Car Loans Australia :: Articles

Why did my Credit Score drop - and how can I fix it?

Why did my Credit Score drop - and how can I fix it?

Why did my Credit Score drop - and how can I fix it?
Your Credit Rating (or Credit Score) plays a very important role in determining your eligibility to get a loan. Here we look at the reasons why your credit score may drop and some handy tips to avoid this problem.

Your credit rating is very important. It is used to determine how much interest you need to pay. It is also a reflection of your creditworthiness.

If you have high credit rating, you can enjoy lower interest charges on loans. Apart from that, you also get higher credit limit and great deals on your credit card.

If you find that your rating has dropped significantly, this may mean that you may have made a financial mistake.

There are a number of reasons why you may suddenly have a lower score.

If you know what these reasons are, there is a chance that you can avoid or at least fix your current dilemma. Here are some possible causes of abrupt score drop and how you may be able to avoid them.

Debt Stressed?
Image for Debt Stressed?If you're struggling to pay your debts and covering living expenses, we're here to help. Through our national panel of Debt Management specialists, we can help customers with $10k or more in debt by consolidating your existing loans, stopping Debt collectors from contacting you and re-negotiating repayments on your terms!

Late Payments

Your payments reflect 35% of your FICO score, regardless of whether you pay on time or not.

If you missed a payment, this will not completely damage your rating. However, if you turn this into a habit, your score will eventually be affected.

Moreover, your creditor may charge you with more fees and you may likely end up having to make many more payments, which could include your credit card bills, immediate fees for missed payments, and charges on credit lines and later, loans.

The only solution to avoid all these is to pay your bills on time.

New Credit Card Application

Applying for a new card when you are struggling with paying another can hurt your credit score. Know that 10% of your credit rating is made up of new inquiries for credit.

New card applications will show on your credit report for 12 months.

If you wish to get a new card, do so with control. If you are to make an inquiry, do it only once as much as possible.

One inquiry is acceptable since your score can rebound within a year.

Credit Card Cancellation

You have the option to close your account if you have credit card debt.

However, doing so will actually damage your score, especially if your account carries a balance.

Another possible scenario is that creditors may cancel your account.

Both scenarios can have an effect on your rating; therefore, avoid credit card cancellation as much as possible.

Unemployment Benefits

If you are unemployed and you get benefits, this will have a slight effect on your score. It is advised that you receive the benefits for a short period only. Although the credit bureaus will not find out if you are unemployed, they will certainly see that your income has decreased.

High Credit to Debt Ratio

Your extended credit will take 30% of your credit score.

Sudden increase in balances without higher credit limit will result to a score drop.

If you have balances, strive to pay them off as soon as possible.

Poor Debt Management

Credit score is not only about what you do with your credit cards. There are other factors that can influence your score.

These include your lines of credit and loan balances, which comprise 30% of your FICO score.

If you have too much debt, your rating will definitely go down. It will also be difficult for you to afford the payments each month.

Hence, you should be able to manage your debt by lowering the amount of money you owe from various financial institutions.

