews your credit.

One example of when hard credit checks occur is when you apply for a credit card or a bank loan. Credit card companies and banks need to verify your creditworthiness first. As such, they pull out your credit score and report, resulting in your score getting “dinged”.

To prevent a drastic reduction in your credit score, don’t apply for too many loans or cards at the same time. Also, if you need to take out a loan, consider personal loans without credit checks. Some lenders offering these financing programs only perform a soft credit inquiry.

4. Opening New Accounts and Closing Old Accounts

Let’s say you want to find the best personal loan since you’ve already paid a credit card account in full. If you’re thinking of closing that account after securing a new loan, don’t. Doing both—getting new credit and closing an old one—can hurt your credit score.

That’s because the length of credit also impacts credit scores. The longer the average age of your accounts, the better for your credit score.

If you close an old account, that will shorten your average credit age. The same goes if you open a new account. So, imagine how big the difference will be if you do both things at the same time.

What you can do instead is to keep your fully-paid card and make small charges on it. Do this as you pay off your larger debts. This will help keep your average account age “old” while also helping keep your score from going down.

5. Sticking to Only One Type of Credit

Credit mix refers to how diverse your credit account portfolio is. This can be an account with one of the best credit cards, a bad credit loan, and a mortgage. The more “diverse” your portfolio is (or the more types of credit account you use), the better for your FICO score.


First, lenders use this credit mix to see how borrowers deal with different types of current debt. This allows them to determine how good borrowers are in paying back their debts on time.

Granted, having only one type of credit account doesn’t bring your credit score down. But it’s a good idea to mix it up so that you can prove your creditworthiness to lenders.

A good example is to consider both an installment loan and revolving credit. Just make sure that as you diversify your accounts, you also don’t use more than 30% of your available credit.

Don’t Let These Credit Score Killers Get the Better of You

There you have it, your ultimate guide to what lowers your credit score. By knowing what hurts your credit score, you can steer clear of and avoid doing them. Not only will this protect your “creditworthiness”—it can also help boost your credit score.

Ready to diversify your credit account portfolio while avoiding hard credit checks? Then please don’t hesitate to request your loan with us! We can help you find the right type of loan that you can use to get a better credit mix.

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