As inflation and import costs have risen, shoppers have been hit with bigger bills when… Read more »
What does and doesn’t affect my credit score?
Credit scores, credit reports and credit hit rates have all become important and useful tools for those of us looking to tackle our debts or make any major financial decisions. It is simple to check our own credit score by simply signing up for a site like Experian, Noddle or Money Saving Expert’s Credit Club.
This gives us a good idea of what to expect when we approach a lender to borrow money and also what we can do to improve our financial outlook. This beneficial tool has become important as a way of taking back control of the way we are viewed by banks and lenders.
A credit report, credit score and credit hit rate are all slightly different and though you have a good credit score, you may still find it difficult to be accepted for borrowing due to a poor credit hit rate.
Credit report – This is the information the credit reference agency holds on you from information provided by your bank, HMRC and yourself. You can edit this information or apply to file an appeal if something on the credit report is wrong, this is particularly beneficial if the incorrect information is affecting your score.
Credit score – This is a number between 0-999 awarded to you based on the information on your credit report. The higher the number, the better your credit score.
Credit hit rate – This is likely to be expressed as a percentage and will let you know how likely it is for you to be accepted for a loan, credit card or mortgage. A 40% credit hit rate means that you will only see 40% of the top deals on the market as they are the ones you are likely to be accepted for.
What does affect your credit score?
- Registering to vote – Not having your name on the electoral register can affect your credit score more significantly than you’d think. Add your name to the register by visiting the gov.uk website.
- Keeping up with payments – Making payments on time as and when they fall due is not only beneficial for your relationships with your creditors but it has a positive reaction on your credit score. However, missing payments whether one off or regularly, can have a detrimental effect on your credit score.
- Spacing out applications – When you make an application for a new account, you are likely to lose some points on your credit score for a few months. Applying for multiple accounts in a short period of time will be viewed negatively by lenders regardless of your reasons.
- Your partner (if you have a joint account) – When you have a joint account with someone whether they are your partner or someone you live with, you will become financially linked to them. Therefore your partner’s credit rating could affect your ability to be approved for lending in the future.
- Missed child maintenance payments – Parents who fail to pay what they owe regarding child maintenance are likely to find it more difficult to borrow due to the government sharing information on missed payments with credit reference agencies. If you are struggling to pay child maintenance, you should get in touch with the relevant government service to lessen the effects of this on your credit score.
- Credit card borrowing – Used effectively, credit cards can be a good way of building up your credit score and giving yourself a credit history if you don’t already have one. It is recommended that your borrowing on credit cards remains below 25% of the total limit that you can borrow.
- Utility bills – Many of the big six energy providers have started sharing data they hold about their customers with credit agencies to give lenders an idea of your payment reliability. If you pay on time and in full every month, it can improve your credit rating but if you regularly miss payments, it may go against you when applying for credit.
- Court judgements – Judgements such as CCJs will show up on your credit file and if they remain unpaid it will stay there for six years. If you pay this off, it will be removed after 30 days. IVAs and bankruptcy will also stay on your credit file for six years from the date you entered into it.
What doesn’t affect your credit score?
- Income – It doesn’t matter how much you earn and how many income sources you have, this will not be included in your credit file and will not affect your score.
- Getting a quote – Asking for a soft quote for something such as a credit card or to switch insurance should not have any impact on your credit score regardless of whether you are accepted or rejected.
- Past slip up’s – Any CCJs, IVAs, bankruptcies etc. that happened over 6 years will not affect your credit score as it is no longer considered.
- Having an alias – Whether you have changed your name due to marriage or you are known under a different name to the one you were given at birth, it is unlikely to have any effect on your credit score.
- Linked addresses – As long as all your linked addresses are up to date, it should not have a detrimental effect on your credit score. Also, if someone who lived in your house before you was bankrupt, this will not affect you.
- If you have been a victim of fraud – This will not show up on your credit report so it should not affect your ability to obtain credit in future.
- Living with someone – It doesn’t matter on the financial status of the people you live with (partners, housemates, family) unless you share a financial product with them such as a mortgage or loan, their credit score and financial status will not affect your own.
- Checking your credit score – It’s a popular myth that checking your credit report often drops your score but it is not true. So you can check your credit score as often as you need to and it will not have any impact.
If you have received a CCJ against you or you are struggling to deal with debt, get in touch with us on 0800 901 2488. Our friendly, confidential advisors can help find the solution to your financial problems.