Why Did My Credit Score Drop in Australia? Every Cause Explained

Quick Answer: Your credit score drops in Australia when new negative information is added to your credit file. The most common causes are: a new default being listed (−80 to −200 points), one or more missed payments (−20 to −80 points), new credit applications creating hard enquiries (−5 to −30 points each), closing old credit accounts, or errors on your file. If a default appeared without your knowledge, it may have been listed unlawfully under the Privacy Act 1988 and can be removed professionally in 30–90 days.

Checking your credit score and finding it's dropped — sometimes dramatically and without warning — is one of the most unsettling experiences in personal finance. If you've been trying to keep your financial life in order, a sudden unexplained drop makes no sense.

Here's every cause, ranked by impact, with exactly what you can do about each one.

The Most Common Reasons Credit Scores Drop in Australia

1. A Default Has Been Listed — Biggest Single Drop

A default is listed when a credit provider follows the process under the Privacy Act 1988 to formally record that you've failed to pay a debt of $150 or more. The impact on your score is immediate and severe — 80 to 200 points depending on the composition of your file.

What makes this worse is that defaults are often listed without the affected person being aware, especially if they've moved address. The Privacy Act 1988 requires creditors to issue a Section 21D pre-listing notice at least 30 days before listing — but many skip this step. If you've had a sudden, unexplained score drop, a new default is the most likely cause.

Check your file immediately at Equifax, Experian, and Illion. If a default appears that you weren't notified about, it may have been listed in breach of the Privacy Act 1988 — and can be challenged.

2. A Missed Payment Has Been Reported — Significant Drop

Under Comprehensive Credit Reporting (CCR), participating lenders report your monthly payment status across all accounts. A payment 14+ days late triggers a negative report. A single missed payment can drop your score by 20–80 points; multiple missed payments across the same period compound this significantly.

Unlike defaults, missed payment entries under CCR roll off after 2 years. But within those 2 years, they actively hurt every time a lender checks your file.

3. New Credit Application — Enquiry Drop

Every formal credit application creates a hard enquiry visible on your file for 5 years. The first enquiry in a period barely moves the score. But multiple enquiries in a 3–12 month window signals financial stress and each one adds to the accumulated negative impact — typically 5–30 points per enquiry. Five applications in six months could cost you 50–100 points in total.

4. Errors or Identity Fraud

Sometimes a score drops because of information that isn't yours at all. A debt attributed to someone with a similar name, a default carried over from a previous address tenant, or fraudulent accounts opened in your name can all appear on your file.

If you spot an account or default you don't recognise, request the full details from the bureau and contact ACS for an assessment — identity-related entries are often the most straightforward to remove under the Privacy Act 1988.

5. Closing Old Accounts

Closing a credit card or loan account you've had for years shortens your average account age, which can reduce your score temporarily by 10–30 points. This effect is usually modest and recovers over time as your remaining accounts age.

6. High Credit Card Utilisation

If the balance-to-limit ratio on your credit cards increased significantly (closer to the limit), your score can drop at the next reporting cycle. Lenders view high utilisation as a sign of financial stress even if payments are on time.

Score Drop Severity: Quick Reference Table

Real Case Study: Grace, Hobart — Score Dropped 187 Points Overnight. Default She Never Knew About.

Grace, 33, a social worker from Hobart, logged into her bank's credit score tool one morning and found her score had dropped from 689 to 502 — a 187-point fall with no explanation. She hadn't applied for any new credit. She hadn't missed any payments.

She pulled her full Equifax report and found a $430 default from a furniture hire company — an account she'd used three years ago and had believed was closed and fully settled. The company had listed a default for a final payment she'd never received an invoice for, at an address she'd moved out of 18 months before the listing.

Two immediate Privacy Act 1988 breaches: the Section 21D pre-listing notice had been sent to an old address (constructive non-delivery), and the amount listed differed from any invoice Grace had ever received for this account.

ACS challenged on both grounds. The furniture company could not produce evidence that the notice had reached Grace, and the amount discrepancy was documented. The default was removed in 29 days.

Result: Grace's Equifax score moved from 502 to 703 in 29 days — recovering 201 points, well past her pre-drop score. The default had been an unlawful listing from day one. She only paid when we succeeded. Subject to individual assessment; results may vary.

What to Do When Your Score Drops Unexpectedly

1. Pull all three credit reports immediately — Equifax, Experian, Illion — to identify what changed
2. Identify the specific new entry — compare current report to previous if you have it
3. Check if a default is showing — if yes, note the creditor, amount, and date listed
4. Review whether you received any pre-listing notice — the Section 21D notice must arrive at least 30 days before listing
5. If you didn't receive notice, or the default was listed during an active dispute, contact ACS for a free assessment
6. If it's a missed payment, address it with the lender and set up direct debits to prevent recurrence
7. If it's an error or identity fraud, report immediately to both the bureau and the Australian Cyber Security Centre (cyber.gov.au)

Frequently Asked Questions

Why did my credit score suddenly drop in Australia? The most common cause of a sudden large drop is a new default being listed on your file — often without your knowledge. Defaults can drop a score by 80–200 points overnight. Pull your full report from all three bureaus (Equifax, Experian, Illion) immediately to identify the cause. A default listed without the required Section 21D pre-listing notice is challengeable under the Privacy Act 1988.

Can a credit score drop for no reason in Australia? Not technically — there's always a cause. But you may not have been notified of the event. A default can be listed without you knowing (particularly if you've moved address), enquiries can be added by brokers without your explicit knowledge, and errors can appear from misidentification or data issues. Always pull the full report to identify the specific entry driving the drop.

How much does a missed payment drop your credit score in Australia? A single missed or late payment (14+ days) typically drops a score by 20–80 points under CCR. The impact is proportional — a 14-day late payment is less severe than a 90-day missed payment. The entry stays on your file for 2 years on a rolling basis. Multiple missed payments across the same period compound the damage significantly.

Can I dispute a credit score drop in Australia? You can dispute specific entries on your credit file that you believe were listed in error or in breach of the Privacy Act 1988. You cannot "dispute" the score itself — the score is a calculated output based on the data in your file. Challenge the underlying data and the score follows.

Does applying for credit lower your score in Australia? Yes. Each formal credit application creates a hard enquiry on your file that reduces your score by 5–30 points. The enquiry stays visible for 5 years. Multiple applications in a short period compound the damage. Use soft eligibility checkers before formal applications wherever available.

Sudden Drop? Get It Investigated.

A free assessment from Australian Credit Solutions reviews exactly what's on your credit file, identifies any entries that can be challenged under the Privacy Act 1988 and Credit Reporting Code, and gives you a clear roadmap for recovery.

Australian Credit Solutions is ASIC-licensed (ACL 532003), lawyer-led by Principal Solicitor Elisa Rothschild, and has helped over 5,000 Australians understand and fix unexpected credit file issues since 2014. No Win No Fee. 98% success rate on accepted cases.

Get My Free Assessment → 📞 0489 265 737 🛡️ ASIC Licensed ACL 532003 | ⭐ 4.9/5 from 976+ Reviews | 🏆 Award Winner 2022–2024

Australian Credit Solutions Pty Ltd holds Australian Credit Licence ACL 532003. Credit repair services are subject to individual assessment. Results may vary. This article provides general information only and does not constitute legal or financial advice.

Related reading: How to Improve Your Credit Score → | Default Removal Services → | Credit Enquiry Removal →