What factors will affect my credit rating?

Marianne Curphey 

Being careless about paying bills on time or forgetting to pay off the minimum amount on your credit card each month won’t just land you in financial hot water. It might even affect the amount of credit you will be able to receive in the future. 

Why does my credit rating matter?

why does my credit rating matter

Sometimes failing to pay your bills on time will end up being recorded on your credit rating and that could affect the way lenders view you when you come to make a new credit application.

Even if you are successful in securing a new credit card or other form of credit, you might find that you have to pay a higher APR (interest rate) on your card than someone with a perfect credit record.

A recent report by Cranfield Business School estimated that a household might have to pay an extra £1,000 a year for utility bills, mobile phone contracts, finance, car loans and broadband due to a poor credit rating.

So what affects your credit rating? Here are the top ten factors which influence a lender’s decision:


Are you on the electoral roll?  

Make sure you have your current address registered. It is proof that you have a fixed address and you are who you say you are.

The electoral register is used by many companies for identity verification purposes. If there is no record of where you live lenders will view you less favourably because their policy is to try to combat identity fraud.


Do you have a credit history?

Not having any credit contracts, be they credit or store cards, mobile phone contracts or other regular payments can actually count against you in credit terms.

By having some form of credit and paying it off in full at the end of the month you are demonstrating to a lender that you can handle repayments and that you don’t default.

Read more: How to check and improve your credit rating


Do you pay your bills on time?

do you pay your bills on time

It’s important to be prompt not just in terms of paying off your credit card bills, but also mortgage and utility bills too. These can affect your credit score.

A series of missed payments will sound alarm bells for lenders, so make sure you at least pay off the minimum amount each month and seek help from a debt charity if your bills are getting out of control.


What information is on your credit report?

There are three main credit reference agencies, Experian, Equifax and Callcredit (which trades under the name of Noddle).

It’s a good idea to apply for a copy of your credit report from one of the agencies to gain an overview of your financial commitments and see exactly what the lender sees.

Under the Consumer Credit Act 1984 you have the right to request a copy of your credit file for just £2—you don’t need to sign up for any expensive services.


Is the information correct?

A credit report lists all your credit commitments. On your report your credit and store cards may be listed in detail, showing balances and payments for the past 12 months.

Lenders may also be able to see the lending terms, outstanding balance and monthly payments towards your mortgage, and the status of your current account. You can write to the credit agency and put right any mistakes.


Do you have several credit cards with high limits?

If you have a lot of potential credit this will potentially count against you, even if you don’t actually use it.

That’s because lenders are concerned that if the credit facility is available it means you could use it all if you needed to.


Do you borrow close to your credit limit on a regular basis?

stressed about credit

It’s best to try to avoid carrying a balance on your credit cards that is more than 75 per cent of your credit limit on each of your individual cards. 

Lenders may worry that if you have too much card debt you might not be able to keep up with any new repayments.


Have you made a lot of applications for credit recently?

Each credit application search by a lender will leave a “footprint” on your credit report. 

Too many searches in a short space of time can be perceived by lenders as you may be over-stretching yourself financially, or even financial desperation, and could therefore affect your ability to get credit.

Applying for more than four forms of credit in a year or applying for more than one credit product at a time can count against you.


Do you have lots of dormant accounts?

Perhaps you have a store card you haven’t used for years, or an old credit card that you only ever use when you go on holiday. If you don’t need them, close the account down. Otherwise even cards you don’t use will count as part of your overall credit and could affect your credit score.


Do you have any County Court Judgements?

If you have had a County Court Judgment (CCJ) and it is now settled then make sure the settlement is recorded on your credit file. If not, contact the court to get confirmation of this and inform the credit reference agencies.

Having been declared bankrupt, or having an Individual Voluntary Agreement (IVA) in the past may also affect your scores.


More help if you are struggling with debt or credit issues:

These charities offer free debt advice and counselling. You don’t need to pay for debt help.

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