We all know how our credit score is affected by so many multiple factors. It is generally believed that after paying the bill, our credit score usually raises when we do the credit score check. However, if you think your credit score keeps declining even after paying your credit card bills and loan payments on time, there could be many reasons. Many people believe that if they have paid their bills on time, their credit score should be high, and when this is not the case, they are perplexed as to why. If you’re wondering why your credit score is declining despite the fact that you’ve paid all of your bills on time, read on to know the most common reasons why you may have a low credit score range:

  1. Your credit utilisation ratio is high: You may have paid your bills on time, but you should also do a credit score check on the balance of your credit card on each credit card. If you have a high credit utilisation ratio, your credit score may suffer. You should monitor your credit limit usage on a per-card and overall basis. It is recommended that you do not use more than 30% of your credit limit on any card. Reduce your credit utilisation ratio if you want a good credit score. For example, suppose you have a credit card with a low limit and use it to purchase a new air conditioner. In case you do not pay off the amount before your next billing cycle, your credit score may suffer. Credit card companies, on the other hand, typically report to the credit bureaus once a month, so as soon as you make a credit card payment, your credit score will improve.
  2. You have used your credit card to make a big purchase: Credit cards are convenient for large purchases because you don’t have to pay the entire amount upfront, but carrying a large balance on your card will result in a higher credit utilisation rate (CUR) being reported to the credit bureaus. Your utilisation rate, also known as your debt-to-credit ratio, compares how much credit you use to how much you have available. You should strive for a low utilisation rate because using too much of your available credit limit indicates to issuers that you pose a financial risk. To get the best credit score, experts recommend keeping your credit utilisation below 30%, with some even recommending less than 10%. Before charging a large expense to your credit card, ensure that you can pay it off in full before the billing cycle ends. Carrying a large credit card balance is not only bad for your credit utilisation rate, but it will also cost you a lot of money in interest.
  3. You missed a payment, and it is reflected on your credit report: Missed payments that are 30 days or later can severely harm your credit score when you do credit score check because timely payments are one of the most important factors in determining your credit score. Worst of all, late payments remain on your credit report for five to seven years. You can improve your credit report by making on-time payments for a long period of time, but the process will be slow, especially if you have a high credit utilisation ratio.
  4. Identity theft or a mixed credit report is lowering your credit score: If you have done credit score check, it is not uncommon for someone else’s credit activity to be reported as yours on your credit report. Check your credit report to see if someone else is using your credit card or applying for new credit in your name if your credit score is constantly dropping even after you pay your bills on time. If this is the case, you must notify the credit card company and the lender immediately of the fraudulent activity. It is also possible that your credit files have become entangled with your namesake, lowering your credit score. Whatever the case may be, you should notify the credit bureaus so that the incorrect information can be corrected and when you check the score using free credit score websites.
  5. You applied for new credit quite soon: When you apply for a new credit card, card issuers pull your credit report to determine how much of a risk you pose before lending you a loan. However, hard inquiries on your credit report aren’t always a bad thing if done in moderation. After all, applying for credit cards is an excellent way to begin building credit. What you can do to reduce the chances of letting your credit score drop is to check if you qualify for a new card using issuers’ preapproval or prequalification offers to reduce the number of unnecessary hard pulls on your credit report. If after seeing your credit score drop using free credit score websites, you should stop applying for credit if your credit score is getting affected as a result of too many applications.
  6. You are unaware of a default judgement: Public records, such as lawsuits and settlement orders, are included in your credit report. It is possible that you are the subject of a default judgement that you are unaware of. For example, if a summons was issued but not delivered or forwarded to you, you would be unaware of the lawsuit. If this is the case, you must decide whether to accept the judgement, settle it, or challenge it further.
  7. You cancelled your credit card: Closing a credit card account, particularly your oldest one, lowers your credit score whenever you have to check your score using free credit score websites because it reduces the overall credit limit available to you and lowers the average age of your accounts.

We have outlined a few of our ways that could be causing your credit score to drop unexpectedly whenever you check a score on free credit score websites— whether you realise it or not. The good news is that many a time a simple credit score is only temporary and easily recoverable. And, once you get past the initial fluctuation, actions like paying off a loan or keeping your high utilisation ratio in check will often benefit you in the long run.