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Why Did My Credit Score Drop When I Pay On Time?

Updated: May 3, 2023


A phone and different credit scores

When your credit score goes down, it's usually not because you're a bad person. While you might think that paying on time is the only thing that matters when it comes to your credit score, there are actually lots of other factors that can affect it. So why do some people have higher scores than others? And can anyone control their own score? In this article, we'll answer all these questions and more!


It's not always your fault


  • You may be reporting more than you should. If you have a mix of credit cards, store cards and loans, this can cause confusion for the lender who's trying to figure out how much debt you're carrying.

  • You may have reported the wrong information. It happens! Mistakes happen all the time, especially when it comes to things like addresses or phone numbers on your accounts (and those are just two examples).

  • Your accounts might not match up with each other in some way--for example: one is personal; another is business; still another is past due.


Don't apply for a big loan right away


If you're looking for a loan, it's better to wait until your score goes up.


For example, let's say that your credit score is at 700 and you want to buy an RV with financing. The lender might turn down your application because they are worried about the risk of lending money to someone who has had bad credit in the past. In this situation, applying for a loan could hurt your chances of getting approved and end up costing more than just waiting until after you've improved your score by paying on time and reducing debt over time.


You may be shopping at bad places.


If you're shopping at places that don't report to the credit bureaus, or if you're paying a lot of interest on what you've borrowed, it could hurt your score. Some stores and services do not report information about their customers' payments or balances to the credit bureaus. This means that even if those companies are reliable and honest (and many aren't), there will be no record of their reliability in your file--and it's just as true for those who pay late or default on their bills as anyone else.


If a store doesn't report its data to one of the three major U.S.-based credit bureaus (Equifax, Experian and TransUnion) then their activity won't appear on your credit report unless they share information directly with an alternative service provider such as Innovis Data Solutions Inc., which provides consumer data on behalf of clients including merchants like Target Corp., Walgreens Boots Alliance Inc., Kohl's Corp., JCPenney Co Inc., Walmart Stores Inc..


Your credit score is calculated based on your past history.


It's a record of your borrowing and repaying habits, and it can be used to predict how likely you are to pay back future loans. Your credit report includes information like:


  • Your payment history

  • Current balances owed on loans (including mortgages)

  • Types of credit that you have (e.g., mortgage, car loan)


New accounts aren't always a good thing.


It can be a good thing if you have a good credit history, but it's not always a good thing. If you don't have a good credit history, then opening new accounts will only hurt your score in the long run.


The reasons for this are pretty simple: when lenders look at your credit report, they want to see that you've been responsible with money and paid off loans on time in the past. So when someone applies for multiple new accounts within a short period of time (like six months), it looks like they're trying to take advantage of their options and get into debt quickly--which isn't something lenders want to see on their reports!


You're shopping in the wrong places.


If your credit score is going down, it's probably because you're shopping in the wrong places. Your credit score is calculated based on your past history. If you have a history of paying on time, then it will be easier for lenders to approve loans for you in the future. However, if there are late payments on your record or other negative marks such as defaulted accounts or collections accounts then lenders may be hesitant to give out loans because they don't know if they'll get their money back!


You can usually fix this problem by asking for a credit line increase from your bank or making small purchases on store cards instead of credit cards.


You should contact your bank and ask them to increase the limit on your current account, as this will make it easier for you to pay off your balance in full each month. You should also consider using one of their other products such as a savings account or an overdraft facility instead of relying on loans or credit cards, which tend to have higher interest rates than other forms of borrowing money.


I hope this article has helped you understand why your credit score is going down when you pay on time. If you have any questions, please feel free to leave them in the comments below!








Disclosure: For Change Financial only recommends products we would use ourselves. All opinions expressed here are our own. This page may contain affiliate links and we may earn a small commission, at no extra cost to you. Read our full privacy policy on our website.


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