You are probably all too aware that having a good credit score and rating will enable you to be a lot more relaxed when it comes to your financial status. A credit score actively reflects your creditworthiness and can be accessed by potential lenders to assess whether you are eligible for a loan, mortgage or credit card, should you apply. Lenders will use your credit score to determine the details of the loan, such as the rate they are going to charge you and how much they are willing to give you overall.
When it comes to a credit score, the higher the better with credit reference agencies such as Experian, Equifax and CallCredit each having a different scoring system.
Luckily for those with bad credit ratings, your credit rating is not fixed. The credit score can go up and down depending on your spending habits and repayment habits. Falling behind on your repayments can have serious repercussions in terms of your ability to access financial products. Therefore, you should always make it a priority to repay your credit card, for example, in full.
There are a few things that may surprise you when it comes how you can gain a better or worse credit rating. In this guide, we highlight some of the factors which may cause your credit rating to decline.
Not checking on your credit rating.
Simply not staying on top of your credit record can result in you seeing a fall in your credit score. In this case, ignorance is not bliss. There are certain websites that offer the service of checking your credit ratings, namingly ClearScore and Noodle.
The majority of credit checking websites allow you to take a 14-day free trial in order for you to review your personal credit records. After this, you can expect to be charged around £2 a month in order to continue using their services to review your credit rating. There is also a Government requirement that people can access their credit report for just £2, read more here.
Having lots of credit cards.
It is all too easy nowadays to apply for a credit card. However, do not fall into this trap as having too many credit cards can seriously affect your credit score. Potential lender will see how many credit cards you have in your possession and may be reluctant to deal with your application since it is clear that you could have access to thousands of pounds, even if you don’t plan to use it.
The best thing you can do is just close any credit card accounts that you don’t need. This includes any store cards that you signed up to from your favourite supermarkets or retailers. If you have not used them in years, just remove them.
Too many applications.
Data from comparison website All The Lenders shows that individuals that make too many loan or credit card applications in a short space of time are considered ‘high risk’ by most lenders.
Those looking for quick funds raises warning signs as to why they need the finance so badly and are not willing to wait for feedback from existing applications. For this reason, it is recommended to apply directly with providers rather than one big form on a comparison table which could expose you to being checked by numerous companies at once. For this reason, All The Lenders redesigned their website around direct lenders, rather than just one main form.
Mobile phone contract.
Failing to pay off your mobile phone bill each and every month suggest to lenders that you are in financial difficulty, which will result in a fall in your credit score.
A really important thing to remember is, if you are upgrading your phone contract to make sure you do not leave your old contract open. There have been a number of cases where people have old contracts still open without their knowledge, and since the contract has gone unpaid, their credit score has fallen.