Why You Might Have A Bad Credit Score
You will have a bad credit score if you regularly fail to make credit card or loan repayments on time or miss them altogether.
REMEMBER: A default will stay on your credit file for six years from the date of default whether you eventually pay off the debt or not.
The good news is that once your default is removed, the lender wont be able to re-register it, even if you still owe them money.
Being declared bankrupt, entering an individual voluntary arrangement to pay back creditors over a set period, or having a county court judgment made against you may also badly affect your credit score.
It takes six years for bankruptcy to be wiped from your credit score, provided it has been discharged.
Making just the bare minimum repayment on your credit card each month can have an adverse effect on your credit report too. Lenders may read that as a sign that you are struggling to clear your debts.
If you are struggling with debt, contact your lender as soon as possible to ask for help. Its much better for you to be upfront than repeatedly miss repayments with no explanation.
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Pay Credit Card Balances Strategically
The portion of your credit limits you’re using at any given time is called your . A good guideline: Use less than 30% of your limit on any card, and lower is better. The highest scorers use less than 7%.
You want to make sure your balance is low when the card issuer reports it to the credit bureaus, because that’s what is used in calculating your score. A simple way to do that is to pay down the balance before the billing cycle ends or to pay several times throughout the month to always keep your balance low.
Impact: Highly influential. Your credit utilization is the second-biggest factor in your credit score the biggest factor is paying on time.
Time commitment: Low to medium. Set calendar reminders to log in and make payments. You may also be able to add alerts on your credit card accounts to let you know when your balance hits a set amount.
How fast it could work: Fast. As soon as your credit card reports a lower balance to the credit bureaus, that lower utilization will be used in calculating your score.
Things You Should Do To Raise Your Credit Rating
DO …
- Make your payments on time. Late and missed payments can affect your credit rating for up to six years, so make sure you pay on time.
- Pay more than the minimum amount. Not only will this reduce your debt faster, but it could also shows prospective lenders how reliable you are.
- Keep credit card balances to a minimum. Only spend as much as you can afford to pay back on your credit card to avoid accumulating unmanageable debt.
- Check your credit report regularly. This will ensure youre alerted as soon as possible should any mistakes or fraudulent activity occur.
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Improving Your Credit Score
Your credit score is important. The higher your credit rating, the better your chances of being accepted for credit at the best rates. It can influence your ability to get things like credit cards, loans, mortgages, mobile contracts and more.
Looking for tips on how to improve your credit score? Try following the steps below.
Check Your Latest Credit Score In The Uk
It’s important to check your latest credit score before taking steps to improve it. Make sure that all the information on the report is accurate, and get it corrected by contacting the lender or credit reference agency if it isn’t. TotallyMoney can provide you with a credit score and report, for free, forever. Use them to track your finances and to find lenders most likely to accept you for credit.
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Coronavirus Update For Mortgage Borrowers
The Financial Conduct Authority confirmed that homeowners whose finances have been affected by COVID-19 can apply for a 3-month mortgage payment holiday, which can be topped up to a total of 6 months.
Homeowners unable to make their mortgage payments who have yet to apply for a payment holiday have until 31 March 2021 to do so. Mortgage payment holidays ease the burden of having to make monthly payments at times when you may be struggling to make ends meet. The holiday will not appear on your credit file and wont affect your credit score, however lenders will still be able to find out about it.
You should only take a mortgage payment holiday if you really need to. This is not free money it is simply extending the term of your mortgage by 3-6 months. Your home loan will continue to build up interest during this time, meaning the total amount you will pay back over the term of your mortgage will be higher.
Check Any Financial Links To Other People
Many people dont know that opening a joint account with another person means that their credit score can have an influence on yours. Make sure you arent financially connected to anyone you shouldnt be and ask for any outdated links to be broken.
Obvious financial links would be an ex-partner, but many renters open shared accounts to manage household bills and this creates a link too.
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Check Addresses On Old Accounts
This may sound bizarre, but a wrong address can have a disproportionate impact. If you had, for example, an old mobile phone contract or credit card that you don’t use any more, but is technically still listed as active on your credit reference files, then check the address is your current one.
If the account is still listed as open, and it lists you as being at a different address, this can stymie applications due to ID checks. Check your file and go through every active account’s address to ensure it’s up to date.
We’ve known people being rejected for mortgages because of this. Worse still, they didn’t know the exact reason why as that’s a nightmare to find out.
Look For And Correct Mistakes
According to Experian, three in 10 people have never checked their credit report.
Not only does this mean that they wont know their chance of getting approved for financial products, but it also means they wont know if their report contains any errors.
Whether its a minor mistake like a previous address being incorrect or a major error like a wrongly recorded missed payment, it can all affect your score and your ability to get credit. It could even help you spot products that have been fraudulently applied for in your name.
Also if you have taken a payment holiday or changed payment amounts, it cant hurt to check theyve been recorded accurately.
If you do find an error, you can take it up with the lender directly, or alert the CRA who will contact them on your behalf. The CRA has 28 days to deal with the dispute and let you know what action will be taken.
- Find out more: how to check your credit report for free
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What Is Not Included In Your Credit Rating
There is nothing in your credit rating about your:
- Criminal record
- Lenders cant see declined applications either
Lenders can only see youve applied but not whether you were accepted or not. However, they may be able to guess by examining when your credit accounts were opened.
The information in your credit report is debt-related. For example, if you bought a car on credit, the type of car will not appear in your credit report it will just be the loan itself and the amount owed.
Bankruptcy will appear on your credit rating, while the less serious cases of library fines and parking tickets are not included.
