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what affects credit

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What Affects My Credit Score? Common Factors

Factors that impact your credit score include your payment history, the amount of debt you owe, the length of your credit history, the types of credit you use, and the frequency of new credit applications. Check for more in the article.
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There are plenty of myths and misconceptions when it comes to what affects our credit scores.

Do soft checks affect our credit scores? What about missed payments? And can our credit ratings fall if the people we live with are bad with money? 

If you’re eager to boost your credit rating, read on to find out what affects your credit score and how you can improve it. We’ll also debunk a few credit score myths.

Do I have more than one credit score?

Before we go into detail about what affects your credit score, it’s worth noting that there is no universal credit score or report.

There are three main credit referencing agencies (Equifax, Experian and TransUnion) and each one has a different method for scoring borrowers. 

Not only will these agencies have separate reports representing your credit history, they’ll come up with different scores too. This might mean you have a score of 600 with one, 625 with another and 799 with the final agency.

  • Experian will give you a score between 0 and 999. A number under 721 is believed to be a poor credit score with this agency.

  • TransUnion will give you a score between 0 and 710. A number under 566 is poor if you check your credit score through this agency.

  • The Equifax scale runs from 0 to 700. If you get a number less than 380, this is deemed to be poor.

When your scores differ from one agency to another, this can cause confusion. It’s a good idea to not get too hung up on any one score or report. Checking your credit score with more than one agency highlights just how much the agencies’ methods can vary. 

As long as you’re doing what you can to keep your credit score healthy, try not to obsess over it.

What affects my credit in a good way?

Although different credit referencing agencies have different rules and strategies to determine a borrower’s score, here are just a few factors which could affect your credit score in a positive way. 

Good money management

The best way to boost your credit score is by managing your money responsibly and staying on top of debt payments.

By paying your debts on time and in full, you can prove to potential lenders that you’re a trustworthy borrower who will pay them back. 

Save yourself the hassle of remembering when payments are due by setting up direct debits to your creditors. That way you won’t have to think about your debts and you’ll know they’re being taken care of.

Having a good credit mix

People with strong credit scores have often used a number of different types of credit in the past. They can also demonstrate an ability to manage them all successfully. For example, someone with a good credit score might have had a car loan, credit card, personal loan and mortgage. 

You should understand what a good credit score is before you rush to take out every type of credit you can. Taking out multiple lines of credit (especially in a short space of time) can affect your credit score in a bad way. 

Not borrowing more than you can handle

Some people get carried away with large credit limits only to panic when the time comes to pay the money back. Lenders will carry out an affordability assessment before agreeing to a line of credit, but sometimes people gain access to more debt than they can comfortably manage. 

At the very least, you should be able to meet all your minimum repayments but pay your balances in full if you can. This can be a smart way of maintaining a good credit rating. 

Staying well below your credit limit

Whether you have access to £3,000 or £10,000, don’t see it as a challenge to spend as much as possible. 

Credit referencing agencies often recommend maintaining a credit utilisation rate of around 30%. This means that if you have a credit limit of £5,000, you might aim to only use around £1,500 of it. Although it might seem strange to not make the most of what you can borrow, by staying well below your credit limit, you can show good habits and financial control. 

Registering to vote

Believe it or not, registering to vote can positively affect your credit score - even if you don’t head down to the ballot box on election day. 

Make sure you’re registered to vote at your current address. This makes it easier for companies to confirm who you are and where you live.

You can register to vote even if you rent, live with your parents or spend most of the year in student accommodation. 

Removing financial ties to past partners

If you’ve ever had a joint bank account, joint loan or joint mortgage with a partner, their financial behaviour and credit score can affect yours too. This is the case even if you’re no longer together. 

Thankfully, it’s possible to de-link yourself financially by asking the credit reference agencies for a notice of disassociation. 

If you still have a joint bank account with your ex partner, this will need to be closed before the credit reference agencies will cut ties between the two of you. If you have a joint loan, this will need to be paid off.

What affects my credit in a bad way?

Here are a few things that can affect your credit score in a negative way. When applying for credit, potential lenders may see these things as a red flag. If possible, avoid doing the following.

Trying to open multiple lines of credit in a short space of time

If you get rejected for a type of credit, it’s only natural to apply for another one - especially if you really need the money. However, applying for several loans, credit cards or mortgages in a short space of time can lead to rejections.

Lenders usually see this as a sign you’re desperate for credit. They may assume you’ll struggle to pay the money back.

If possible, spread your applications out as much as possible, particularly in the run up to a really important application. For example, if you’re planning on buying a house in the next six months, don’t apply for a credit card until after you’ve got your keys.

Missing payments

Some people assume that the occasional late payment won’t make a difference. Unfortunately, this isn’t the case. You may find that just one late or missed payment affects your credit score, even if you’ve been paying on time and in full for many years. 

A non-existent credit history

If you’ve never had a credit card before, you might assume this makes you look like a responsible borrower. Unfortunately, without a good track record of borrowing and repaying money, lenders are often reluctant to approve applications. They want to see that you’ve borrowed money before and have managed it well.

What doesn’t make a difference to your credit score?

There are a lot of credit score myths which can leave people feeling unnecessarily paranoid about their finances. Here are just a few of the most common ones to keep in mind when building your credit score. 

Financial mistakes made more than a decade ago

While the damage caused by missed payments and maxed out credit limits can be long lasting, most problems won’t last forever. If you made some mistakes more than a decade ago, these are unlikely to make much difference to your credit score now. 

Housemates past and present

Do you have a financially reckless housemate? Did your ex partner struggle with debt? Unless you have a joint bank account, mortgage or loan with them, their finances have no impact on your credit score. If you simply lived together, your credit won’t be affected.

Checking your credit report

You can check your credit report as often as you like because it has no impact on your credit score. Saying that, there’s little point obsessing over it. Day-to-day changes are likely to be minimal. Checking two or three times a year is usually enough to stay on top of things and check for errors. 

Soft checks

If you compare loans or credit cards online and apply for quotes, this is unlikely to have an impact on your score. This type of check is called a soft check and isn’t visible to lenders. Only you can see soft checks on your report and it doesn’t matter how many appear in your history.

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