Why Is My Credit Score Going Down When I Pay On Time

The credit score is an arbitrary number of three digits that reflects an individual’s creditworthiness and ability to repay. Credit score can be a maximum of 900. Anything lower than the 650 mark is considered a poor credit score. A drop in the credit score can reduce the chance of obtaining any loans in the near future. There are some general guidelines to how you can improve your score on credit. Some actions that can impact your credit score are not considered, and the effect can be negative.

It is true that the credit score can only be not permanent and are easily recovered can be a relief. The score can be raised positively through a couple of steps that affect scores positively. Things like purchasing credit cards or requesting loans could cause an initial dip in score but can help build a positive score soon.

Factors that may cause an increase in Credit Score

The Credit Utilization is High

After paying your bills, making payments on time, and following the timeframe of your payment schedule, If your credit utilization ratio is high, it can hurt your credit rating. It will drop. The most common rule of thumb is that the credit utilization ratio should be at least 30 percent. Anything higher than this threshold could result in a decline in credit score.

Applying for a New Credit in a Short Gap

The credit card companies and lenders inform the credit bureaus whenever a request for a credit card or an additional loan is received. The credit bureaus will subtract some points after requesting another loan or credit card. In these instances, firms and lenders will thoroughly investigate before giving the credit. This is a hard inquiry and could negatively impact your credit score. The multiple applications you make to credit also add risk to your credit score, and a high risk can be linked with low credit scores in the business. Hard inquiries won’t show up on your credit report for some time, and therefore, when applying for a loan or credit card, careful study should be conducted to determine which one is most suitable for your needs, and the application must be made.

Missed Payments

If you’ve failed to pay a loan during the billing cycle, it will instantly show up on your credit report. If there is a missed payment, your credit report will be severely affected until the borrower makes payments in time for a set of installments in the cycle. A missed payment will appear on your credit file for long time and consequently the process of getting a clean credit report will be slow. If the ratio of credit utilization is high, it is anticipated that the recovery process will be much slow.

Closing Old Accounts

It is not recommended to close all old accounts because it could negatively impact the credit rating. If you cancel your credit card it will result in the ratio of utilization to be higher, and the length of your credit history will be diminished. Both of these things will affect the score in a negative way. A credit score comprises various factors that weigh an individual’s credit rating differently. The length of your credit history is at minimum 15% part of your credit score. so a long credit history will aid in maintaining a high score. If the credit was closed on good terms, the account will be included on the credit report and will impact the score in a small way.

Reduction in Credit Limit

Another reason that the credit score has dipped could be due to a reduction in the credit limits from the card’s issuer or the creditor. For instance, you have an amount of credit and use 25% of the credit. If the credit limit is reduced, the utilization ratio will automatically increase, and the score will be affected negatively.

Credit Mix

The credit mix makes up at minimum 30 percent of the credit score, a significant component of your credit report. It represents the various credit options you have and how you deal with the different options. A healthy credit mix will demonstrate that the borrower takes care of multiple loans with no payment default on the other. This will reflect on the credit score positively.


It’s it isdisheartening to watch your credit score decline. Therefore, a constant review and monitoring for your score on credit is essential. If you are planning to take advantage of credit in the future the factors mentioned above must be considered and your credit report needs to be analyzed on a regular basis.

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