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Things You Can Do Over Time To Raise Your Credit Rating
Five things you can do over time:
Improving your credit rating wont happen overnight, so be prepared to make longer-term changes to your finances.
First, do all you can to reduce your outstanding debt. This will signal to the credit rating agencies that youre tackling any issues and working to improve your credit worthiness.
If you can, stay in one address for a long period. This shows stability on your part, which is something that lenders like to see. The more stable your life appears on paper, the higher your credit rating is likely to be.
Its an obvious point, but it cant be overstated: keep on top of bills, payments and contracts. Jot down debit dates in your calendar to make sure theres enough money to pay the bills and you dont go overdrawn or default on your payment.
There are specific credit cards designed to help you improve your credit rating. Using one responsibly over a long period can boost your reputation with credit reference agencies.
The trick to using one successfully is staying within your credit limit and making at least the minimum payment each month. If you dont make at least the minimum repayments on time and stick to the limit all the time, it could in fact worsen your credit score the exact opposite of your goal. Read more about Barclaycards .
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How To Improve Your Credit Score
Find Out More About How National Hunter Works
It works by looking for inconsistencies between your current application form and any past applications you’ve made, trying to spot factual errors. While it can’t block your application itself, it triggers a red warning flag to lenders, and this happens roughly 7% of the time. Lenders can then check the info, and ignore it or do further checks. They’re not allowed to reject you based on the National Hunter red flag alone.
Factors such as a number of applications in a few days can also trigger warnings, though generally that’s more acceptable with mortgages, where it’s more common, than with credit cards.
What to watch for
It’s crucial to be consistent, even over long periods, when you fill in application forms. If you have a number of job titles or phone numbers, try to use the same one on every application. Changes to guidance introduced in 2009 mean lenders are supposed to tell you if National Hunter has been a contributing reason for your rejection.
How to check your National Hunter file
To check the info it holds on you, you’ll need to make a subject access request, which is free thanks to the introduction of the General Data Protection Regulation in May 2018. This can also be a useful thing to do if you think you’re a victim of ID fraud.
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Avoid Ccjs And Bankruptcy
Being declared bankrupt, entering into an Individual Voluntary Arrangement or having a County Court Judgement made against you will badly affect your creditworthiness.
According to Experian, receiving a CCJ will knock 250 points off your score, and defaulting on an account will mean a 350 point reduction.
So it’s worth checking if there are any alternatives to these routes if you are in financial difficulty.
Usually, it takes six years for individual voluntary arrangements or court judgments to disappear from your credit report. At that point, you should see an immediate change in your score.
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Does Voting Increase Credit Score
While voting in elections doesnt necessarily improve your credit score, being on the electoral register will.
The electoral roll is a list of names and addresses of people who are registered to vote. Being on this register makes it easier for you to borrow money because it helps credit companies confirm your identity.
Lenders can also check that the details that you have provided are accurate and minimise the risk of fraud.
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Top Tips To Improve Your Business Credit Score:
- Pay your bills on time. A negative record of paying on time can indicate a poor cash position.
- Limit your credit usage and keep debt low, however, use some credit to create a history.
- Regularly check your credit rating using an online tool and correct any mistakes immediately.
- Register your business with a credit reference agency or directory to make sure there is a record of your business. If your business is below the radar it could affect you getting credit.
- Check the credit position of your suppliers to protect yourself if something happened to them.
- Avoid closing accounts when paid off.
- If youre a start-up business, keep a close eye on your personal finances. If financial information about your business is not available, your personal data could be used as an indicator.
- Avoid County Court Judgements but if one does occur make sure its paid off immediately.
Also see: Concern over disparities in credit ratings for small companies
Can Lenders Find Out About Coronavirus Payment Holidays
At the start of the coronavirus pandemic, lenders were offering coronavirus-related payment holidays on mortgages, credit cards, loans and more to customers struggling to make repayments. If you applied for one, here’s how taking one might have impacted your credit file:
For more information on the help currently available, and whether it’ll affect your credit file, see our Coronavirus finance & bills help guide.
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Register For The Electoral Roll
Registering on the electoral roll is an easy fix. Lenders want to check that you are who you say you are, and you live where you say you live. The way they do this is to check the information you have provided against what is on the electoral roll. Making sure they can quickly and easily verify that youre telling the truth can help your .
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Be Wary Of County Court Judgments
You may get a county court judgement or high court judgement if someone takes court action against you for money they believe you owe them. If you do get a CCJ registered against you, settle it within 28 days to ensure that the judgement is cancelled and will not appear on your record. Unpaid county court judgements can appear on your register for up to six years, so avoid this at all cost.
Why Do You Need A Credit Score
Your credit score is one of the most important things that banks will consider when you apply for a mortgage, and it will determine how generous they’re likely to be with the repayment terms. As such, anything you can do now to improve your score is worth doing.
However, as valuable as a good credit score is, it’s not the only factor that a lender will consider when you apply for credit.
Among other things, they’ll also look at the affordability of the debt in other words, can somebody on your salary, and with the other financial commitments you have, afford to make the monthly payments required?
And despite what you might’ve been told in the past, the idea that there’s some sort of credit score ‘blacklist’ that prevents people from taking out loans isn’t true, so don’t worry! Just remember that if your credit score is low, it’ll make being accepted for financial products more unlikely.
Also, if you think that you can try to minimise your credit history in an effort to avoid a bad credit score, think again.
Having no credit history is just as bad as having a poor credit history, as lenders are keen to see evidence of you having successfully and reliably repaid credit in the past. In other words, you can’t game the system. Sorry.
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