Published: Wednesday, 18th Aug 2021
Author: 260


Car Loans Articles

5 Critical Steps to Take Before Applying for a Car Loan in Australia 5 Critical Steps to Take Before Applying for a Car Loan in Australia
Stepping into the world of auto financing can be as daunting as it is exciting. The commitment of a new car loan demands more than just desiring your dream car; it necessitates a balanced budget and a solid financial plan. Understanding how to prepare before signing on that dotted line is not only wise, it’s imperative for your financial health. - read more
Avoid the Pitfalls: Common Mistakes to Avoid When Seeking Car Finance Avoid the Pitfalls: Common Mistakes to Avoid When Seeking Car Finance
Entering the world of car finance can be both an exciting and daunting venture. With a plethora of options for car loans in Australia, it is essential for potential buyers to arm themselves with knowledge to make the best financial decision. A well-informed choice can be the difference between a loan that propels your personal mobility, and one that hinders your financial stability. - read more
Your Car Loan Journey: From Application to Approval Your Car Loan Journey: From Application to Approval
In this article, we are embarking on a guided journey that we believe will help immensely in navigating the intricacies of the car loan process. - read more
The Smart Aussie Buyer's Guide to Securing the Best Price on a New Car The Smart Aussie Buyer's Guide to Securing the Best Price on a New Car
There's a unique thrill that comes with purchasing a new car; it's not just about getting from point A to B, but about fulfilling a dream and the freedom of the open road. However, with the excitement comes the need for careful planning and smart decision-making to ensure that your investment pays off in the long term. - read more
How to Create a Flexible Budget for Your Next Car Purchase How to Create a Flexible Budget for Your Next Car Purchase
When it comes to buying a car, particularly a used one, having a flexible budget is essential. Flexible budgeting allows you to adjust your spending plan according to your current financial situation and any unexpected changes that might occur. This adaptability is crucial in managing your finances effectively and ensuring you make a purchase that won't strain your resources. - read more
Avoid the Pitfalls: Common Mistakes to Avoid When Seeking Car Finance Avoid the Pitfalls: Common Mistakes to Avoid When Seeking Car Finance
Entering the world of car finance can be both an exciting and daunting venture. With a plethora of options for car loans in Australia, it is essential for potential buyers to arm themselves with knowledge to make the best financial decision. A well-informed choice can be the difference between a loan that propels your personal mobility, and one that hinders your financial stability. - read more
Your Car Loan Journey: From Application to Approval Your Car Loan Journey: From Application to Approval
In this article, we are embarking on a guided journey that we believe will help immensely in navigating the intricacies of the car loan process. - read more
Top Tips for Australians Navigating the Online Car Market Top Tips for Australians Navigating the Online Car Market
The Australian automotive landscape has witnessed a significant transformation with the rise of online car sales. The concept of browsing, selecting, and purchasing a vehicle through digital platforms has gained immense popularity, offering consumers a vast array of choices at their fingertips. - read more
Decoding Car Loan Fees: What to Watch Out For Decoding Car Loan Fees: What to Watch Out For
Navigating the car loan landscape in Australia can feel like a daunting task. With a vast array of options available, choosing the right car loan can significantly impact your financial well-being. Understanding the fees associated with car loans is crucial, as they play a significant role in the total cost of the loan. - read more
Navigating Car Finance: How to Choose a Loan That Works for You Navigating Car Finance: How to Choose a Loan That Works for You
Buying a car is a significant financial decision, and for many, it means exploring the world of car finance. In Australia, the options are plentiful, and understanding them is key to making an informed choice. Car finance can seem daunting, with various loan types, interest rates, and repayment plans to consider. But fear not – a clear understanding of these options can steer you towards a deal that complements your financial circumstances. - read more

Finance News

Auditor Deregistered After Brite Advisers Collapse Auditor Deregistered After Brite Advisers Collapse
30 Jun 2025: Paige Estritori

The Australian Securities and Investments Commission (ASIC) has deregistered auditor David Makowa, previously of DM Advisory Services, due to his role in the downfall of financial advice firm Brite Advisers. This decision follows Makowa's acceptance of a court-enforceable undertaking in which he agreed to surrender his auditor registration permanently, pledging never to re-apply. - read more
US Involvement in Israel-Iran Conflict Sparks Financial Market Concerns US Involvement in Israel-Iran Conflict Sparks Financial Market Concerns
23 Jun 2025: Paige Estritori

The escalating likelihood of the United States engaging militarily in the Israel-Iran conflict has raised alarm among investors, potentially leading to significant market volatility. This concern was highlighted by the global financial advisory firm, deVere Group, as tensions heighten in the Middle East. - read more
Global Markets Brace for Oil Price Surge Following US Strike on Iran Global Markets Brace for Oil Price Surge Following US Strike on Iran
23 Jun 2025: Paige Estritori

The recent US military attack on Iranian nuclear facilities has raised expectations of a significant oil price spike as global markets prepare to resume trading. Announced by former President Donald Trump, the attack marks an increased US involvement in the Middle East, which analysts believe could lead to heightened volatility across financial markets. - read more
Trump Mulls Change of Heart on Firing Fed Chair Powell Trump Mulls Change of Heart on Firing Fed Chair Powell
21 Jun 2025: Paige Estritori

US President Donald Trump is once again contemplating the dismissal of Federal Reserve Chair Jerome Powell, whom he has criticized for not lowering interest rates. Trump expressed his dissatisfaction with Powell's decisions in a Truth Social post, suggesting he might change his mind about firing him. Despite acknowledging that his strong criticisms make Powell's task challenging, Trump remains focused on his agenda for reduced rates, especially with Powell's term set to end in May 2026. - read more
APRA Clarifies HELP Debt Considerations in Home Loan Assessments APRA Clarifies HELP Debt Considerations in Home Loan Assessments
20 Jun 2025: Paige Estritori

The Australian Prudential Regulation Authority (APRA) has released pivotal updates to the Prudential Practice Guide APG 223 and Reporting Standard ARS 223.0, focusing on how Authorised Deposit-taking Institutions (ADIs) should integrate Higher Education Loan Program (HELP) debt into home loan evaluations. The changes are aimed at enhancing regulatory clarity and acknowledging the individual circumstances of borrowers, including the nuances of their HELP debts, without compromising prudent lending practices. - read more

Need Help Finding a Loan?
Get a free car loan eligibility assessment and compare offers tailored specifically to your circumstances.
Loan Amount:
Postcode:
All finance quotes are provided free (via our secure server) and without obligation.
We respect your privacy.

Knowledgebase
Capital Gain:
The profit realized from the sale of a capital asset, such as stock or real estate, where the sale price exceeds the purchase price.