What Can Affect Your Credit Score Negatively?

Have you ever wondered if your credit score really matters? 🤔 Well, it sure does! Just like a report card in school, your credit score is a financial report card for financial lenders. It basically helps them decide if it's safe to lend you money.

Just like your grades in school, there are certain things that can make your credit score go up or down. Here, we look at what affects credit score negatively and answer some of your common questions.

What Is a Bad Credit Score in the UK?

A bad credit score in the UK varies between credit agencies. For Equifax, a bad credit score is classed as anything under 379. Experian, meanwhile, considers anything under 560 a bad credit score. For TransUnion, a bad credit score in the UK is between 300 and 600.

It’s worth noting that these ratings point to a “very poor” credit score. You can also have a “poor” score which would still be considered bad credit.

What Things Cause People’s Credit Score to Lower?

When you apply for a loan, lenders are going to check your credit score as well as your credit history, to get an idea of your financial behaviour. Here’s some of the main things that can cause your credit score to lower:

Setting Up New Accounts

Whenever you open a new bank account, it’s going to knock off a few points from your credit score. However, this is not something to worry about because it would only be temporary, and you can gain those points back again. What’s important to keep in mind, is to not do this too often because your credit score will suffer and may not have enough time to bounce back. 

Also, keep in mind that any unused accounts can also harm your credit score. Close down any unused credit accounts you have so they aren’t included in your overall score.

Reaching Your Credit Limit

Credit cards are not bad for your credit score. In fact, if you use them responsibly, you can demonstrate to lenders your ability to pay back what you owe. Credit cards only become a problem if you max them out. Lenders would see this as you are being too over-reliant on your cards, or that you’re in a difficult financial situation. 

Multiple Applications for Credit

Whenever you apply for a loan, the lenders are going to perform a hard search on your credit report. This, in turn, will lower your credit score. If you only applied for one and it was successful, your credit score will bounce back when you make on-time payments. However, if the lender declined to give you a loan and then you immediately applied for another from a different lender, it’s going to make your credit score worse. It’s better to wait and work on improving your credit score first before you reapply for a loan. 

Late or Missing Payments

If you miss a payment, it will look bad on your credit history and negatively affect your credit score. If you miss a series of payments, then the lender will record a default on your credit report. This record can stay on your report for up to six years and it will be much more difficult for you to apply for credit during that time. Missing payments won’t just decrease your credit score, but it will also affect your ability to get credit. 

Borrowing Beyond What You Can Afford

Before applying for a loan or our very own car finance, it’s vital that you really evaluate your financial situation. How much can you realistically afford? Remember that loan agreements can last for several years and you’re going to have to make monthly payments to pay them off.

If things go bad for you financially, can you still afford to pay them? Always plan for the worst-case scenarios. If you cannot pay off your loan, you might get a Debt Relief Order, an Individual Voluntary Arrangement, or a County Court Judgment. These will be included in your credit report and can stay there for many years, making it difficult for you to get a loan or even open a new bank account.

If a Debt Relief Order, County Court Judgement, or Individual Voluntary Arrangement aren’t an option, you could find yourself facing what hurts credit score the most – bankruptcy. Being made bankrupt will have a significant negative impact on your life, as well as your credit score.

These are the main factors that can lead to a negative credit score. So now you know what to avoid, let’s look at the things you can do to improve your score before applying for finance.


Credit scores are important, especially when you are applying for a loan or car finance. There are many ways to improve it, but the most basic thing to remember is to know how much you can afford to borrow. This way, you won’t have trouble making payments on time. Did you know we have a useful car loan calculator you can use to help you determine the potential costs of car finance? 

Also, take note of the things you can avoid so as not to affect your credit score negatively. Continue to read more about how to increase your credit score so you can further improve it and get better loan deals in the future. 

At Carmoola, we run a soft credit check before you submit an application that won’t have any impact on your credit score. You can find out exactly how it works here, or check out our FAQs to learn more 😊.